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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?

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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.

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    Note that Visa does not permit this: visa.co.in/merchants/acceptingvisa/guidelines.shtml – ChrisInEdmonton Apr 24 '14 at 19:46
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    @ChrisInEdmonton In India as the price of the fuel is regulated and the pump owners get a fixed comission, there is an exception made by Central Banks to allow fuel surcharge on this transaction to compensate the margin asked by Cards [Merchant Bank, Visa, issuing Bank] – Dheer Apr 25 '14 at 6:59
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    @ChrisInEdmonton a lot of people point to those guidelines, but they are not a condition of your merchant agreement with Visa - they are merely guidelines, nothing more. Merchants are restricted by what is in their merchant agreements, nothing more. – Moo Dec 23 '16 at 9:59

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