Mercedes Mullins
Fuel cards are a cost-effective way for companies to manage their fuel expenses. They are primarily used for company cars, where the organisation provides the car and covers all costs. However, they can also be used for employees' personal vehicles, which can be more difficult to manage. The cost of a fuel card depends on the provider and the type of card selected. Some fuel cards have hidden fees, such as annual charges, network service fees, and replacement card fees, which can quickly add up. Fuel cards can offer discounts on fuel based on the amount purchased, and some are universal, while others are restricted to specific brands or locations.
| Characteristics | Values |
|---|---|
| Cost factors | Number of company vehicles, geographical region, and company needs |
| Cost-based pricing | Based on the price listed at the gas pump; rebates are provided later based on fuel purchased |
| Retail pricing | Pay the retail price and receive a rebate later based on how much gas was bought |
| Fuel card fees | Transaction fees, account setup fees, APR, check processing fees, program administration fees, bank handling fees, annual fees, network service fees, replacement card fees, etc. |
| Annual membership fee | Up to £40 per card, per employee |
| Network service fee | £3 per transaction |
| Subscription fee | Not more than £24 per annum |
| Maiden deposit | Applicable in some cases |
| Additional fees and commissions | Applicable |
| Discounts | Based on the amount purchased by the company |
| Controls | Limit frequency of use or the number of gallons per month |
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What You'll Learn
Cost-based vs. retail fuel card pricing
The cost of a fuel card depends on the company and the type of card selected. There are two common types of fuel card pricing: cost-based and retail.
Retail fuel card pricing is based on the price listed at the pump, including taxes and a retail margin. The user pays the retail price and receives a rebate later based on the amount of fuel purchased. This is the most common type of fuel card pricing due to the wider availability of retail fuel stations compared to members-only stations for commercial vehicles with fuel cards. Retail pricing offers transparency, allowing users to choose the best price in the area. However, it requires training drivers to select the cheapest locations to take advantage of potential savings.
Cost-based fuel card pricing, also known as OPIS plus pricing, is set using a market-related fuel cost provided by entities such as the Oil Price Information Service (OPIS). The user pays the OPIS-determined price, which includes state and federal taxes, plus a fixed fee set independently of the pump price. This pricing model is beneficial in areas with high transportation costs, such as California or Hawaii. It also ensures consistent pricing across different fuel card companies within the same network, as the pricing is based on the same cost base. However, there is a lack of transparency in how OPIS index prices are set and changed.
Fleet fuel cards are designed for companies that purchase over a thousand gallons of fuel per month. They offer benefits such as rebates, discounts, and controls to manage expenses and save money. Some cards have no annual or setup fees, while others charge various fees, including annual membership fees, network service fees, and card replacement fees. These fees can add up over time, so it is important to consider the potential costs associated with using a fuel card.
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The number of company vehicles
The benefits of fuel cards, such as rebates and discounts, usually apply to larger fuel purchases. Companies with a higher number of vehicles are more likely to benefit from these volume-based incentives. Fuel cards can also help manage fuel expenses more efficiently, especially for larger fleets. They provide real-time tracking of fuel purchases, allowing fleet managers to set spending limits and automate accounting duties.
Additionally, the type of company vehicles can impact the decision to implement a fuel card program. With company-provided vehicles, employers can choose fuel-efficient models, helping to manage costs and budget accurately. In contrast, when employees use their personal vehicles, employers have less control over fuel costs, as they cannot dictate the choice of vehicle. This can result in higher fuel expenses, especially if employees drive less fuel-efficient cars.
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Employee fraud or misuse
The cost of a company fuel card depends on the provider and the type of card selected. Some providers charge a range of fees, including annual charges, network service fees, and replacement card fees. These fees can add up, especially for larger fleets. For example, a business could be charged around £40 per card, per employee, as well as a network service fee of around £3 per transaction.
However, some providers offer cards with no annual or setup fees and no additional charges for normal business use.
Now, onto employee fraud or misuse.
Fuel card fraud can result in significant financial losses for businesses, so it's important to be aware of the risks and take preventative measures.
- Monitor fuel purchases and mileage: Regularly review fuel purchases and vehicle mileage to spot any unusual patterns, such as frequent fill-ups that don't align with the distance covered.
- Set fuel limits: Control fuel costs and prevent unnecessary purchases by setting maximum fuel limits per transaction, day, or week.
- Utilise alerts and flags: Many modern fuel card companies offer alerts for suspicious activities, such as frequent fuel purchases or transactions that exceed a vehicle's fuel tank capacity.
- Implement a PIN system: A PIN system adds a layer of security, preventing unauthorised use even if the card is lost or stolen.
- Educate employees: Teach drivers about fuel card fraud, including how to detect skimming at fuel stations, to empower them to protect their cards and PINs.
- Enforce consequences: Ensure employees are aware of the repercussions of fuel card fraud, including termination and other disciplinary actions.
- Restrict fueling days and times: Limit fuel purchases to specific days and times, such as only during working hours, to deter misuse during off-hours.
- Use digital cards: Opt for digital cards secured in smartphones, which reduce the risk of lost, stolen, or shared cards and PINs.
- Choose a reliable provider: Select a fuel card company that offers fraud prevention features, such as real-time data layering and instant flags for suspicious activity.
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Cost control measures
The cost of a company fuel card depends on the provider chosen and the type of card selected. Some fuel card companies charge a range of fees, including transaction fees, account setup fees, APR, check processing fees, program administration fees, and bank handling fees. Some providers also charge annual membership fees, which can be as high as £40 per card, per employee. Other potential costs include network service fees, which can add an extra £3 per transaction, and replacement card fees.
However, fuel cards can also help businesses save money. They are a cost-effective way for fleets to fill up, offering valuable metrics, controls, and rewards that help profit margins. They can also provide cost control measures, cashback, rebates, tax exemptions, and fuel discounts. Businesses that purchase over a thousand gallons of gas per month can benefit from fleet cards, which offer rebates and discounts. Fuel cards can also be used to track fuel purchases in real time, set spending limits, and manage fuel expenses.
To control costs, companies can provide company vehicles with good fuel economy instead of allowing employees to use their personal vehicles. This helps to manage costs and plan budgets. Mileage logs can also be used to track business mileage in real time, ensuring accurate and IRS-compliant reporting.
Before implementing a fuel card program, businesses should consider the number of company vehicles, the geographical region, and their unique needs. They should also be aware of the risks and benefits involved and take steps to protect themselves from employee fraud or misuse.
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Hidden fees
While fuel cards can be a convenient tool for businesses to save on gas and control expenses, there are some hidden fees to watch out for. The cost of a fuel card depends on the provider and the type of card selected.
Some fuel cards have various hidden fees that can add up, such as annual charges, network service fees, and replacement card fees. For example, some fuel cards charge an annual membership fee per card issued, which can be up to £40 per card, per employee. A network service fee can also add up quickly, with a charge of around £3 per transaction, especially for businesses with multiple vehicles.
Additionally, fuel card providers typically receive a cut from the gas station, usually 2% to 3% of the fuel purchase, for directing their members to partnered fuel stations. These discounts may change based on fuel prices and agreements between the fueling locations and card companies.
It is important to note that some fuel card providers do not charge any subscription fees, while others may charge up to £24 per year. When considering the implementation of a fuel card program, it is essential to take into account the additional fees and commissions to estimate the annual cost for the company accurately.
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Frequently asked questions
A fuel card is a payment card that allows employees to purchase fuel and, in some cases, vehicle maintenance and other related expenses.
The cost of a fuel card depends on the fuel card company and the type of card selected. Some companies charge annual membership fees, network service fees, and replacement card fees. Some fuel card providers do not charge any subscription fees, while others charge up to £24 per year.
Fuel cards offer companies a way of cutting business costs by providing fuel discounts, rebates, and tax exemptions. They also simplify paperwork and help manage fuel expenditures and reporting.
Fuel cards can be costly if not managed properly. They may also not be a good option for companies with fleets that purchase less than a thousand gallons of fuel per month due to associated fees and expenses.
