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.
Some gas stations banning credit cards [AP]
(Photo: Getty)
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I’m not even sure this is newsworthy. There are a few gas stations around here in the Greater Metro Boston area that are cash only — and they’re 10 to 15 cents cheaper per gallon than stations that accept credit cards.
“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.”
You have? How? You shouldn’t be advertising the lower price unless you advertise both, so the person won’t know about it until they get there. If you advertise a cash price, then don’t offer it for everything, that’s a surcharge for using credit. That whole mess is on shaky ground to begin with. I don’t blame people for taking away the credit option – but that’s the real inconvenience. I can’t think of a place I don’t use my debit card anymore (except the local store that machine stamps things, and that’s as a courtesy to them because they’re great and they asked), so having the option taken away? It’d piss me the hell off (thankfully, the bus is free for me…)
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.
Maybe instead of marking it up by a fix amount, you should try marking it up by a percentage. Just a thought…
This is tough, because how can you feel sorry for gas stations ‘not making as much’ on gas? Just mark up the 20 oz Cokes to $1.79 instead of 1.69. Or change the dates on those sandwiches so you keep ‘em in the cooler another couple days. “Yes, some chicken IS green, sir.”
Although the gubbamint is just as good at the “we sure didn’t see this coming” lie.
He is only hurting himself. Many people don’t carry cash nowadays, especially not the extra $50 needed to fill up. A cash discount isn’t going to do anyone any good when they are on “E” and all they’ve got is a credit card in their wallet.
Moreover, gas stations are a dime a dozen. Throw a rock, hit 10 of them. Around here, there are gas stations literally right next to each other. If a gas station doesn’t serve my needs, I drive 5 more seconds to the next one. Beep-beep, goodbye.
@thetango:
It certainly is. It relates the troubling part of the economy, hitting the small business owners yet again. If they stop taking credit cards, it reduces the business they get. If they don’t, they have little, or no profit, or even costs them money.
Most of the problems with the economy and stories mentioned on Consumerist regarding price increases and shrinkage, are a direct fault of the oil companies, who continue to profit.
@krunk4ever:
The problem with gas is that the mark-ups are razor thin to begin with. If you do it by percentage, it increases gas prices even more, forcing customers to shop elsewhere.
Gas stations don’t make money on gas; they make money on the food that they sell there.
Of course, the greedy oil companies, who PRODUCE the gas that the stations sell could cut their CEO pay a little and help out the very stations that are feeding their greed…… naaaaaa
“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.
sure, it doesn’t cost any more to process the transaction, but what does cost more is a $1000 fraudulent transaction vs. a $100 fraudulent transaction. that’s what interchange fees are all about & i don’t think retailers fully comprehend that.
card issuers eat almost all fraudulent transactions & spend enormous amounts of money on technology to combat theft. none of this is borne by retailers. yet, they want an “as good as cash” payment service with zero cost. yeah, good luck with that.
@doctor_cos: You are aware that convientmarts that also sell gas would have to raise prices by more than 10c on everything which would lead to fewer sales then they already get. Most stations like that, that are busy do maybe 8-12k sales in gas, if they are lucky, they’ll do an additional 2k in sales from the mart side of it, if they are lucky. Most only do 500-750 in extra sales so that would help to slightly reduce the hurt, but not prevent it. And dont forget alot of those sales are also from CC/DC as well.
Interestingly the cheapest gas station close to NYC is right over the holland tunnel in NJ. It’s a cash only place, about 4 cents cheaper than the other dozen stations over there. Yet it’s often empty, people just don’t seem to like to pay cash for gas.
@mac-phisto: Yeah, because the CC companies need to make even more money than they do now.
This is actually a great time to go back to a “cash only” market for fuel sales. The stations can keep using their “pay at the pump” card readers, just program them for DEBIT CARD, PIN ONLY sales (Aldi food stores have been doing this for years, and not accepting credit hasn’t hurt THEIR sales)! They can keep their price competitive with the other guys AND keep more profit.
@juggler314: I find what is even more funny is that people who refuse to use caash to pay for things such as gas, end up paying much more than that in the end. Use your CC to buy 75 bucks in gas, by the time you pay that off the CC it’s more like 100 bucks. AMEX owners being the exception as most follow the pay it off end of month scheduel.
I predict that convenience store robberies will drastically increase if this starts becoming common. Probably more personal thefts around gas stations. Knowing that everyone coming to that station would have $50 to $200 cash in their pockets would just be fodder for thieves.
Or gas station owners all put in ATM machines that charge $3 to get money out, thus creating another revenue stream for them.
@juggler314:
when your paying 80-100 dollars its understandable. I never carry
more than 40 on me these days, 40 wouldn’t even pay my subcompacts
tank these days… When I started driving 40 was enough for me for a
whole MONTH of gas + a snack, and that was 10 years ago. The minute
gas hit 2 bucks people should have been breaking down the gates and
hanging the CEOs by their necks while burning down their 4 billion
dollar mansions… at 4 bucks we are still talking about if its their
fault, despite OVERWHELMING evidence its the Federal Government and
Gas companies in collusion.
I mean jesus Bush’s whole fucking press release yesterday was
probably written by the oil companies themselves! WAKE UP PEOPLE!
> Maybe instead of marking it up by a fix amount, you should try marking it up by a percentage.
Many gas stations have the prices set by the oil company. They’re the ones who decide that the margin will be only 11-12 cents. If the guy raises the prices more than that, he’ll have problems getting his next delivery – or his next delivery will be more expensive.
Completely independent gas stations have complete freedom in setting their own prices but they don’t always have a reliable source of gasoline at a competitive cost.
Don’t mess with my Visa stock.
I said it on the last credit card fee story and I’ll say it here too: Yes you may “lose” a couple of percent on a CC transaction, but by refusing to take them you will lose far, far more customers.
@mac-phisto: card issuers eat almost all fraudulent transactions & spend enormous amounts of money on technology to combat theft.
I have to disagree with this. It seems to me that credit cards companies keep doing things that make it easier for thieves to make fraudulent transactions – although I can’t understand why.
My first gripe is with RFID-enabled cards. What the card issuers have now done is make is possible for a thief to steal your credit card without taking your wallet or even touching your card! All they have to do is pass an RFID-reader somewhere near your butt and they can make an exact duplicate card (in the sense of the RFID transmission it constantly broadcasts). And with RFID readers at checkout lanes, the cashier wouldn’t even have a chance to see that someone is waving the Park Place card from Monopoly that he stuck an RFID chip on. All for the sake of saving a half second at a checkoutlane because of not having to swipe the card through a reader?
Another way card issuers have set themselves up for more frequent fraudulent charges is by sending already-activated cards to account holders. If it were to become common knowledge that Chase sends Visa cards (just as an example) already activated, it’s extremely easy for it to never show up in your mailbox and the card be used and ditched even before you and the bank knows it was stolen.
I am happy that consumers have been released from almost all financial liability from fraudulent charges; and I agree, obviously, that the banks have to eat that money. So my question is, why do the banks keep making it easy for thieves?
@Logan26:
Not everyone who uses a credit card carries a balance. I pay mine off every month, and haven’t ever paid a cent in finance charges.
AMEX also has many cards now that can carry a balance month to month, and don’t need to be paid off monthly.
Given that the merchant agreement with the credit cards prohibits a different price for credit than cash, this is a predictable outcome.
Of course, an easy way to get around the merchant agreement issue is to open two stations, across the street from each other, one that takes credit cards (and charges enough to make a profit) and one that takes cash only. Then, train the staff of both stations to be able to explain why the station across the street has such a different price. This would then get the idea across to consumers that “free” isn’t free.
@boomerang86:
If my station did that, it would drive me away just like a cash only place would. Most banks charge for PIN transactions.
@Logan26:
AMEX owners are not the only exception. My cards are paid off online within days of the charge posting.
The other problem with cash-only places is that many (and probably most) of them still require you to pay before you pump. So not only do you have to go in to the store once, you have to go in a second time to get your change, if you want to do a true fill-up.
@masonreloaded: Agree totally. I rarely ever carry cash, and would refuse to stop at a store that only accepts cash.
So basically what you’re saying is, if a Gas Station has a $50 sale of gasoline to a particlar customer, the credit card company takes 2% of that sale, or $1.00, as the “interchange fee”. If we consider that the gas station only makes a 3% profit on the gas in the first place, that doesn’t leave much for the owner of the station.
And of course the Credit Card companies make it illegal to charge the customer that additional 2%.. (although they CAN offer a discount for cash).
Q: Do debit cards carry the same interchange fee?
double dipping by the cc should be illegal. they shouldnt be allowed to charge me and the merchant.
Everybody seems to be missing the point that when you pay with cash, you go _inside_ the gas station. The products inside is where all the profit is. So gas stations are one of the few places where losing those credit card paying customers (like myself) doesn’t cost them very much.
@Logan26: if banks didn’t have interchange fees offsetting fraud losses, you wouldn’t have ZERO fraud liability. look at how the ATM networks work – lower flat fee costs that are mostly borne by card issuers. & what happens if someone steals your card & your PIN? you are on the hook for some (if not all) of the fraudulent transactions.
@heavylee-again: most new technologies are developed & pushed by processors (& VISA/MC in particular), not card issuers. i can’t comprehend why any issuer would send pre-activated cards to account-holders – that’s just stupid, but the RFID program is marketed to card issuers by the middle men that control the network.
@Southern: A: no, there’s a different fee structure (& it’s generally much lower), but one thing that no one seems to be discussing here is equipment/processing costs, which is separate from interchange fees.
merchants mostly lease equipment & pay processors access fees (in addition to interchange fees). as with anything else in the business world, the initial cost of access is disproportionately high compared to usage costs. to give a super-simplified example – $200 monthly access fee per network up to 1000 transactions, additional transactions 1¢ each. most small business owners in this case would be paying 20¢ or more for virtually every transaction whereas a large merchant benefits from the volume discount.
The operative word here is “small.” Your large chain stores will still gladly accept your credit card because it makes turnaround faster. Now, what would be swell would be if there was a bill acceptor/change maker that took up to a $20 bill (like in some grocery stores) that would allow cash purchases without having to go inside the store. Of course, this would also be too expensive for the small independent operator.
@mac-phisto:
“card issuers eat almost all fraudulent transactions”
Nope, the merchant does.
I’m awful. I’ve actually stopped at a gas station before and left without getting gas when I realized they only accepted cash. (I rarely carry more than $20 on my person.)
The line inside the store was horrendous, and there was another gas station across the street.
Guess where I went?
@Murph1908: You need a better bank. I’ve NEVER been hit by a fee for a PIN transaction.
So margins on gasoline are razor thing… 10-12 cents per gallon. This particular station owner makes about $60 in profit per month on gas. I know times are tough and gas is expensive and every penny counts. But $60/mo? I would think the loss of business by no longer accepting credit cards would cost him more than $60/mo! People are already trying to find ways to stay away from the pump (and therefore the station all together) Sounds to me like he needs to make sure his profit covers the cost of the transaction and pray people bring their credit cards to buy his gas!
Yeah, if I can’t pay at the pump, that time I don’t have to spend, and not being treated like a criminal, is worth the $0.20 more. I always assume if they won’t let me pay at the pump, it’s because they expect their customers to be criminals.
@Steaming Pile: There was ONE Shell station by me that had this about 5 years ago. I can’t remember another one like it and they got rid of it at some point. It was like you describe- basically like a pop machine that takes dollars, you would just feed the cash in at the pump and it would register how much you put in. Granted as others have mentioned if you’re out in the open at night shoveling cash into a machine it might not be the safest thing to do, but at least you didn’t have to go inside the store to pay cash
That’s generally how percentage-based fees work.
@Me:
I agree. My credit union doesn’t charge a fee for PIN transactions.
@Dobernala: wrong. especially in the case of gas stations. there is ZERO chargeback right to card issuers for PAY AT THE PUMP transactions up to the transaction maximum of $75 (this is why PAY AT THE PUMP is all the rage – ever try to use your card inside & have the attendant send you back outside? this is why).
other examples – any time you use your card at a merchant & you don’t have to sign (fast food up to $25, grocery store up to $50, etc.), ZERO chargeback rights. merchants that participate in VERIFIED BY VISA have 100% chargeback protection for transactions purchased utilizing the service (& even in many cases where it wasn’t utilized).
card issuers also have ZERO chargeback right on fake cards.
yes, occasionally a merchant could be liable for a chargeback. in almost every case they would not have been liable if they picked a better processor. sometimes processors “cheat” the system to provide faster transaction speeds. this is where merchants can really bite the bullet of fraud transactions. but assuming they did their due diligence in selecting a processor, my original point stands – card issuers eat the bulk of the cost of fraudulent transactions, not merchants.
I would be shocked if Chevron allowed him to do this…dealers I think are required to accept credit cards in their PMPA Agreements (dealer franchise-type agereements). Unbranded stations routinely are cash only.
@mac-phisto: @heavylee-again: most new technologies are developed & pushed by processors (& VISA/MC in particular), not card issuers. i can’t comprehend why any issuer would send pre-activated cards to account-holders – that’s just stupid, but the RFID program is marketed to card issuers by the middle men that control the network.
Card issuers have some control over whether they send me a card with an RFID chip in it. In fact, each time I’ve received a card with one in it, I’ve shredded it and called the company to request a replacement one without a chip.
Cash discount + ATM machine in gas station == PROFIT!
@Southern: “So basically what you’re saying is,…”
BINGO! That’s what the average consumer doesn’t get yet. It’s NOT the station owner thats making the big money; it’s the oil companies (and Visa & MasterCard Corp) as they get a bigger stake simply as prices escalate upward, and the station is getting less and less profit (and it was never big to begin with) for the fuel as a small fixed mark-up. Heck, my local guy just barely breaks even on the fuel volume after he pays the pump-jockey kids.
As mentioned elsewhere, they stay in biz via the convenience store or the repair bays. Hoepfully this discusiion will enlighten a few of the “blame the station” people that its not the station that is the bad guy here.
So people, please don’t dump on your gas stations; unite against the conglomerates for a change….
@fostina1: What double dipping are you talking about? Is there some strange credit card I’ve never heard of that charges the purchaser for every transaction?
Annual fees, penalty fees, and finance charges are different and can be entirely avoided. If you’re paying them, you’re a sucker.
There was a station around here who offered 3 cents off a gallon if you paid by cash. (it has since closed)
Heck, the gas station I normally visit has made it so I use my credit card twice. They have now made all pumps pre-pay, which means I pay with my credit card out at the pump. I then go inside, by a pop – and also use my credit card….. since they are forcing me to use it twice… I’m going to use it twice.
I typically pay with my PIN at the gas station. Does that incur fees for the gas station? It comes straight out of checking.
I don’t pay in cash for two reasons. First, I don’t want to make another stop at the ATM. Secondly, I only want to remove exact amounts from checking. Don’t want to take out $40 and spend $35 on gas. Sure it’s only $5, but every little bit helps.
Still, I completely understand the gas stations POV.
@Erwos: The only problem with that is that gas stations have those ATMs that charge a fee if your card isn’t part of the SUM Network or whatever it is. That means if you bank with Wachovia or Bank of America (and lots of people do) you’re getting charged a $2 fee on top of whatever the bank will charge you for using that ATM.
They could convince people to pay using debit if they didn’t leave $100 holds on the card.
@NoWin: You’re right, they’re being pulled in three different directions, but it never should have gotten this far. They’re upset because they got in bed with the credit card companies, only to find out about the herpes when it’s too late.
It shouldn’t take a price surge to realize you’re being screwed on credit card transactions. They’ve been placid about the situation for years now because it was so easy to pass the cost to the customer, but now they’re pushed to the edge with gas prices and are losing money.
@Lambasted:
“Moreover, gas stations are a dime a dozen. Throw a rock, hit 10 of them. Around here, there are gas stations literally right next to each other. If a gas station doesn’t serve my needs, I drive 5 more seconds to the next one. Beep-beep, goodbye.”
Not true. This is a full service gas station, not a convenience store. This guy makes way more on repairs than he does on gas.
There are virtually no full service gas stations around here anymore. 99.9% of the places that sell gas are convenience stores.
I live a couple of miles from this guy’s station.
Sounds to me like the market is already taking care of this. Gas stations that are unprofitable will close. Ones that innovate (either by finding other CCXaction methods, or going to cash, etc) will survive.
The hidden gem in this piece is that some entrepreneur has found a niche/need and created a lower-cost CCXaction company. If that works, gains momentum, maybe a couple of others open up in other regions, the big CC companies will take notice and be forced to lower their fees. Problem solved.
Competition is working here.
The only cash-only stations I see around here in Jersey have pretty much the same prices as the ones that accept credit cards. In fact, there are times where they’re about 5 cents MORE than the CC-accepting stations. So…where’s the cash discount?
I very rarely carry cash on me and if I do, it’s never more than $20. If I’ve withdrawn cash from the ATM, chances are its for a specific purpose (not gas).