Ever wondered what the hell is Fuel surcharge when you swipe your credit card to fill fuel? There is something called transaction charge when a credit card is used anywhere online or offline. This charge is usually around 2%-3% of what you pay and the same is absorbed by the merchant where you swipe the card.
Fuel Surcharge is a Card Transaction Charge
But as Fuel business operate in a very low margin, they can’t absorb this transaction charge as it hits their profit margin. So the transaction charges used on fuel purchases are now passed on to the customer, so the fuel station can receive 100% of what a customer pay.
Now this transaction charge that you pay in addition to actual charge is called fuel surcharge which is usually 2.5% and is actually little more as service tax is levied on this surcharge.
If you need to fill fuel for Rs.1000 via your credit card, this is what you need to pay.
= Rs.1000+ Fuel Surcharge + S.Tax on surcharge
= Rs.1000 + Rs.25 + Rs.3.63 = Rs.1028.63
Fuel Surcharge Waiver on Credit Cards
Now you could have seen many credit cards with fuel surcharge waiver benefit. What they don’t mention is that they don’t waive the Service tax levied on Surcharge.
For example, if you spend Rs.5000 on fuel every month for a year, you spend extra Rs.1500(Surcharge)+Rs.217(S.tax) = Rs.1717 per year.
Here, Rs.217 would be the S.tax which will not be waived off by the banks.
That isn’t a big number though, but you can save this by paying cash for fuel instead. I’ve made a point in my spending habit that unless or until am running out of cash, i won’t use the card for fuel purchases. Penny saved is Penny earned 🙂
Surcharge Waiver has higher cap on Premium & Super Premium cards:
Most credit cards waive of fuel surcharge within a certain limit per transaction. Usually waived on Rs.400-Rs.5000 Fuel bill with a maximum cap of around Rs.250(surcharge) per month.
What’s your opinion on Fuel surcharge? Do you use credit card for fueling your car/bike or do you prefer cash?