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BUSINESS NEWS

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Financial Glossary

PERSONAL FINANCE AT WALLETPOP

SMALL BUSINESS

Some Gas Stations Declining Credit Cards

By TOM BREEN,

Posted: 2008-06-19 12:57:04

Filed Under: Money

CHARLESTON, W.Va. (June 19) - When gas station manager Roger Randolph realized it was costing him money each time someone filled up with $4-a-gallon gas, he hung a sign on his pumps: "No more credit cards."

How Gas Prices Are Affecting US Way of Life

Charles Rex Arbogast, AP

This year's record rise in oil and gas prices has forced local governments to make tough choices. Some cities and other municipalities are reluctantly cutting back police patrols, road repair crews -- asphalt is composed largely of heavy oil -- and, paradoxically, even some bus services in order to lower their fuel bills.

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He may be the first in West Virginia to ban plastic, but gas station operators nationwide are reporting similar woes as higher prices translate into higher credit card fees the managers must pay, squeezing profits at the pump.

"The more they buy, the more we lose," said Randolph, who manages Mr. Ed's Chevron in St. Albans. "Gas prices go up, and our profits go down."

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."

Lenard's group reports convenience stores paid roughly $7.6 billion in credit card fees last year, while making $3.4 billion in profits.

The way interchange fees are structured has long annoyed retailers, prompting calls for relief.

Legislation pending in the U.S. House and Senate would allow merchants to bargain collectively with major credit and debit card companies.

The National Retail Federation says gas prices point to the unfairness of the system: Gas stations are paying more in interchange fees because the price of gas has gone up, while the cost of processing credit or debit cards remains 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.

The credit card companies say fees are just part of the cost of doing business.

MasterCard has capped interchange fees for gas purchases of $50 or more, said company spokeswoman Sharon Gamsin.

Accepting MasterCard also gives gas stations "increased sales, greater security and convenience, lower labor costs, and speed for their customers at the pump," Gamsin said in an e-mail to The Associated Press.

Visa argues that the fees are offset "by the tangible benefits to stations and their customers, such as the ability to pay at the pump," the company said in a statement to the AP.

Absent congressional action, gas stations are seeking other relief, including discounts to customers who pay in cash.

Shipley Energy, which owns 23 Tom's Convenience stores in Pennsylvania, has partnered with a new credit card company, Revolution, which charges smaller interchange fees.

Bob Astor, wholesale fuels business manager for Shipley, said those savings get passed on to customers as cheaper prices at the pump. Customers who pay with the card get an automatic 10 cent discount.

Gas stations in South Carolina, Georgia, Maryland, New Jersey and Arizona are among those offering cash customers a discount, with savings from four cents to 10 cents per gallon.

The Connecticut General Assembly recently passed legislation to make it easier for stations to offer discounts for cash purchases, bidding to cut consumer prices by 10 to 12 cents on average.

Discounts for cash customers may not, however, be the stations' salvation.

The National Association of Convenience Stores reports about two thirds of transactions at gas stations were with credit or debit cards in 2007, a figure expected to rise this year.

"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," Lenard said.

The experiment at Mr. Ed's Chevron, though, has paid off so far.

The station has been in business for 44 years and the ban on plastic hasn't scared many people off, Randolph said.

"We've got generations of customers who come here," he said. "Most of them have accepted it."

Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.

2008-06-19 11:43:13

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451 comments

Quickmatch 05:53:49 PM Jun 20 2008

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Story says: "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," Lenard said.

Winninghamk says: Yep, and people like me who pay cash have to pay an extra dime per gallon so that the gas stations can afford to pay the fees caused by people like you. They should drop the cash price and raise the credit price. Why should I have to subsidize your plastic?

I say: I like to pay with credit card. If I have to pay the 2% credit card cost while the cash buyer pays the flat rate, so be it. Happy? No. But I pay $20 for DSL to enjoy the speed; I pay $2 to use the Chicago Skyway to avoid the traffic on I80/90. Big deal. I pay 2% extra for gas--maybe 70 cents a fill on $4.00 gas. This gas price rise has been a long time coming. Appreciate the low prices over the last 15 years, suck it up and get over it!

TheSports1 07:29:10 AM Jun 20 2008

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He's complaing about $500 a month on credit card fees I own a station in NY and my fees are over $3000 a month that i have to eat.

Magnoliascent 05:21:57 AM Jun 20 2008

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the fuel stations are not making but around 10 cents a gallon the credit card companies charge a swipe fee to the retailor everytime its swiped plus they have to give the credit card companies discounts on the purchase . if you think gas prices are bad now let the stations starting charging the customer for the loss most suffer because of credit cards. it always amazed me at the people who gripe about anything homeland security does , but will not blink a eye filling out information on a credit app. the credit bureaus know more about you than any government agency. the credit card people are making billions and laughing at you all the way to the bank.

Winninghamk 12:39:26 AM Jun 20 2008

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Skneme 11:19:37 PM Jun 19 2008
When used right a credit card is an advantage, we use them for all fuel purchases and pay them off monthly. We also earn about $180-$200 a year from the credit card companies for using them.

Yep, we're the leeches the CC companies HATE, the ones that plan correctly and use THEM to make money
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Yep, and people like me who pay cash have to pay an extra dime per gallon so that the gas stations can afford to pay the fees caused by people like you. They should drop the cash price and raise the credit price. Why should I have to subsidize your plastic?

Fox3776 12:14:48 AM Jun 20 2008

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Fox3776 12:14:17 AM Jun 20 2008

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I don't think I'd patronize a gas station that declines credit cards. It has nothing to do with me lacking cash, just that I do not want to use available cash, when I can use the convenience of credit (that I pay off at the end of the month).

I don't think I'd patronize a gas station that declines credit cards. It has nothing to do with me lacking cash, just that I do not want to use available cash, when I can use the convenience of credit (that I pay off at the end of the month).

www.thelogicgirl.com/2008/06/when-we-are-vulnerable-to-oil-price.html

Fox3776 12:13:38 AM Jun 20 2008

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I don't think I'd patronize a gas station that declines credit cards. It has nothing to do with me lacking cash, just that I do not want to use available cash, when I can use the convenience of credit (that I pay off at the end of the month).

http://www.thelogicgirl.com/2008/06/when-we-are-vulnerable-to-oil-price.html

Skneme 11:19:37 PM Jun 19 2008

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When used right a credit card is an advantage, we use them for all fuel purchases and pay them off monthly. We also earn about $180-$200 a year from the credit card companies for using them.

Yep, we're the leeches the CC companies HATE, the ones that plan correctly and use THEM to make money!

AllianceAE 11:13:43 PM Jun 19 2008

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Credit cards will be the next great crushing blow to the economy when tens of millions default on what they owe. I use my cards heavily, but I pay the bills in full every month. People like me are far a few between. People are maxing out their cards at an ever increasing rate and barely making the minimum monthly payments. I strongly suggest if you have any investments involved with the credit card industry that you divest yourself of them now.

Smi7Jan 11:01:00 PM Jun 19 2008

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Just for you that do not understand, i own a small gas station and i can give you some true info. This 10 cents a gallon profit is bull. We make 5 cents a gallon unless someone uses a card. if someone gets $50.00 worth of gas and puts it on their card we lose 32cents. I dont mean that we make 32 cents less, i mean that we had to pay for the gas and then pay 32 cents more for the gas than you did!!! And for those who dont believe the profits, we mada a whole $188.15 on gas last week before you take off the credit card fees!!!!!!

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451 comments