Gas Stations Charging More for Credit Card Users?

Some gas stations are secretly charging credit card users more, ABC News reports. (Video here.)

ABC NewsMany Americans have taken up a new hobby — hunting for the gas station with the lowest prices. But the hunt has gotten exponentially harder as the price of oil has skyrocketed and the posted price may not even be advertised, especially if the consumer wants to pay with a credit card.

To combat the hefty fees that card companies are charging gas stations, many owners have passed the costs on to the consumer by charging more per gallon if the payment is made with plastic instead of cash. The card giant Visa, for instance, typically charges a 2 percent fee for each credit card transaction to the station owner. If the price of a gallon of gas is $4.11, that translates to about 8 cents a gallon, which is then passed on to the consumer who pays with a credit card. But sometimes, as ABC’s New York affiliate found, some gas stations take the opportunity to charge even more exorbitant increases — as much as 50 cents per gallon.

But increased profit from credit card customers is not the only reason to raise prices for those who pay with plastic. As more people use cash to save at the pump, they are forced to come inside the store to pay, which creates another opportunity for the gas station owner. “Because while you’re in there, you’re going to also pick up a coffee, a soda, maybe even a sandwich,” Mount said.

Those of us who were buying gas twenty years ago recall this practice, although it was almost always posted in big signs by the pumps. It was also widely outlawed, prompting some station owners to offer a “cash discount” rather than the illegal “credit card surcharge.”

Indeed, many stations are doing that again. It’s a practice that makes sense, really, given the skyrocketing price of gas and the low margins at the station level. With most of us now swiping our cards and never entering the mini-mart to pay, station owners are getting squeezed.

But hidden fees? Let alone 50 cents a gallon?! That’s certainly criminal.

via l0ckergn0me

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James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. BigFire says:

    There’s an article from WSJ a couple of days ago that points out many gas station are going out of business due to the processing fee of the credit card company. The transaction fee is percent based, so any of these gross profit gets gobbled up. In the article, Cheveron has been trying to get out of the gas station business just for this reason.

  2. yetanotherjohn says:

    Stations here in Texas have worked out a system for paying cash though your drivers license. You sign up, agree for them to debit your bank account and then when you slide your drivers license through the card reader at the pump and the cost gets taken directly from your account. In turn, you get about 10 cents off per gallon.

  3. Jeffrey W. Baker says:

    Texas drivers’ licenses have your bank account number encoded? That seems … improbable.

    The real question here is why it is illegal to pass along the credit card processing costs. Pure legislative pandering I assume. I’m barely old enough to have filled up my car regularly with the old dial-type pumps, where everyone made a game of trying to hit .00 exactly. In those days I never used my credit card, only cash. I never used a card to pay for gas until they came up with the pumps with the card slots integrated.

  4. PD Shaw says:

    I thought it was the retailer’s contract with the credit card company that precluded different rates for credit care and non-credit card use.

  5. Fredw says:

    A couple of points here:

    If you let ANYONE scan your drivers license you probably deserve what you get. When T.J. Max customer records were compromised the people who allowed scanning of their licenses for returns were the ones most at risk. Your DL strip has all of the info necessary for identity theft. In addition, these are you national identity papers. Do you know what happens when your papers are compromised? You may have to kiss that trip to Italy goodbye because you find that you can’t leave the country when you go to board your flight ( see Casablanca ).

    About the credit card charges; if you call your card issuer about transactions where you were charged more than cash customers, they WILL take action and the station could lose their card clearing privileges. Right or wrong, they are contractually obligated to charge the same amount. If businesses don’t like the charges, they can stop taking cards; then market forces will lower the rates.

  6. just me says:

    I haven’t seen any stations offering a cash discount around here.

    I generally use my debit card rather than credit anyway.

    Credit card contracts aside, I am not bothered if the increase for CC users is what the store would pay for the transactions, but I would think marking the fee up 50 cents would be an illegal or prohibited practice.

    I think what I have noticed here is that stations that used to let you pump and walk in and pay after filing up don’t do it anymore. You pay cash up front or run your credit card through.

  7. teqjack says:

    To combat the hefty fees that card companies are charging gas stations, many owners have passed the costs on to the consumer by charging more per gallon if the payment is made with plastic instead of cash.

    Well, they are trying (illegal and/or against agreements with CC companies) that, or (legal) upping price but offering discount for cash. but the reporter does not seem to have listened to station owners/managers and instead made assumptions.

    The card giant Visa, for instance, typically charges a 2 percent fee for each credit card transaction to the station owner. If the price of a gallon of gas is $4.11, that translates to about 8 cents a gallon, which is then passed on to the consumer who pays with a credit card. But sometimes, as ABC’s New York affiliate found, some gas stations take the opportunity to charge even more exorbitant increases — as much as 50 cents per gallon.

    Uh, the 2% has for years (decades back discount-for-cash was widespread among all retailers [not just gas] but was dropped) been included regardless of whether plastic or cash was used.

    The problem is that the gas station is restricted not to a percentage over cost, but a flat sum. This sum is usually 8-10 cents per gallon: not too bad when gas at the pump is under, say, $2.25. But when gas is at $4.00 an 8cent allowed markup is wiped out by the 8cent fee: at $4.10 the station is losing money when customers use plastic.

    Query: is this ignorance on the part of reporter, or editor?

  8. FireWolf says:

    1 molotov cocktail oughta solve that dilemma???

  9. DavidTC says:

    There’s an article from WSJ a couple of days ago that points out many gas station are going out of business due to the processing fee of the credit card company. The transaction fee is percent based, so any of these gross profit gets gobbled up. In the article, Cheveron has been trying to get out of the gas station business just for this reason.

    If you can, when you buy gas on a debit card, be sure to actually purchase it as ‘debit’ instead of ‘credit’. Debit cards purchases cost a flat processing fee, usual 10-20 cents per purchase, as opposed to credit cards, or debit cards run as credit cards, which costs, as they point out, up to 3%.

    So do a good deed and have more of your money go to the struggling gas stations instead of the certainly-not-struggling credit card oligopoly.

    And now some people are scratching their heads and wondering why the pumps, and store clerks, ask if it’s debit or credit, when the scanner could clearly read the card and simply use it as debit if it worked as such? No one would mind if the store rang it up the cheapest way for the store, especially if that’s the way it had always been done…ringing up as debit unless the store didn’t take them, and only then ringing up as credit.

    Well, it’s prompting you because the credit card oligopoly require, in their contracts with the businesses that process credit cards, that you get asked, so approximately 50% of the purchases result in a huge kickback to them that shouldn’t exist.

    It’s the same reason places can’t offer discounts for cash, even when it’s not illegal…their CC processing contracts don’t allow it. The CC oligopoly has strong-armed the whole industry, so buy ‘debit’ whenever you can, which simply has a very tiny fee that your bank charges to handle the processing, instead of an absurd percentage.

    (Of course, WRT to the original post, you shouldn’t be buying Chevron gas unless you like propping up the murderous Burmese military junta.)

  10. DavidTC says:

    Oh, and it’s been mentioned that some places are raising prices and then offering a discount for cash, instead of having a surcharge for credit cards, with the assumption that this is somehow legal or not a violation of CC agreements.

    I don’t doubt that some places are doing that, but I seriously doubt they’re doing it legally or in accordance with the contract. I can’t imagine anyone would write a law or contract and state the requirements in such a way that this behavior would be allowed. The sane way to write such contracts and laws would be to disallow ‘any price variation between different payment methods’, and I suspect that’s what they say. You can’t just play with semantics over what you call the two prices, no lawyer would be stupid enough to allow that.

    Now, there are ways to do it legally…for example, you can sell, only to cash purchasers, an entirely separate product, namely, a discount card. Few agreements, and no laws, require that you sell all items via all payment methods, for a good reason. (For example, you might not wish to sell money orders to people paying via check, as that sounds like a great way to turn a bounced check into actual cash, and that purchase appears to have no other purpose, as money orders essentially are checks anyway.)

    So you can probably legally sell them a discount card, or, if not, a pointlessly marked up item that coincidentally gives them the same amount of discount gas. ‘Buy this plastic trinket for 95 dollars, get 100 dollars worth of gas for free! Cash only.’ Tada, you just sold gas at a 5% discount to cash users.

    Or, if you want to go the card route, you can even have an entirely separate legal corporation selling such discount cards, and reimbursed fully them for the cards, with them reimbursing for the gas (I.e., they all come exactly even.), with this second corporation not taking credit cards at all. (This isn’t as crazy as it sounds…this is essentially how coupons work, except that the second corporation is the manufacturer, and no one charges for them.)

    And some stores that have gone this route in the past have sent up two entirely separate stores that happen to occupy the same location and have the same merchandise and clerks…and only one of the stores take credit cards, and the other charges less. But with the regulation on gas stations and their gas storage, I doubt that could work.

    There are ways to weasel through the agreements, but not any that would let customers walk in and pay less with cash than credit cards without some prep work on the customer’s part. (I’m suddenly reminded of places that require you to pay a dollar to join ‘a club’ before you can purchase alcohol, in a similar legal situation.)