Beginning July 18, 2008, Visa Inc. will implement a cap on interchange rates for Visa debit and prepaid fuel transactions in an effort to help lower costs for oil companies and service stations, which can pass the savings on to consumers. Systemwide implementation for restructured Visa credit card interchange fees on gas purchases takes effect October 2008.
"While Visa cannot lower the price of crude oil, there are things we can do to help make the process of buying gas easier for our cardholders," said Bill Sheedy, Global Head of Corporate Strategy and Business Development for Visa. "As oil prices rise, we are accelerating our ongoing efforts to address the issues in the fuel segment." Interchange fees for Visa debit and prepaid gas purchases will be capped at 95 cents per transaction. Credit card rates will adjust to 1.15 percent of the total purchase plus 25 cents. In addition to the interchange fee adjustment, Visa will implement its Real-Time Clearing (RTC) program to process transactions immediately and reduce the hold times that financial institutions place on cardholders' account.
This new program is Visa's way of contending with a nearly 100 percent jump in crude oil prices since June 2007, driving gas prices in the United States from an average of $2.98 per gallon to $4.07 in a year. "People are frustrated enough with the price of gas today," Sheedy said. "They shouldn't be frustrated with the payments process as well. We ... created a solution that removes many of the major barriers that consumers and station owners face at the pump today."
In April 2008, the limit on debit transactions receiving chargeback protection increased to $75. RTC provides merchants and acquirers clearance within two hours. This can help drive sales for stations because it gives consumers the ability to pump more gas in a single transaction without hitting price limitations.
"The number one inconvenience that we've been hearing about is that when you use a debit card to buy gas, service stations can put a hold on your funds of up to $75," said Maria Hatzikonstantinou, Vice President, Visa Public Relations. "So now with real-time clearance, it basically eliminates the hold that some stations put on your money." RTC can also qualify stations' transactions for better interchange rates at higher ticket amounts, which can lower station owners' costs.
Until Visa's processing changes begin implementation this October, the company will allow consumer fuel transactions up to $125 to qualify for its best available interchange rates. This interim step is effective from mid-July 2008 to October 2009. Once gas stations and their FIs migrate to RTC, consumer fuel transactions up to $500 will qualify for Visa's best available interchange rates.
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