When a credit card is used anywhere online or offline then you will be charged a transaction fee. This charge is usually around 2%-3% of what you pay and the same is paid to the merchant where you swipe the card.

Now this transaction charge that you pay in addition to the actual charge at any petrol pump is called a fuel surcharge. The fuel surcharge is usually 2.5% and is actually little more as service tax is levied on this surcharge.

Let’s help you understand fuel surcharges with an example. Say, you need to fill fuel for Rs.1000 through 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

Generally, since fuel businesses operate at 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 pays.