Gas Stations' Profits Hurting: Should Congress Intervene?
A recent article on CNN Money described the woes of independent gas station owners. The increasing cost of a gallon of gasoline results in less profit thanks to the processing fees credit card companies charge the merchants. I can appreciate that doing business in this type of environment is tough.
With gas prices soaring to a national average of $3.76 Wednesday, according to motorist group AAA, those credit card fees add up to an average of 7.5 cents per gallon – taking away nearly 83% of gas stations’ fuel profits.
Most gas stations earn their bigger profits on items purchased in the attached convenience store and mechanic services. Gasoline is a loss leader. Everyone needs it, and many gas stations are willing to take even a slight loss on gas as long as they continue to make profits elsewhere.
The credit card companies don’t accept the blame. For example, Visa says the processing fee they charge their gas stations is set by the large oil companies.
The Electronic Payment Coalition (EPC), a group representing credit card networks and financial services organizations, said it’s impractical for card companies to negotiate with every single gas retailer. So, it said, gas station owners should put pressure on their parent oil companies to negotiate a better fee.
To compete, some gas stations are charging customers who use a credit card more than a customers who use cash. Apparently, they’ve found a way to avoid breaking the credit card companies’ rules by calling this a “cash discount” rather than a “credit premium.”
I don’t know what the real difference is, and the only effect it’s had on me is switching to another gas station. The main problem is when gas stations advertise their cash price without disclosing (until the nozzle is in your car) that you will be paying more if you use a credit card.
To help solve some of these problems, both for the consumer and the independent gas station owner, Congress is suggesting fixing the maximum rate that credit card companies can charge merchants to accept their cards through a bipartisan bill in the House, called the Credit Card Fair Fee Act. Congress will set up a committee who will define what rates the credit card companies can charge merchants.
Will this solve the problem or is it unnecessary meddling in a free(ish) market economy?