First National Bank (FNB) clients who have petrol cards linked to their credit cards can be forgiven if they’re struggling to make sense of their bank charges for fuel transactions.
Although FNB’s spokespeople maintain that the bank does not charge a transaction fee or interest from the date of purchase when you use an FNB credit card to pay for fuel, credit card statements issued by the bank appear to indicate otherwise and so do call centre and credit card division staff in response to queries from clients.
Late last year, Personal Finance ran an article (“Wiser payment options can save holiday travel costs”, December 3) about the costs associated with the various methods of paying for fuel, particularly in light of the fact that more and more garages accept credit cards.
Based on information supplied by the media departments at the big four retail banks, Personal Finance reported that fuel transactions on a credit card carry no cost, and that the banks “regard fuel purchased on a credit card as a regular retail purchase, so you benefit from the usual interest-free period set by your bank”.
The article also looked at the cost of using cash, debit cards and petrol cards. Of all the methods of payment, credit cards – when used responsibly – came out looking the most cost-effective.
Following the publication of the story, Standard Bank readers reported to Personal Finance that the story was inaccurate: they are charged a transaction fee, as well as interest from the date of purchase when using a credit card to pay for fuel.
In response, Sugendhree Reddy, the director of banking at Standard Bank, admitted as much: “We acknowledge that fuel purchases on a credit card are treated as a cash advance, meaning we charge a transaction fee and interest from the transaction date,” Reddy said.
The article quoting Reddy (“Standard Bank to review charges on petrol purchases via credit cards”) also quoted Arif Ismail of the Payments Association of South Africa (Pasa). Ismail said that, according to Pasa’s rules, “a fuel purchase must be treated as a retail purchase” and not a cash advance.
Reddy said Standard Bank was “reconsidering” its position, and by the end of January would like to have “rectified this”.
In light of Standard Bank’s admission, Personal Finance contacted the spokespeople for Absa, Nedbank and FNB and asked them to double check their facts. All insisted that they treat fuel transactions on a credit card like any other retail purchases made using a credit card.
But eight FNB clients subsequently contacted Personal Finance alleging that, despite what the bank claims, they are charged transaction fees and interest when they use their credit cards to buy fuel.
FNB client Peter Attwell sent Personal Finance his October 2011 credit card statement, which reads: “Please note … Fuel, outward electronic transfers and cash transactions always attract interest from the transaction date.”
In December last year Attwell wrote to FNB to obtain clarity on the matter. In response, he received a letter from a staff member at FNB’s credit card division stating: “Both petrol purchases/cash withdrawals, resulting in a debit balance, are treated as cash loans [as is the case with all financial institutions] and will attract interest for the full period of the loan. Interest is calculated from the transaction date of a petrol purchase or cash withdrawal until the date of the statement on which the transaction appears.”
Barrett Whiteford, the head of FNB Credit Card Marketing, this week said that Attwell had been misinformed. “There seems to have been a misunderstanding with the information given to Mr Attwell,” is how he put it.
“The agent is correct if the petrol is purchased with a Linked Petro or a Standalone Petro, but the information does not apply to credit card fuel purchases.”
Whiteford said the note on Attwell’s credit card statement refers to Linked Petro card transactions only. He said the bank would look into clarifying it.
A Linked Petro card, Whiteford said, is “a non-Visa-labelled FNB card that is linked to a credit card account”. A Standalone Petro is also “a non-Visa-labelled FNB card, but it is not linked to a credit card account. It has its own account.
“The way we charge for these products is different. This is because the fees charged to us and the revenue earned by us are different,” he said.
To summarise how fees are charged to these products, Whiteford provided a table (see below).
Attwell has an FNB credit card and a Linked Petro card. He receives one statement each month.
“If I buy petrol using my credit card no interest or fuel transaction fees are charged, but if I use my Petro card I am charged a fuel transaction fee and interest. Both cards are credit cards and come under the same limit and are paid in full every month.
“Since there’s one statement, one credit limit that applies to transactions on both cards and one payment date, one assumes that the same terms and conditions apply to both cards.
“I want to know how FNB can get away with treating fuel transactions differently depending on the type of card you use, when Pasa says that fuel transactions must be treated like ‘retail purchases’.”
When it was put to FNB that it was in breach of Pasa rules, Whiteford said: “We are not in breach of Pasa-agreed treatment of fuel transactions (reverse interchange) when using a Petro card. We also abide by the Visa treatment of purchases when the transaction is facilitated via a Visa credit card.”
But Walter Volker, Pasa’s chief executive officer, says Pasa does not regulate interchange, nor is it involved in setting interchange. “Currently, interchange is bi-laterally negotiated between the banks. However, future interchange will be determined through a process managed by the South African Reserve Bank (SARB). This would include fuel transactions.”
After Standard Bank owned up to treating fuel transactions as cash advances – and so did FNB in letters to two of its clients – Personal Finance asked Pasa what it was doing about the apparent breach of rules by its members. (Pasa is “recognised by the SARB to organise, manage and regulate the participation of its members in the payment system”.)
Volker says Pasa was made “aware of the treatment of ‘on-us’ fuel transactions by the bank [Standard Bank] during the course of this query and will investigate and deal with the matter in terms of the Pasa constitution and policies.
“The Pasa constitution allows for the Pasa Council to ‘impose a fine, the amount of a fine shall be determined by the council but may not exceed R1 million.’ This is also in line with section 14 of the National Payment System Act, which deals with penalties (not exceeding R1 million) for specific offenses (as stipulated in the Act).”
Volker said if penalties are imposed, they would be based on factors “such as the nature, duration, gravity and extent of the matter”.
Health warning: Transactions on most petrol or garage cards – whether standalone or linked to a current account or credit card – attract a transaction fee and interest from the date of the transaction.
Definitions:
“On-us” transaction: This is where the payer and the payee are at the same bank. For example, if a Standard Bank client uses a Standard Bank point-of-sale terminal, the transaction will be seen and processed by Standard Bank only, hence the transaction is referred to as an “on-us” transaction.
Reverse interchange: This is when your bank pays another bank for the use of its payment system at a merchant (in this instance, a petrol station). In the card environment, reverse interchange is compensation paid by the bank of the cardholder who performs the transaction to the bank that services the merchant.
Source: Payments Association of SA