Hidden Costs: Understanding the Fee Structure of Fuel Card Providers

What are the typical fees associated with fuel card providers?

Fuel cards are often marketed as tools to streamline fleet operations and reduce fuel expenses. However, beneath the surface, many fuel card programs come with a variety of fees that can significantly impact a company’s bottom line. Understanding these fees is crucial for businesses aiming to manage their transportation costs effectively.

Account Setup Fees

Initiating a fuel card program typically involves an account setup fee. This one-time charge can range from $20 to $50, depending on the provider. For instance, P-Fleet notes that opening an account can cost up to $40 for processing and setup.[1] While this fee may seem minor, it becomes substantial when multiplied across a large fleet.

Monthly Service Fees

Monthly service fees are a recurring expense associated with fuel cards. These fees can vary widely:

• Per Card Fees: Many providers charge a monthly fee per active card. For example, the Circle K Pro Universal Card has a small monthly fee per card.[2]
• Flat Monthly Fees: Some cards come with a flat monthly fee regardless of usage. The WEX fleet card, for instance, charges an $8 per card monthly fee after a one-time $50 setup fee.[3]

These fees, while individually small, can accumulate quickly, especially for businesses with large fleets.

Transaction Fees

Transaction fees are charges applied each time a fuel card is used. These can be:

• Flat Fees: Some providers charge a flat fee per transaction. For example, P-Fleet mentions a $2 per transaction fee.[4]
• Percentage-Based Fees: Others may charge a percentage of the transaction amount. This can significantly increase costs over time, particularly for high-volume fuel purchases.

Additionally, using the card outside of the provider’s preferred network can incur higher transaction fees, further increasing expenses.

Late Payment Fees and Finance Charges

Failing to pay the fuel card balance on time can result in substantial late payment fees and finance charges. For example:

• Fuelman: Charges the greater of $75 or 12.25% of the new balance as a late fee.[5]
• RCPA Fuel Card: Imposes a late fee equal to $150 or 9.99% of the past due amount, plus interest at the Federal Reserve Prime Rate plus 4%.[6]

These charges can escalate rapidly if not managed carefully, emphasizing the importance of timely payments.

Administrative and Miscellaneous Fees

Beyond the standard fees, fuel card programs often include various administrative charges:

• Replacement Card Fees: Losing a card can result in replacement fees ranging from $4 to $10 per card.[7]
• Maintenance or Administration Fees: Some providers charge $0.02 to $0.05 per gallon for account maintenance or administrative tasks.[7]
• Invoice Fees: Generating paper invoices can incur additional costs, such as $3 per invoice.[4]

These fees, often overlooked, can add up over time, increasing the total cost of the fuel card program.

Fuel Price Markups

While fuel cards may offer discounts at specific stations, they can also lock users into network-pricing structures that prevent access to lower-cost options elsewhere. This lack of flexibility can lead to higher per-gallon fuel costs, especially when prices fluctuate between regions or urban and rural areas.

Moreover, some fuel card programs include hidden fees that can negate advertised discounts. For instance, administrative fees ranging from $0.02 to $0.05 per gallon can offset the savings from fuel discounts.[7]

Minimum Spending Requirements and Usage Thresholds

Certain fuel card programs impose minimum spending requirements or usage thresholds to qualify for discounts or to avoid additional fees. Failure to meet these thresholds can result in:

• Loss of Discounts: Not reaching the required spending level may negate advertised discounts.
• Additional Fees: Falling short of usage thresholds can trigger extra charges, increasing the overall cost of the program.

Businesses must carefully review the terms and conditions to ensure that their fuel usage aligns with the program’s requirements.

Administrative Overhead and Compliance Costs

Managing a fuel card program involves administrative tasks such as monitoring usage, enforcing transaction policies, and resolving disputes. These responsibilities add time and labor costs to finance and operations departments. For example, the City of Denton, Texas, conducted an audit of its fuel card program and identified the need for better monitoring and compliance measures to prevent misuse and fraud.[8] 

The administrative burden associated with fuel cards can be significant, particularly if the program lacks robust automation or integration with enterprise systems.

Alternative Solutions: Fixed and Variable Rate (FAVR) Reimbursement Programs

Given the complexities and hidden costs of fuel card programs, some businesses are exploring alternative solutions like Fixed and Variable Rate (FAVR) reimbursement programs. FAVR programs reimburse employees based on actual usage and geographic cost data, eliminating the need for centralized fuel purchasing and management.

These programs offer several advantages:

• Tax Efficiency: FAVR programs are IRS-compliant and typically avoid payroll tax obligations when structured correctly.
• Reduced Administrative Burden: Automation tools and mobile mileage tracking streamline compliance and enhance cost visibility.
• Flexibility: FAVR programs can adapt to changing economic conditions and workforce dynamics, providing a scalable solution for businesses with mobile employees.

Conclusion

While fuel cards offer convenience and control over fuel expenses, they come with a variety of fees that can erode the anticipated savings. Businesses must scrutinize every line item in their fuel card agreements to understand the full cost profile. Alternative solutions like FAVR reimbursement programs may provide a more efficient and cost-effective approach to managing transportation expenses. By evaluating all options and considering the hidden costs, companies can make informed decisions that align with their operational and financial goals.

[1] Include Fees in Analysis of Discount Fuel Card Options

[2] Fleet fuel card FAQs | Circle K Pro

[3] Fleet Fuel Cards: The Ultimate Guide

[4] Fleet Fuel Card Fee Comparison

[5] FUELMAN FLEET CARD CLIENT AGREEMENT

[6] FAQs | Expert Answers Here — RCPA Fuel Card

[7] The Hidden Costs Of Fuel Cards: Are Discount Fuel Cards Really Saving You Money?

[8] Audit of Fleet Services Opreations: Fuel Card Administration

Disclaimer:

The content provided in this blog is for informational purposes only and is not intended as legal, financial, or tax advice. While every effort has been made to ensure the accuracy and reliability of the information at the time of writing, Cardata and the author assume no responsibility for any errors or omissions. Readers should consult with a qualified professional to determine how any information discussed may apply to their specific circumstances.