I noticed something disturbing last night. I pulled into my favorite gas station last night, which happens to be Valero. It’s my favorite simply because it’s the least expensive in the area and it’s right on my route home from work. Apparently they have begun charging 6 to 8 cents more per gallon for payments with credit card than they are charging for payments with cash. This is a very new development, as the last time I filled up a few days ago, this was definitely not the case.
I didn’t look at the pump until I gave the attendant my credit card and he began pumping. (New Jersey is still a full-service-only state.) There was nothing on the large sign that indicated that there was now a price difference between credit and cash.
The price difference practically wipes out the cash back bonus I’d receive by using my credit card, so it will now be more difficult to determine which method of payment will actually cost less in the long run and which gas station to use, as prices vary daily.
I thought it was against the terms of service of a merchant account—and possibly against the law—to charge different prices for cash and credit or to add a surcharge for credit card purchases, all else being equal. Here’s how the stations apparently get around this issue:
Now we all face dual pricing, and as was the case when the practice first popped up, to comply with the law, the pump price has to be the credit price from which the cash discount comes.
But the price advertised on the big signs that draw people to the stations is the cash price. That is misleading.
According to North Jersey Media Group, gas stations are “forced” to adopt this policy because merchant fees eat into their profits. I understand that individual stations are put in a squeeze when prices are increasing. Understandably they want to pass that cost onto the consumer without pricing themselves out of competition.
As I’ve been following prices practically day to day, it’s clear that when this was initiated at the stations within the last few days, the cash price is the one that followed the trending line and an extra surcharge was added to the credit card prices. Nevertheless, they can still consider it a “discount” for cash purchases. The regular credit card price should be the one advertised on the large signs, not the discounted price.
11:17 am (reply)
Use the credit card to buy gift cards. This only works if the surcharge does not apply to the gift card of course.
11:34 am (reply)
I remember back before we started using credit cards extensively (early 80s) that all gas stations gave a “cash discount.” I was very surprised when they dropped it. I am not surprised that they are bringing it back, particularly in the case of independent station owners, who don’t make much off the sale of a gallon. What really surprises me are that there are still places where attendants have to pump the gas for you.
11:35 am (reply)
The funny part is that most people spend way more money with credit cards. From what I have read, that is why some many companies can charge the same price for cash and credit cards purchases. The extra spending they receive on credit cards far exceeds the small percentage the credit cards fees take up. Forking over 50 cash, versus swiping a card is a big psychological differences.
I will be putting this to a test personally with a cash only July, to see if I really will save 12-18%.
11:44 am (reply)
I noticed this when I was on vacation to CA about 2-3 years ago. The price differnece was about $.10 a gallon. I paid cash.
What I don’t like about it is that I love pay at the pump – no lines, no hassles. :(
I guess that is another way to drive customers into the stores and get them to buy more snacks, cigarettes, etc.
11:47 am (reply)
I am surprised Jersey is doing this. I have to tell my parents because our gas station is close enough to Jersey that we lose a tiny slice of customers. (The crazy full-serve people)
Fascinating. I thought advertising like this was illegal because it was deceptive. I am also surprised that gas stations are still allowed to charge two prices. My parents don’t and I highly doubt they will. (Prices are back below $3 in PA, DE, MD, and VA anyway.)
12:08 pm (reply)
This is good news (the cash/credit difference, not the sign issue). The only reason I stopped paying cash was because the price advantage disappeared. Coincidentally, I am working on an article where I mentioned the old days of paying less for cash so now I have to update that part.
I received a server error so I am resubmitting this comment.
12:57 pm (reply)
“I thought advertising like this was illegal because it was deceptive. ”
I think as long as they advertise the higher price and charge a lower price for a cash transaction they are in the clear. Seems reasonable to me.
1:28 pm (reply)
I too had thought this was an illegal practice and it does seem to be pushing the line if the large sign advertises the cash price but the pumps themselves list the credit price.
I’ve been known to skip stations that advertise their price on the main sign being a discounted price if you purchase a car wash. When I pull into a station, I would expect to pay the price that was displayed on the main sign.
I’ll have to keep my eyes open here at our gas stations to see if there is any difference in the sign/pump prices.
1:31 pm (reply)
I’ve noticed this popping up more in California, too. Just a year ago there were no stations with two price tiers, now there are a few that I know of. I’m sad to see this myself since I use a 3% cash back card to get money back from the sale, and it’s about awash with the cash/credit price difference. Hopefully my favorite stations will continue to be one price.
1:44 pm (reply)
Patrick: In NJ it won’t necessarily drive people into the stores to buy higher-profit-margin items because the attendants often take your cash right at the pump thanks to the full service requirement.
J: It’s not a price advantage for cash—cash prices are in line with the station’s historical trend—it’s the credit card prices that jumped. I guess it’s just semantics, but it’s important to note that there is not suddenly a “new discount” at these pumps.
1:56 pm (reply)
Flexo, yes, I noticed from your first post that cash is the old combined price—for now—but in the long run credit-payers will become like bottled-water-buyers by bearing the profit burden for the cash-gas-payers (paying cash for gas is like only buying lost-leader sales items at the grocery store).
2:05 pm (reply)
At least in busy places like grocery stores, it has been found that credit and debit cards take less time than cash or checks at the check out and thus save on labor costs and reduce customer annoyance from having to stand in long lines. This would at least partly justify keeping the same price for credit cards as cash.
But this might not hold true for gas stations that don’t necessarily have long lines anyway.
2:11 pm (reply)
I got caught by this same exact thing in NJ as well. I didn’t realize it until my tank was half filled and at that point it was too late. Annoying thing is that I had the cash on me, but I just found it easier to pay with the card at the time and save the cash for a wedding later that night rather than having to hit up an ATM.
I don’t mind gas stations doing this, but it should be made clear to the customer rather than using deceptive advertising. In defense of the gas station they did have the credit price on the main board as well, but the cash/credit part was tiny and in odd placement and I just assumed the prices were the usual regular/plus/premium prices.
3:39 pm (reply)
My understanding is that this practice went away because credit card companies began enforcing their contracts with the stations. When you contract to accept Visa or Mastercard you have to agree NOT to charge higher prices to consumers. You can get your ability to handle credit cards revoked for this kind of nonsense—unless something has suddenly changed and Visa/Mastercard doesn’t mind retailers discouraging the use of credit cards. How likely is that?
4:01 pm (reply)
Kevin: The stations get around this regulation by calling the credit card price the “real” price and then offering a cash “discount.” The only problem is they’re advertising the “discounted” price on their huge signs. But I still don’t see why Visa/Mastercard lets them get away with the practice, as it’s effectively the same thing.
4:37 pm (reply)
According to the TOS for mastercard (too lazy to look up visa) it is okay to offer a “discount” for cash payers.
12:19 am (reply)
>>What really surprises me are that there are still places where attendants have to pump the gas for you.
LOL—one place anyway—it’s called “New Jersey”
9:30 am (reply)
10:51 am (reply)
I passed two different Valeros yesterday, and they have changed their big signs to advertise the CASH price for regular unleaded in the top position and the CREDIT price for regular unleaded in the second position (where the price for plus unleaded used to be).
I haven’t passed my regular station yet—and I probably won’t again as I am moving.
11:29 am (reply)
What’s eating into your pocket in NJ is those unnecessary labor union gas attendants.
12:07 pm (reply)
Ted: are you sure? Gas prices in NJ are among the lowest in the country, and as far as I know, gas attendants in this country are not unionized. I’d welcome any evidence otherwise, however.
12:48 pm (reply)
Flexo wrote, “I haven’t passed my regular station yetâ€â€?and I probably won’t again as I am moving.”
Might that be overreacting to the sign placement?
1:29 pm (reply)
Here in the MD suburbs of DC there is a chain of stations (FREESTATE) that only takes cash and is the low price leader in the area. The lines to gas up and/or pay are always long on the weekends, although mid-day during the week is fine. Pricing for these stations is consistently 3-7 cents less than the stations 1/4 mile down the block that take credit cards for regular unleaded.
1:42 pm (reply)
Marcy, that is a good point and reminds me of another point: In the old days, after the cash/credit difference first disappeared, I used to seek the stations that had the old pumps where you needed an attendant to process your card, because the stations with the fancy self-swipe pumps were naturally getting their customers to pay for the high-tech pumps with higher gas prices.
2:37 pm (reply)
No question the gas station owner is trying to steer the consumer away from credit cards—you sound a bit skeptical about the owners motives, but this is part of a much larger fight between merchants and the banks issuing credit cards. See this newspaper column, “Credit card interchange fee outrageous” for one explanation.
I consult for the Merchants Payments Coalition on the issue, and they’ve got a lot more information about this up at their website, UnfairCreditCardFees.com.
Long story short: Merchants aren’t the bad guys here. They’re just trying to keep their heads above water, and while they watch profit margins narrow, the banks’ profit margins thanks to the interchange fee keep going up and up.
3:00 pm (reply)
?!er: I’m aware of the slim profit margins for the owners, but the merchants are not free and clear of deceptive practices. Either raise all prices to compensate for the low profit margin, or advertise the CREDIT price (non-discounted) on the large signs that draw people into the stations. When Station A is (inappropriately) advertising their lower cash-only price reflecting the “cash discount” (say $2.80), and the Station B across the street is advertising their price for all transactions (say $2.85), you pull into Station A for their lower price, and once the gas is being pumped you realize Station A’s real “non-discount” price is $2.88, you’ve been a victim of deceptive advertising. You have to be observant if you’ve been used to paying credit cards for all transactions, but you shouldn’t have to be, you should be able to compare apples with apples.
4:25 pm (reply)
Visa rules are available here:
http://usa.visa.com/download/merchants/rules_for_visa_merchants.pdf
Surcharge rules are on page 15.
I believe that what this particular station is doing violates these rules, as it is stated that the cash discount offer must be clearly disclosed.
Also: If credit card interchange fees are eating up so much of the merchant’s profit, switch to debit only! It’s a flat fee instead of the fee-plus-percentage of a credit card.
1:36 am (reply)
1:57 am (reply)
But you forget – a debit card means you have to actually have money in your checking account to pay for the gas.
This means 90%+ of Americans couldn’t use this option ;-)
12:10 am (reply)
The problem is that, ironically, the more expensive gas is, the less money most gas stations make. Gas stations make most of their money by sales at the mini-mart or from car wash sales. They typically make a fixed amount per gallon of gas, whether the gas sells for $1/gal or $4/gal. But at $4/gal, the CC merchant fees eat far more of their (fixed) profit than at $1/gal – and people are much less likely to buy a Coke if they just caughed up $75 to fill up their truck…
11:24 am (reply)
12:07 pm (reply)
12:25 am (reply)
12:34 am (reply)
Foobarista: As I’ve said, while I feel somewhat sorry for the station owners’ plight as gas prices rise, it’s not an excuse for advertising only the “discounted” cash price. The bottom line is that if I want the best price, I’m going to start having to carry much more cash than I normally would, and be more discerning about the stations I frequent. I still find the practice of charging cash customers one price and credit customers another price inappropriate (raise all prices is the credit card fees eat too much into profits) AND don’t use misleading advertising. If it is truly a cash DISCOUNT as required by the merchant agreement, list the regular credit card price.
If this type of advertising was truly allowed, gas stations could offer gas at $1 a gallon with a $30 car wash, and list the price on the sign as $1.00 for regular unleaded.
6:50 am (reply)
Flexo said, “If this type of advertising was truly allowed, gas stations could offer gas at $1 a gallon with a $30 car wash, and list the price on the sign as $1.00 for regular unleaded.”
I like 1 penny per gallon with a $3 per gallon pump rental. If the total was competitive, I would buy that guy’s gas for his creativity.
7:19 am (reply)
10:46 am (reply)
This just happened to me yesterday. I agree that you are used to seeing the 2nd price on the sign as the next grade gasoline and not a “credit card” price. This is just wrong – it should be more clear. I was half-tanked before I noticed the difference. My wife went back to her credit card receipt and noticed a 6-cent/gallon charge.
NJ Officials certainly did not to a good job informing consumers that this was coming.
Finally, with cash, there is almost never a receipt. It is easier to hide cash sales and cheat the Government.
Never again will I go to Valero….
11:04 pm (reply)
Hi,
I am so glad you raised this issue. I have had this happened at a Valero gas station. They do not display the price for using a credit card and you find out only if you look at figures when the guy is pumping which is how I caught this.
So how do I beat this, well simple, avoid Valero!
Once people stop coming they will stop deceiving the customer.
6:10 pm (reply)
i see not many of people here are getting the actual point, “hiding gas sale has never happened and do not need to be hiden” you are probably thinking tax but goverment charge merchant tax on per gal which is .44 cents a gallon before its even delivered to the gas station. and credit card fees are normaly 2 to 3 % + 10 to 25cents per transaction so do the cal for every gal merchange will pay minimum of 10+9 = 19cents per gal if gas price is $3 per gal, so in reality they can offer 6 – 9 cents and be able to stay in market with bigger companies.
9:20 am (reply)
I went to the gas station this morning, Garden State Fuel on Rt. 130 in Bordentown, NJ, and their sign displays the cash price as well. When you pull up to the pump, they display both cash and credit. The attendant atleast let me know that since I would be paying with credit, I would be charged a different price. I was blown away and can’t even believe this is LEGAL!
And for all of you who aren’t from New Jersey, we DO have one of the lowest gas price averages in the US. On average, we’re $0.10 cheaper than PA alone.
10:51 am (reply)
I had the same experience last month on Rt 27. There are an Valero Gas Station and a BP Gas Station. Since I was used to go to the Valero Gas Station to fill my car, and the BP station and the Valero station showed the same price on their roadside sign, I went to the Valero station, and you know what happened next: I was charged about 6 cent higher per gallon than the price listed on the road side sign. I felt that it was kind of deception going on there. Later I filed a complaint about this to State Office of Weights and Measures. The office sent a person to investigate the issue. Today I got reply from the office saying the Valero station is in compliance. So if you feel you’ve been treated badly by Valero, you need to file complaints to the Office, and talk to your senators. See the link
7:55 am (reply)
Obviously the one way to combat the practice is to NOT support that station. Drive to one that has one price. Boycott Valero!
5:24 am (reply)
You might want to check your state’s laws. The laws of several states have laws against surcharges for using plastic to pay for products & services. Florida’s law specifies that it’s a 2nd degree misdemeanor to do so.
9:22 am (reply)
Floridian: In some cases, merchants are able to get around that law by declaring that the lower cash price is a “discount” from the regular price. The question then is whether they, in the case of gas stations, can advertise their “discounted” price to compete with other stations, and by the time you pull into the station and notice that you’re bing charged more, drivers may not be motivated to pull away and find another station.
10:35 am (reply)
Where I live in Southern California, there are two stations that advertise dual pricing: the first is now a Chevron, the other is a Valero (though the only Valero in town to do so). Both have large signs advertising both prices.
Remember though, it costs now about 9 cents a gallon to process your credit card, by which point the station makes maybe a nickel GROSS per gallon sold.
The minority of sales and majority of profits are from non-gas sales.
Personally, I now usually fill up at one of the Arco’s (BP). Cash or debit only, 45 cent charge for debit.
2:53 pm (reply)
1:02 pm (reply)
iam a gas station owner and here are the facts. because the consumer likes to use credit cards how do you thing the cc company makes their millions. thats right by charging to merchants. here is the break down. mc/visa charge 2.5% plus a .35 cents transaction fee amer.express charges 3.1% plus a .35 cents transaction fee you do the math on how much it costs a gas station. when gas was a dollar we made 10 cents a gallon and when gas went to 3.00 dollors we still make 10 cents. when you buy $35.00 in gas on your ax it costs us $1.43 in fees. thats aprox. 12 gallons @ .10 profit. that gives us a loss of .23 cents