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SAN FRANCISCO -- Visa Inc. is implementing processing and rate changes, including lowering its interchange fees for fuel transactions, in efforts to ease pain at the pump for both consumers and gas retailers.
"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. And by lowering our rates, we hope to see oil companies pass these savings along to their stations and ultimately to consumers," Bill Sheedy, global head of corporate strategy and business development for Visa, said in a statement.
"As oil prices rapidly rise to unprecedented levels, we are accelerating our ongoing efforts to address the issues in the fuel segment."
As part of the initiative, Visa will reduce interchange rates for fuel transactions, which can lower costs for oil companies and service stations and can be passed onto consumers at the pump.
Effective July 18, 2008, consumer interchange for transactions using Visa consumer debit cards at automated fuel dispensers and service stations in the U.S. will be capped at 95 cents per transaction. Meanwhile, Visa interchange applied to fuel transactions paid with a credit card will be restructured effective October 2008, into a single, lower rate across all consumer credit card transactions.
Before then, Visa is willing to work with fuel merchants and their acquirers individually to process credit transactions at these lower rates, the company stated.
"Even though Visa's interchange rates on fuel transactions are already among the lowest in our system, the run-up in fuel prices to today's unprecedented levels requires an exceptional response," Sheedy said.
For example, if a motorist uses a Visa credit card to fill a 15-gallon tank at $4 a gallon -- totaling $60 -- the interchange fee would amount to approximately 94 cents, a 14 percent savings over current rates, according to the company.
In addition, when consumers use a debit card, the transaction could be cleared within hours of purchase, quickly removing a $60 hold often placed on a consumer's funds, which can take one or two days to remove under the current system, Visa stated. It will do this through Real-Time Clearing, which calls for transactions to be processed immediately instead of at the end of the day, and will be implemented this fall.
"People are frustrated enough with the price of gas today; they shouldn't be frustrated with the payment process as well," Sheedy said. "We took an entirely new approach to processing fuel payments, and created a solution that removes many of the major barriers that consumers and station owners face today at the pump."
Under Real-Time Clearing there will be more control over merchants acceptance processes, allowing for better authorization decisions, and a reduction in the number of consumers who encounter a shut-off before tanks are filled, the company stated.
Until the new processing changes are implemented in Visa's October systems upgrade, the company is allowing consumer fuel transactions up to $125 to qualify for its best-available interchange rates, which will remain in place through October 2009.