Visa Inc. is planning a series of changes to gas station rules to allow for larger transactions after a spike in U.S. fuel prices made it difficult for some drivers to fill up with credit cards .
Many gas stations have a $125 limit for Visa transactions at the pump, as larger transactions carry higher fees for some cards, as well as additional liability for fraud. In recent months, that has forced some customers — those who drive large SUVs in states with high fuel prices, for example — to pay using two transactions to fill their tanks.
Starting next month, the San Francisco-based company will quadruple the maximum transaction amount that offers better interchange rates for purchases made with small business and commercial cards, according to a document seen by Bloomberg. Visa will also raise the liability threshold for fraud to $175, according to a person familiar with the matter. Taken together, these measures should mean that petrol stations can raise limits and fewer consumers will face pump stoppages.
“In response to rising fuel prices, Visa is making an adjustment,” according to the document. “This change will ensure that the best available interchange rates are received for larger fuel transactions, which should result in fewer pumps stopping while cardholders fill up.”
A Visa spokesperson confirmed the authenticity of the document.
Gasoline prices have skyrocketed in recent months, with the national average for a gallon of regular unleaded gasoline 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.
The move is just one of many that Visa and rival Mastercard Inc. will make in the coming weeks.
Mastercard, for example, will reduce the fees it charges for any transaction under $5 by about 300 basis points, according to people familiar with the matter. The New York-based company Purchase also plans to cut the rates it charges hotels, rental car companies, child care centers and casual dining restaurants.
The company’s so-called digital activation fee, which it charges on all online transactions, will drop from 0.1% to 0.2% of the purchase price, and Mastercard will charge a minimum of two cents per transaction. This means that, for a $50 online purchase, the fee will triple, from half a cent to two cents.
Fees will also be capped at 20 cents, meaning that for larger online purchases — those over $1,000 — Mastercard will reduce the amount paid by the merchant.
As part of the move, Mastercard is bundling more of its services into digital activation fees, such as fraud mitigation, identity theft prevention or address verification fees.
“Our goal remains to ensure the safety and security of payments while balancing the interests of all parties,” Mastercard said in a statement. “Electronic payments have proven even more valuable since the start of the pandemic. And that’s why we see merchants encouraging their customers to use electronic payment methods because of the significant value they receive in return.
The company also plans to increase the rates it charges so-called Merit I merchants, which cover most e-commerce expenses. Merit III retailers — those who do the most in-store spending — as well as convenience stores and supermarkets will also see swipe fee increases starting this month.
Visa, for its part, announced earlier this month that it would reduce the fees it charges businesses with Visa credit card volume of less than $250,000 by 10%. 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 the fees it charges for most online expenses. The network originally planned to introduce the change as part of an update it made to its 2020 rate tables. 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 increase can be avoided if retailers adopt some of its technologies designed to improve the security of a transaction.
“Any rate increase is largely avoidable and applies to transactions that are sent to Visa with insufficient data, are incorrectly coded, carry increased risk, or are processed without using” Visa’s smart card technology. company, Visa said in the emailed statement. “These rates are designed to maintain high data quality and integrity on our network to prevent fraud.”
Taken together, the changes planned by Visa and Mastercard will add some $475 million to merchant acceptance costs, consulting firm CMSPI estimated.
Traders have denounced the companies’ plans to raise sweeping fees. This week, the trade group Merchants Payments Coalition asked the US House Committee on Financial Services to review the fees.
“It’s particularly troubling given the level of inflation right now,” Stephanie Martz, general counsel for the National Retail Federation and executive committee member of the Merchant Payments Coalition, said in an interview. “We strive to hold on to our thin margins 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 swipe fee levels, banks issue credit and debit cards and collect the bulk of the revenue. While many job changes would only cost pennies per transaction, the fees add up.
In 2020, merchants paid $110 billion to accept electronic payments, down 5.2% from the previous year, according to the Nilson Report, a trade publication. The drop came even as spending on cards rose overall in 2020, the last for which data is available. Indeed, during the pandemic, consumers have increasingly used debit cards, which are generally cheaper than credit cards for merchants.