Management
Fuel Delivery and CC Payments,
Which Way to Go?
"When it comes to securing
a payment in advance, you do
not know how much product
will fit in their tank. "
For many fuel dealers, there is a completely rational
fear you may not get paid for the fuel you deliver if you
don’t get an upfront payment.
As a fuel dealer you already do a lot for the communities
you serve and many of you go far beyond keeping
them warm in the winter and the pool heated in the
summer. It’s up to you to decide if you
should require a payment up front or
extend terms to your customers. You
may decide to have different payment
policies for different customers
because you have a good
idea which customers
are “good for it.”
Should you decide that
a payment up front is
needed, credit card and
debit card payments
are the way to go. When
it comes to securing a
payment in advance,
you do not know how
much product will fit in
their tank. There are two
ways you could approach this scenario. Let’s look at a
scenario where a full tank delivery is equal to $400 and
you get to the home and the tank only takes $325 worth
of fuel:
Option 1. Pre-Authorize
With a pre-authorization, there are two parts to
completing a credit card transaction, the “Authorization”
and the “Settlement/Capture”. In the above
scenario, the card would first be authorized for the full
Dan Roe
President
Hoot Payment Solutions
amount—$400. After the delivery is made, that open
authorization would be adjusted to $325 and submitted
for capture. During the pre-authorization period, the
transaction will be pending and the funds will be held.
If the capture is different from the amount that was preauthorized,
there will be a downgrade on that transaction’s
interchange cost. The difference in the authorization
and the capture will take a couple days to drop off
and return to the customer’s card.
Option 2. Capture & Refund
With the Capture and Refund method, the transaction
is initially processed for the full $400 amount. A refund
is run for the difference and is processed after the
delivery has been made.
The customer will see a
charge of $400 and a $75
refund. By doing it this
way, your transactions
will qualify for a much
more favorable interchange
category. You will
also receive interchange
credits for the refunded
amount.
It is up to each business
to determine which
method is right for them. Many
folks prefer one method over the
other because it is the way they
have always done it.
Delivering fuel is a business with
tight margins. It is important to get the most from your
payments. Reduce your cost per gallon and you increase
your margin. Capture & Refund would reduce the processing
costs when you take a payment prior to the fuel
going into the tank.
There are organic ways fuel dealers can reduce their
processing costs. I challenge all those who have been
using pre-authorizations as a policy to switch it up for
a month or two and see how changing your process can
impact your processing cost. ICM
26 ICM/July/August 2019