In Bangalore (INDIA), when you purchase fuel with cash, you never have to pay for a 'fuel surcharge'. When you pay for it using your credit or debit card, a fuel surcharge is added on later? What and why do they do this?
Credit card companies charge 2%-3% transaction fees. On typical retail transactions [buying clothes, groceries, electronic goods, etc] the margin is in excess of 10-30%. Hence the Merchants tend to absorb the cost of card from profit margin.
In petrol transactions, the dealer make a fixed amount per liter of pertol/desiel sold. They cannot absorb the loss of 3%. Hence they charge additional Fuel surcharge to make up for that loss.
Some companies will lift the surcharge fee with a minimum transaction amount. For example, many fuel stations won't apply the surcharge if you buy at least 400 Rupees of fuel. There are also Card Tie-up where by Card Issuing Companies absorb this cost and hence no additional surcharge.