Visa Inc. is planning a series of gas station rule changes to allow for larger transactions after a rise in fuel prices in the US made it difficult for some drivers to use credit cards to fill up.
Many gas stations have a $125 limit on Visa transactions at the pump, as larger transactions trigger higher fees for certain cards, as well as additional fraud liability. In recent months, this has forced some customers — for example, those who drive large SUVs in states with high fuel prices — to pay with two transactions to fill up their tanks.
Starting next month, the San Francisco-based company will quadruple the maximum transaction amount that brings better exchange rates for purchases made with small business and corporate cards, according to a Bloomberg document. Visa will also raise the fraud liability threshold to $175, according to a person familiar with the matter. Taken together, the measures should mean that petrol stations can increase the limit values and fewer consumers are confronted with pump shutdowns.
“Visa is making an adjustment in response to increased fuel prices,” the document said. “This change will ensure that the best exchange rates available are obtained for larger fueling transactions, which should result in fewer dispensers being shut down while cardholders are fueling.”
A Visa spokesman confirmed the authenticity of the document.
Gas prices have skyrocketed in recent months, with the national average for a gallon of regular unleaded hitting $4.21 this week, according to the American Automobile Association. That’s up from $3.61 a month ago and just $2.88 a year ago.
Further changes
The move is just one of many that Visa and rival Mastercard Inc. are making in the coming weeks.
Mastercard, for example, will reduce the fees it charges for transactions under $5 by about 300 basis points, according to various people familiar with the matter. The Purchase, New York-based company also plans to lower the prices it charges hotels, rental car companies, daycare centers and casual dining restaurants.
The company’s so-called digital enablement fee, which it charges on all online transactions, will increase from 0.1% to 0.2% of the purchase price, and Mastercard will charge at least two cents per transaction. That means the fee for a $50 online purchase triples from half a cent to two cents.
The fee will also be capped at 20 cents, meaning that for larger online purchases — those over $1,000 — Mastercard will cut the amount a merchant pays.
As part of this move, Mastercard is bundling more of its services into the digital enablement fee, such as B. Fees for fraud prevention, identity theft prevention, or address verification.
“Our focus remains on ensuring the security of payments while balancing the interests of all parties,” Mastercard said in a statement. “Electronic payments have proven even more valuable since the pandemic began. And that’s why we’re seeing merchants encouraging their customers to use electronic payments because they’re getting significant value in return.”
The company also plans to increase the rates it charges so-called Merit I merchants, which cover most e-commerce spend. Merit III retailers – who are involved in most in-store spending – as well as convenience stores and supermarkets will also see increases in swipe fees starting this month.
Smaller Retailers
For its part, Visa earlier this month announced it would cut the fees it charges by 10% to businesses with less than $250,000 in Visa consumer credit card volume. The change would apply to the vast majority of U.S. businesses, the network said.
At the same time, however, the company also plans to increase fees for most online spending. The network initially planned to roll out the change as part of an update to its rate tables in 2020. At the time, Visa described the changes as the biggest in a decade. The new charges were delayed due to the pandemic.
In a statement, Visa said the surge could be avoided if retailers adopted some of its technologies aimed at improving the security of a transaction.
“Rate increases are largely avoidable and apply to transactions sent to Visa with insufficient data, are incorrectly coded, involve increased risk, or are processed without using the company’s smart card technology,” Visa said in the emailed statement. “These tariffs are designed to maintain high data quality and integrity across our network to prevent fraud.”
Combined, the proposed changes to Visa and Mastercard will increase merchant acceptance costs by about $475 million, consultancy CMSPI estimates.
“Particularly disturbing”
Merchants have criticized the firms’ plans to increase swipe fees. This week, the Merchants Payments Coalition trade group asked the US House of Representatives Financial Services Committee to review the fees.
“It’s just particularly worrying given the current level of inflation,” said Stephanie Martz, chief legal officer of the National Retail Federation and board member of the Merchant Payments Coalition, in an interview. “We struggle to hold on to our narrow edges as they are. Because these fees sometimes exceed our margins, we need to pass some of these rate increases on to consumers.”
While Visa and Mastercard set the level of swipe fees, it’s the banks that issue credit and debit cards and thus generate the bulk of the revenue. While many of the changes in the works would only add up to pennies per transaction, the fees add up.
In 2020, merchants paid $110 billion to accept electronic payments, down 5.2% from the year before, according to the Nilson Report, a trade publication. This decline came even as card spending increased overall in 2020, the latest for which data is available. That’s because consumers have increasingly used debit cards during the pandemic, which are generally cheaper than credit cards for merchants.
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