Why Do Gas Stations Charge More for Credit? | Chase (2024)

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Why Do Gas Stations Charge More for Credit? | Chase? ›

Gas stations are in fact legally allowed to charge a customer extra if they choose to use a credit card to purchase gas. This is because the gas station owners pay an interchange fee to the payment networks.

Some gas stations charge more for using a Credit Card to offset the transaction processing fees imposed by Credit Card companies, as accepting card payments can be costlier for merchants than cash payments.

The gas station charged you $100 on your credit card likely because you paid for the gas at the pump. When doing so, gas stations place a temporary hold on your card, to ensure that you have enough funds to cover the purchase.

Some businesses (like gas stations and hotels) will place a temporary charge on your payment card. Since pumping gas is an open-end purchase, gas stations will typically pre-authorize your payment card for a larger amount to ensure that your card has enough funds to cover the amount of gas you'll leave with.

The businesses pay processing fees that help fund those credit card rewards programs. They need to charge higher prices to cover those fees, and that affects other customers who aren't earning any rewards. But ultimately, credit card companies pay for their rewards programs.

Convenience fees are legal in all 50 states but must be clearly communicated at the point of sale. Additionally, a convenience fee can only be imposed if there's another preferred form of payment as an option.

Pre-authorization charges are a common practice when a vendor (a gas station, a hotel, or a rental car agency) doesn't know exactly how much of their service you're going to pay for. The hold ensures that the vendor will get appropriately paid after you're done, but this can put consumers in a tough spot.

The surcharge waiver is usually applicable only at specific fuel stations tied up with the Credit Card company. You should check the list of partnered fuel stations to ensure you are eligible for the benefit. Some Credit Cards issuers may impose a minimum transaction amount to avail of the fuel surcharge waiver.

Merchants may charge a convenience fee to discourage the use of credit cards, which are often more expensive to accept than other payment methods. While the rewards you earn from a credit card can help offset some of the cost of the fee, the charge is often more than what you'd earn in cash back, points or miles.

If you prepay too much for gas with a credit card, you will only be charged for the purchase amount and the remainder of the prepaid amount will not be charged to your card. The gas pump will stop when you reach the prepaid amount or when the tank is full.

Do gas stations overcharge credit cards? ›

Gas stations charge an average of 5 to 10 cents more per gallon for credit card purchases. According to the Association for Convenience and Petroleum Retailing (NACS) , credit card processing fees at gas stations average about 2.5% of the total transaction price.

For debit card users, even when they are using the card like a credit card, they must still have that amount in the bank account.

What are pre-authorization charges? A gas hold is a gas station payment processing method that places an authorization hold on your account for an amount ranging from $1 to $125, and leaves it there until your actual transaction clears.

Places that prohibit surcharges

While surcharge fees are legal under federal law, there are a few states and one jurisdiction that prohibit surcharges, according to the National Merchants Association. The laws in Connecticut, Massachusetts, and Puerto Rico do not allow merchants to impose surcharges.

Pay cash. While businesses can charge a surcharge for paying with a credit, debit or prepaid card, they can't charge you more than the advertised price if you're paying in cash.

How to avoid a convenience fee. Convenience fees for online or phone payments can easily be avoided by utilizing alternative payment methods. One option is to use cash, check, or an ACH transfer. These methods typically do not incur convenience fees, making them a cost-effective alternative.

Businesses apply credit card surcharges to offset the costs associated with processing credit card transactions. When customers pay with a credit card, businesses incur fees from their bank or payment processor. These fees can include a percentage of the transaction amount plus a fixed charge per transaction.

The authorization limits are a compromise between liability for the merchant and the average consumer gas purchase. Most car drivers will never run into the limit. Only truckers and RV drivers have to deal with it regularly, except when gas prices rise.

In 1985, California passed a law (Civil Code section 1748.1) that prohibited merchants from adding a surcharge (an extra fee) when customers pay by credit card instead of cash.

It is normally a small percentage, usually around 1% to 2.5% of the fuel purchase amount or a fixed amount added to the transaction. This surcharge compensates the Credit Card company for the processing costs associated with fuel transactions at the pump.