It’s not only the customer who is taking a hit from high gas prices, some gas stations’ profits are being entirely mitigated by credit card interchange fees. The AP reports that gas station manager Roger Randolph was fed up with losing money on credit card fees. His solution was to place new signs on his Chevron gas pumps that read “No more credit cards.” Details, inside…
The article says,
His complaints target the so-called interchange fee — a percentage of the sale price paid to credit card companies on every transaction. The percentage is fixed — usually at just under 2 percent — but the dollar amount of the fee rises with the price of the goods or services.
As gas tops $4 a gallon, that pushes fees toward 10 cents a gallon. Now stations, which typically mark up gasoline by 11 to 12 cents a gallon, are seeing profits shrink or even reverse.
In a good month, Randolph’s small operation would yield a $60 profit on gasoline sales. But that’s been buried as soaring prices forced the station to pay about $500 a month in interchange fees.
“At these prices, people aren’t making any money,” said Jeff Lenard, spokesman for the Alexandria, Va.-based National Association of Convenience Stores. “It’s brutal.”
Many gas stations across the country have dealt with this issue by offering discounts on cash transactions which is not a perfect solution explains the spokesman for the National Association of convenience stores, “The problem with cash discounts is, if people don’t have the cash or don’t want to spend the cash, you’ve inconvenienced them.”
Another avenue being explored by some gas station owners is finding less expensive credit card companies. Tom’s Convenience stores in Pennsylvania has started using a new credit card company called Revolution which charges smaller interchange fees. Customers who use the card get an automatic 10 cent discount.
The National Retail Federation says that the recent surge in gas prices has focused attention on to what they believe is an underlying problem with credit card fees. They say that even though the price of gas has gone up, the cost of processing credit and debit cards stays the same. “We have always contended that it doesn’t cost Visa and MasterCard any more to process a $1,000 transaction than it does a $100 transaction,” said J. Craig Shearman, vice president of government affairs at the retail federation.
Currently, there is pending legislation in Congress which would allow merchants to bargain collectively with the credit card companies. Other legislation focuses on requiring credit card companies to explain how they calculate their fees. Unfortunately, approving and enacting such changes will probably take some time. So until there is any change in the structure of interchange fees, it seems that customers and owners will continue to experience pain at the pump.