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A fuel card is a payment card for petrol, diesel and other fuels at filling stations. Account balances are cleared in full when due and payment terms vary depending on the supplier and can be anything from weekly to monthly. One of the main reasons fuel cards are popular is due to the elimination of cash required at filling stations and hence the increased security.
Additional recommended knowledge
In its infancy, fuel cards were only printed with the company name, vehicle registration and a signature strip on the reverse. No electronic data was stored. Fuelling sites would verify the company, vehicle registration (on the forecourt) against the card and also the signature written on the back. The site would allow access to the fuel once the retailer's receipt had been signed for and cross checked against the signature written on the back of the card.
Initially, fuel card networks were very small and based around trunk roads and main haulage routes. For example, in 1983, the Keyfuels site network consisted of only seven stations. Therefore, they were initially targeted at haulage or delivery companies. A few years later, cards became embossed rather than printed. This was due to provide the cards with a greater longevity — frequent use would rub off the printed information.
Due to the lack of electronic data on the fuel cards at this stage, transactions would be recorded by the card being 'stamped' onto a manual transaction sheet. Further details detailing date, time, volume, grade of fuel and registration would be hand-written.
During the mid to late 1980s, fuel cards began to use magnetic strip technology. This meant fuel cards could be processed by a retailer electronically and reduced the risk of human error when recording transaction details.
Magnetic strips also enabled fuel card providers to increase fuel card security by ensuring PINs were encoded into the card. Although it should be noted that when the magnetic strip is swiped though a fuel card reader, the transaction is still only verified by checking signatories to this day.
In the advent of outdoor terminals, these PINs became compulsory in order to re-fuel.
The reasoning behind moving from the magnetic strip to smartchip technology was down to the fact that the magnetic strip could be cloned and the data written onto a dummy card. Also, the use of fuel cards was far heavier than that of debit or credit cards, and therefore it became apparent that the magnetic strip began to wear out far quicker.
Smartchip technology (similar to Chip and PIN) is the largest development in the fuel card industry in recent years. (See Smartchip benefits)
Fuel and credit card comparison
There are many reasons for/against the use of a fuel card over a credit card, which are outlined below:
Although fuel cards effectively 'look' like credit cards and use very similar technology, their use and implementation is significantly dissimilar enough to differentiate them as an alternate payment method. The main differences from credit cards are:
Fuel card providers realised there were many benefits from moving over to the smartcard from the magnetic strip:
As of 2007, only 50% or so of fuel cards on offer utilise the smartchip technology.
Added features of smartchip technology
Fuelling limits can also be programmed into a fuel card using smartchip technology to specify the following:
Fuel card re-fuelling procedure
The general procedure for using a fuel card at stations is as follows:
Outdoor terminals (pump operated):
Indoor terminals (cashier):
Commercial use in business
Typically, the majority of businesses using fuel cards are those which heavily rely on motor vehicles on a day-to-day basis e.g. transport, haulage, courier services. One of the primary reasons a business will use a fuel card is to obtain (potentially) significant savings on the current price of fuel.
In most cases, fuel cards can provide fuel at a wholesale price as opposed to standard retail. This way, discount fuel can be purchased without needing to buy in bulk.
Furthermore, the management and security concerning fuel purchases is greatly improved via the use of fuel cards. These features often prove themselves attractive to businesses, especially with those operating large fleets which can sometimes be in the 1000s of vehicles.
For example, a business may obtain anything from a one to four pence per litre reduction (PPL) on diesel, which in real terms can be translated into the following (UK based) example:
Potential Cost Saving Example (for small fleet)
International fuel cards
While most fuel cards are for use in a particular country, there are some companies who offer international fuel cards themselves and some via a third party. International site networks often use fully automatic fuel pumps to avoid possible language difficulties and are specially designed to account for different taxation regimes e.g. producing separate invoices for each country which fuel was purchased in a particular month to account for different rates of VAT charged. These site networks sometimes offer the ability to reclaim VAT paid in each country, for a small percentage of the amount reclaimed.
Bunkering versus retail
Bunkered fuel cards
Fuel cards providers which operate on a bunkering basis aim to achieve a fuel reserve on a particular network in order to achieve a discounted price, therefore taking advantage of economies of scale.
For example, a company may purchase one million litres of diesel at 72.50 and aim to sell this on to the customer with a mark up of 2.5 pence per litre — 75.00 PPL.
Examples of fuel card providers working on a bunkered basis are Smart Diesel or Keyfuels etc.
Bunkered fuel card companies sometimes also offer customers their own fuel bunker to under the premise of further benefiting from a discounted price. Furthermore, a customer can also hope to achieve a saving by way of avoiding any market increases in the standard market price for that particular fuel. In short, customer fuel bunkering has many pros & cons:
Retail fuel cards
In contrast to bunkered, retail fuel cards operate by way of allowing the customer to draw fuel at almost any fuelling station (in same method as credit card). Often the provider will levy a surcharge on top of the retail price as advertised at the fuelling station. The retail price given is often considerably higher than that of the bunkered.
Although retail is generally more expensive, there are a number of exceptions depending on the region, particular brand/site and timing of fuel purchased. Retail fuel can be cheaper in certain regions, particularly those near to a major port. Further reasons for the difference in price may be due to local economy (e.g. north / south of England) and whether the site is close to any main transport links i.e. the fuel costs more to deliver into the site. As for timing, the supermarkets or large providers often have a great deal of fuel in their stock reserves, so if the market increases rapidly, they would generally take longer than smaller providers to reflect this change.
Furthermore, retail fuel prices have decreased over the past 15 or so years largely due to supermarkets providing fuel at their superstores at hugely discounted prices in order to entice users to the store.
For example, at the time of writing (March 2007), according to Petrol Prices the cheapest diesel is 77.31 PPL (plus VAT). Most bunkered fuel card companies are also offering around 78 PPL, which indicates that bunkered fuel cards are not always the best choice financially.
Those which operate on a retail basis are for example: Overdrive, Allstar, Shell.
Fuel card providers
Examples of fuel card providers are Shell, Total, BP.
|This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Fuel_card". A list of authors is available in Wikipedia.