I noticed something disturbing last night. I pulled into my favorite low-cost gas station, 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 cards 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.
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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 with rewards, 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.
Updated March 20, 2012 and originally published June 21, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Does anyone know why I am being charged $1 somewhat frequently by Exxon Mobil gas stations. I have not even bought this gas and I was charged two days in a row. I live in NJ.
my experience has been that service stations often “try” your card when you get gas to see if its good………..usually the dollar comes off and the real price goes on i bet while you see them on your account they dont stay on there long……..its just a way to verify that you have a valid………open card…….if you are SURE you have not bought this gas (ie read the small print at the pump) i would call my bank…….its possible that someone got a hold of your credit card info and may try to use it!! hope that helps Vicki
I hear what you are saying, but cant they just as easily do that with the full charge amount?
If it turns out to be a bad card, its not like they get the extra $1 for their troubles.
And that $1 charge does not come off right away, sometimes 10 to 14 days. I know $1 does not sound like a lot, but multiplied by all of us who buy gas this way? They are sitting on a lot of money. And how are they deciding who to pull this $1 from? They seem to pick my husbands card over mine, it doesn’t happen to me. I cant figure out who is doing it, the gas station, the credit card, or the bank. None of them are owning up to it.
Yes, but by then you already have the gas, so if it’s a bad card, it’s very easy for you to make a quick get away.
Consumers are clueless when it comes to the gas station business. Let me break it down for everyone so they will be able to understand what goes on.
The average yearly margin on a gallon of gas for a station owner is 10 cents. If a customer uses a credit card, the fee for the owner of the station averages 2 1/2 % of the sale price per gallon.
Example : I sell a gallon of gas for $3.65 per gallon. My profit margin is 10 cents on that gallon before expenses. The credit card company (transaction fee) they charge me on that gallon is 9 cents. That leaves me a measly 1 cent profit before paying my bills to sell that gallon of gas (employee/cashier, electricity to pump the gas, repairs and maintenance). Gas station owners actually lose money on gas, especially now that prices are so high.
We are being forced to go to a cash discount or charge more for credit because we are being put out of business with all these fees. The government makes 35 cents on a gallon of gas and we make 1 penny? Get the picture. If we raise prices to be able to cover the credit card fees, we are labeled PRICE gougers. When you go to a restaurant, their profit margins are 300 % or more per plate, so their profit margin is so high that credit card fees do not affect them as badly. The credit card companies are making billions in credit card fees while leaving me 1 penny per gallon and I am the one left with all of the costs.
Cash discount at this point is our only option.
Thanks for the lesson in gas station economics. I had no idea. I wonder if you could tell us if you are one of the larger chain stations or not? And also if you are a chain, if one uses the chains credit card, does it still cost you if at all, or less than the other major credit cards, ie; visa and master-card.
I also own a gas station. Gas Man is 100% correct. If a customer comes in and spends $60 on an American Express Card, the transcation costs us $2.10(3.5%). We make $1.50 on the 15 gallon purchase. This is why we have to charge more for credit. If you like a station ask for the gas companies credit card(I.E. Mobil, Gulf,Sunoco). The station owner does not get charge a fee for these cards and therefore should offer you the “CASH” price for their credit card.
If you do not want “clueless” consumers complaining about what they are paying, then you should advertise the ACTUAL price the consumers will be paying; not a reduced price designed to lure unsuspecting consumers to your station. The issue is not whether gas station owners are profiting from this hidden charge. The issue is that the gas price advertised is misleading and is deceptive and, it is.
I just noticed that a new Safeway grocery store in our area has included a gas station at its site with very competitive prices. The station is adjacent to the street, just as with most other gas stations, with easy access. I suppose it’s possible that this gas station is a loss leader to bring customers to the grocery store, but it offers no more convenience than other stations. In fact, if you need something at the grocery store, you would still have to leave the station and park your car near the entrance to the store. So, my question is: why would a large grocery store chain spend the money to build a gas station, given the high cost of doing so, if the facility would not make enough money to justify the expenses of building and operating the station and buying the gasoline from an oil company? I can’t imagine that any volume discounts they might receive from any oil company would justify the cost, either, especially given the very competitive prices that the grocery store charges for its gasoline (and they accept credit cards without charging more). A major corporation doesn’t invest in a business that won’t result in a substantial profit for the company and its shareholders. The numbers we have been given by the station owners on this board can’t be accurate.
I would like to know why I am being charged the extra credit card charge for gas when I use a cash card bought from the same gas station? We buy these from a Texico station and when used they say they have to treat them as a credit card.
Confused in Taft California
Most of the gas stations here do this bullshit by charging customers 5 to 15 cents a gallon more for gasoline if they use a credit or debit card versus paying with cash. Buy your gas at Speedway,Meijers,Kroger or any gas station that does not pull that bullshit ripping off customers
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