Credit Card Processing Costs for FBOs

The cost of credit card processing has become a bigger factor to FBO margins as credit card rates have continued to climb over the past several years thanks to several factors including the growth of rewards and purchase cards which increase the interchange fee to the merchant to fund the rewards programs. The increases in the interchange rates have led to several high-profile confrontations between big retailers and the card networks recently including a battle between Amazon and Visa that led to Amazon threating to stop accepting Visa in Europe due to the high fees. Of course, aviation hasn't been immune, at today's fuel price ($6.73) credit card fees can be as much as $0.29 per gallon. Today the average FBO transaction has a fee of just around 2.9%. That means the average cost per gallon is $0.19. First, let's look at how we get to 2.9%.

What are Interchange Fees?

Think of the interchange rate as the cost in a cost-plus fuel price and they can range from 1.29% ($0.08681 per gallon) to 3.5% $0.2355 per gallon). The interchange is what the bank or card issuer sets at the cost of processing that card. The interchange fees are how the issuers cover the costs of the risk associated with issuing credit, their operations and as mentioned the rewards programs. Here are the factors that can impact the interchange rate you are charged on any given transaction:

  • The Credit Card Brand - Each credit card sets its own interchange fees so accepting one card brand over another can result in a higher interchange fee. American Express is often singled out for assessing higher fees than Visa, MasterCard or Discover but we have seen higher cost cards from the other brands and attempts by American Express to offer better rates to small businesses.

  • Your MCC Code - This one is essentially how the credit card companies have labe