Payment Method Discrimination Strikes Again at the Gas Station

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Last updated on March 28, 2010 Views: 547 Comments: 32

Last June, I noticed that a few gas stations in my area were charging different prices for gas depending on whether your method of payment was cash or credit. My biggest problem was that this wasn’t advertised on the large signs attracting drivers to the station. The station later changed its signs, though the cash price appears in the spot where one would normally see the “regular unleaded” price, and the credit price appears where one would expect the “plus unleaded” price. The labels “cash” and “credit” are only legible up close.

This “cash discount” is a joke. The cash price is the competitive price relative to other local stations and the credit price has increased more significantly. This is just a sneaky way of getting around Visa’s and MasterCard’s requirements for merchants not to charge more for customers who use credit cards. I am aware the credit card companies charge transaction fees that can cripple gas station owners who make very thin profits on gasoline, but this is not the answer, particularly if they must run misleading advertising to compete with other stations.

The price discrimination first occurred shortly before I moved to a new town, so I didn’t have to deal with it at that time. Once I moved, I found a local, low-price gas station on my daily route that did not offer a “cash discount.”

Last night, I pulled into my low-cost station on the way home from the office, just like I have been doing several times a week for the past 11 months. As pumping our own gasoline is against the law in New Jersey, I asked the attended to fill up the tank. It wasn’t until the tank was almost full that I glanced at the sign on top of the pump to see how high the prices increased over the weekend. I noticed there were two sets of prices, one for cash and one for credit.

Curses, foiled again. Some time in the past few days the owners of this Raceway gas station decided to offer a “cash discount” as well, just like the Valero station near my old apartment. The large sign attracting drivers to the station had been changed to list cash price first, followed by credit price in the “plus unleaded” location, with small labels reading “cash” and “credit.”

The price difference between cash and credit was ten cents. I’m considering opening up a CitiBank Driver’s Edge credit card, currently offering a 6% cash back rebate on gasoline purchases. That rebate would make up the ten cent difference and more, but I’d rather not open more credit cards.

I’d also rather not carry around cash for fueling my car, considering it cost almost $40 to fill up last night. I would save $2.00 to $3.00 a week by paying with cash. All other gas stations are either more expensive or out of the way. Perhaps I’ll try cash for a while, but I’ll have to get used to withdrawing about $100 more than I usually do each week. If I adapt, I’ll have perhaps an extra $150 saved after one year.

Article comments

Anonymous says:

Now, my understanding is that this dual pricing occurred because as gas prices go higher, stations loose their profit margin. Now that the prices have plummeted, I’ve only seen one station revert to single pricing again….interesting.

Also, from what I’ve seen on this board, people are talking about a nickel difference between cash and credit…here in Connecticut, the average difference is a dime, and I’ve seen a disparity of 15 cents at one station.

Again, this just makes me believe that there are owners taking advantage of a bad situation.

Fortunately, only about a third of gas stations here employ dual pricing. Especially when the ones without it are charging the same as those who give cash discounts…hmmmm….

Anonymous says:

I can 1 up you.

In Florida the difference between the advertised, ‘discounted’ price and the credit price is generally $0.03. They only advertise the ‘discounted’ price on the sign with “Cash only” next to the prices. I pull up and start filling up my car. The advertisement on the pump says “Next time save 3 cents per gal if you use cash or sonoco credit.” I finally look at the price and I’m paying $0.05 more than the discounted rate.

This is not the first time I’ve had this issue. About a year and a half ago I had this same issue when filling up at a different station late at night. Both times I have gone in to talk with the attendant and both times the attendant starts agreeing with me that there is a 3 cent increase, but once I show them the difference I am paying they change their tune and agree with the price difference I’m charged. I show them the advertisements that show 3 cents and they say “I cant help you, I’ll tell my supervisor” or “You are going to have to call the owner.” Meanwhile the receipts you are given have no contact phone number for the gas station.

I wonder how many people are getting overcharged for their ‘undiscounted’ gas. It also makes it impossible to shop around for gas prices unless you pull into each station to check the price.

Anonymous says:

You make very good points…again, though, merchant fees are the cost of doing business…as a customer, I am sympathetic only to a degree. Let me ask this: Do you see other types of retailers charging credit card fees to their customers? And what would happen if they did? The playing field for the customer needs to be even, no matter what. How do retailers deal with the costs of doing business? It’s absorbed into the prices of the merchandise, without discriminating against a customer who pays by either paper or plastic.

The same goes for gasoline….if your prices were a couple cents higher across the board to pay for these fees…but there was no difference between cash or credit, I probably wouldn’t even notice…neither would most customers…and retail is a monkey see monkey do business…if you are worried that higher prices across the board would drive away business…well, if everybody adopted the idea of absorbing these costs across the board, the playing field would be even.

More and more people use direct deposit, and therefore don’t need to carry cash, since everybody (pretty much) has a debit card. That, coupled with the high price of gasoline, and the fact that this practice was quietly introduced without warning, in my eyes gives the PERCEPTION that this is another price gouging stunt. It looks very deceptive. Retail is all about PERCEPTION…this is a poor practice, and I as far as I’m concerned, it needs to stop. Another way needs to be found. It feels like discrimination because I choose not to carry cash. In this day and age, I shouldn’t have to.

Again, I understand that businesses need to profit to stay alive. But, as Iearned a long time ago, the PERCEPTION needs to be customer service first, profit second. It is insulting to the customer when you make it obvious that profit is first.

And, I tend to always do business with the local stations…I believe in doing business with the little guy whenever possible. I don’t even have a Sam’s Card!!!


Anonymous says:

Why are “cash discounts” are emerging among small businesses?
Many unprecedented industry standards form when businesses are struggling however providing a “cash discount” is not unprecedented. Our economy is struggling, as a recent cum laude honored graduate of major university, I cannot find a job in my career field. Money, from the Fortune 500 to the smallest single family business, is tight. The government is concerned with bailing out corporations that upon collapse would devastate our economy.

While the financial sector corrects, banks and other financing institutions are unable to hold more liability on their sheets. Furthermore, the generally accepted accounting rules which value these liabilities on their sheets are being valued at almost nothing because instead of analyzing the liability based upon future value, which can be calculated with statically determined bad debt allowances, the liabilities are being valued at market value. In other words, “What would you pay for this today?”. This thought process has emerged from difference financing contracts being lumped together, kinda like an ETF, and then being traded between corporations. As housing grew into a bubble with financial companies covering the rest of buyer dollars, these lumped-together-liability contracts began to be traded almost as if they were stocks. We are now seeing the resulting market correction from this financing-liability frenzy.

To exacerbate problems, the up-tick rule was removed from Wall Street and there are naked shorts against financial companies. (The up-tick rule required a stock to tick positive once before another short transaction could occur. Naked short selling, shorting a stock without borrowing against a common share, has always been illegal, yet the rule is not being enforced.) Basically, there are short sellers on Wall Street, for no fundamental reason, who could drive a company right out of business. Now if I know the financial sector is already struggling from over financing, I could easily and relentlessly short them right out of business using fewer dollars. Our government, as glorious as it is, is slow moving beast unable to react to the minute by minute panic and manic that exists on Wall Street. As the government bails out massive corporations on Wall Street, who cannot even finance themselves out bankruptcy, no financing is left for small business.
When there is no financing available for small businesses, which allows them to survive the stretch of days from the time of purchase to the time of cash inflow from accounts receivable, “cash discounts” emerge to mitigate the lack of financing available to small businesses.

Why do you feel so cheated?

Do you really want to use that credit card and add to the amount of liability our nation carries? The businesses allowing you to use credit card do not realize cash for one week and your financing liability is transferred to the credit card company to which you pay interest. Isn’t it interesting that the same company is actually charging you to use the card? The gas station really is not charging you to use your credit card, the credit card company is double dipping, if anyone is, by charging you at both ends of your transaction. Credit card companies wrote the contracts requiring money to process the transaction rather then using the interest you pay each month to cover the expense of you using your card! Are the credit card companies providing a service to you or to the business? They charge business as if they providing a service in alternative means of transaction processing, but in reality they are providing a service to you—Which is why you are so upset about the “cash discount”! You feel you have been cheated and you have been. They are charging you for a service you already paid to use through credit card fees and interest upon principles carried after 30 days.

So you can grab your scissors and cut your credit cards, or you can learn more about legislation to requiring credit card companies to pay for their own costs of doing business and specify that they are providing a service to third party consumers and not businesses!

Clark Schinger, could you please provide us more information on credit card legislation that would help keep jobs in the United States with a more fecund smaller business economy?

Anonymous says:


That’s all right. There are some businesses that are taking advantage of it. However, we are not. If you really hate it so much, maybe you should complain to the credit card companies. Gas station owners, like myself, are the ones getting the butt of it. The only people the consumer sees are Business Entrepreneurs like myself. We’re the ones they complain to. Simply put, our hands are tied. We can’t really do anything about it. If we could have, something would have definitely been achieved a long time ago.

Another thing to consider Marc, are our expenses. These unfortunate days, most of us, are paying out A LOT more than we are profiting. For example, lets take my store. I make about 50,000/month in gross sales a month nowadays. My profit margin is about 22% across the board with items inside the store. That would mean my profits bring me to a total of 11,000/month. Out of these profits, I have to pay the mortgage for the new tanks that the GOVERNMENT mandated we put in. These cost about 275,000. The mortgage on these is about 8,000/month. Mind you, we didn’t get any tax incentives to do this. It was either a do or die situation. My Electricity is a little over 2,000/month. I’m selling gas at cost to me to keep my prices low. If I keep them any higher, the consumers are just going to drive to another station that has same policies but sells the gas for a cheaper rate. Now not charging the customers would end up me being charged 10 cents per gallon. And I sell about 40,000 gallons a month. That is another 4,000 extra that I pay. I’ve also got to pay insurance for the store and gas station which costs a little over 1,000/month. Then there’s also the general bills such as phone service, fax service, maintenance costs which total to about 500/month. There’s also taxes that the business has to pay which is about 2,000/month. And I’m not even done with all of the costs, but let’s tabulate how much I’m paying out. 8,000 (Mortgage) + 2,000 (Electricity) + 4,000 (Loss in Gas) + 1,000 (Insurance) + 500 (Misc – Phone, etc) + 2,000 (Taxes) = $17,500/month.

Now given that my profits are $11,000/month and my bills for the store are $17,500…That means I’m losing $5,500. And cutting taxes out, I’m losing $3,500. On top of this, I have my personal bills to pay. Now let’s tabulate those. Mortgage – $4,500. Water, electricity, food – $500/month (200/electricity, 100/water, and 200/food). That just covers basic living needs. That puts me at $5,000. That on top of what I’m losing from the store equals $8,500/month. That’s more than what MOST people make in 5 MONTHS. Now to help alleviate MY PROBLEMS – IF I FEEL like passing on extraneous unnecessary costs to the consumer, I will.

And pretty much, when it comes down to it…I’ve had a few customers like you. And you know what? That’s fine. If you want to go fill gas up at another gas station such as Sam’s Club…go right ahead. Unlike us small business owners, they have their own faults. Some like Sam’s Club don’t contribute to the local community. Others overcharge on other products that go unnoticed, like cigarettes. And that’s the beauty of a free market. Consumers are allowed to shop where they want to. I’m not really forcing anyone to come to my gas station. I’m just passing along incurred costs to them. If they don’t like it, they might as well go somewhere else. Pretty soon, everyone will be passing those costs on. And these frugal consumers won’t have anywhere to go and will have to pay. As of last Friday (9/19/2008), all gas stations in my area have separate cash and credit prices for gas. The closest one to me that does not is about 2 hours away.

With that being said…The only real way to alleviate this problem is for the credit card companies like Visa, Amex, and Master Card is to sit down with Small Business Owners and reach an agreement. They can’t continue to charge us wantonly. There needs to be a price ceiling for them. Pretty much we need to undergo a pricing reform. I am sure everyone can reach some sort of agreement by compromising.

What are your thoughts, Marc?

Clark Schinger
[email protected]

Anonymous says:

Okay, but whatever happened to the ‘Customer is Always Right’? I’m sorry, but the practice of separate pricing is deceptive, and just plain wrong. As far as I’m concerned, the credit card surcharge for the gas station is simply a cost of doing business. I understand the need to profit to stay in business, but if it means ripping off customers, then that business deserves to go under. I’m in retail, and for us to do something like that would create a lot of customer service issues. Unfortunately, we all need gas, and therefore we are a captive audience. I feel gas stations are taking advantage of it…I’m keeping my eyes open…if I see the practice, I will not do business there.


Anonymous says:

I completely and wholeheartedly agree, darksyde.

Clark Schinger
[email protected]

Anonymous says:

I work at a convenience store in South Carolina where we have been doing this (8 cents less per gallon if paid with cash or debit card) for almost a month. It causes some confusion to the customer (and often to the employee). If the customer calls for approval from the pump and is ok’d, then they see the credit price when they finish pumping. They receive the difference back, in cash or on their debit card, once they pay, but it is a problem if someone actually wanted $10 of gas, not $8.80 and 20 cents in change.

Also, customers often pay in cash and leave, not giving the employee the chance to give them their change. This isn’t too common, but it does happen, and the customer may realize it later and simply assume that the store/employee intentionally ripped them off.

Bottom line…it costs the store more money to do credit transactions but this system is a pain in the @ss for everyone else.

Anonymous says:

What many people don’t realize is that gas station owners have to pay the credit card companies that do wipe out their profits if not putting them in losses. Yes, the writer here does recognize it, but he/she fails to bring up a very notable point.

Most gas station owners have to buy about 8500 gallons of gas when they do order. You do the math and you’ll see that they then have to pay $33,375 (given the price is $3.95) for that single order. That’s ONE order of gasoline. That is MORE than what the average American makes in the United States. Now that order is payable within 10 total days of delivery. That means you HAVE to sell all your gas really quickly – and these would be the stores that are located on interstates and major highways. However, the good ol’ ma and pa stores get screwed because they DON’T sell 8500 gallons of gas. For them to even come close to selling all the gas, they’d have to sell at least 850 gallons a day. And some can do it, some can’t. Those who do it, keep prices low and even take a loss.

Secondly, most people don’t realize that when a person pays with a credit card, the gas station owner does not get reimbursed for 5 business days – that ONE week. For the first few days after the owner gets the gasoline, he/she can afford to let the consumers indulge on using their credit cards and selling the gas at a loss because he/she will be paid by the time the money is due to their vendor. However, in the last half of the 10 days, the gas station owner wouldn’t be able to receive the money from those payments in time, and hence they resort to cash only systems, where the consumer pays CASH ONLY. To alleviate this a little and to deter people from using credit and debit cards, the gas station owners use separate prices for cash and credit prices.

So the gas station owners aren’t just getting their jollies off by charging the consumer a different price, they’re trying to get you to pay cash for more than one reason. For once, look at it from their perspective. They’re people too who have to earn a living. Most of the gas station owners I know, work about 70-80 hour weeks. How many of you work that much? I’m sure no more than a handful of you would step forward. So please, STOP moaning you have to pay 4-10 cents more per gallon and carry some cash to pay for your gas. If you really want to moan and complain to someone, do it to congress and tell them to push the Credit Card Fair Fee Processing Act quicker.

Clark Schinger
[email protected]

Anonymous says:

I just want you to know that charging extra for using a credit card instead of cash at the pump is illegal by federal law. You can check it out. I’m not sure about debit cards.

Anonymous says:

get used to paying more for credit and don’t blame station owners who are trying to stay in business. It is MC and Visa that are gouging us. The merchant has been paying a 2% plus 10cents transaction fee for years every time we use credit and when gas was only $2/gallon it was bearable. But with gas at $4/gallon, the profit from each gallon has remained the same and the cost has doubled. Station owners loose money on every fill-up. And with a good majority of people not even going inside because of the use of credit at the pumps they can not make up the difference in in store purchases. It is MC and Visa that need to reduce their processing fees. Gas can not be a loss leader. Business are not in the business of giving things away. The use of plastic has become rediculous. I see people buying 35 cents gum on credit. Get some cash already. If businesses want to offer discounts for cash it is their right to do so. Let MC and Visa become more competitive, by offering reduced processing fees.

Luke Landes says:

mbhunter: There are two issues. First, they call this a cash discount, but it is actually a credit premium if you analyze price history and competition. Second, advertising is often misleading. They can probably get away with it, but it’s a non-consumer-friendly practice and I avoid gas stations and any other merchants who use these tactics. In this latest example, I allowed myself to become lulled into a false sense of security after 11 months of the same procedure, ie., I look at the top price on the sign and assume that’s what I’m paying for regular. I didn’t notice that *on the pump* they listed differentiated prices. My fault, I suppose, but it sure is sneaky. In the case from a year ago at the other gas station, they did not advertise the price they charged.

Gas station operators can make this change knowing they’ll snag quite a few people who think they’re paying a lower price than they’re charging. But they lost a customer in me… I’ll just go where I can pay a lower price and get my credit card rewards.

Anonymous says:

Is the pricing misleading or just unfamiliar?

Price based on payment type has been around for a long time. Businesses can accept payment in many different ways, and offering a cash discount is the only way that they can charge different prices for cash and credit transactions.

Anonymous says:

Do you have Costco near you, and does your Costco store have a gas station? Around here, Costco sells gas for 10 to 13 cents a gallon less than you street price. And you HAVE to pay by credit, either with a Costco charge card or with American Express.

And the AMEX card you get through Costco gives you a 3% discount on gas purchases.

I wouldn’t buy gas from a station that gouged me for using credit, even if I had to pay more to buy somewhere else.

Anonymous says:

A price difference for credit/ cash should definitely be visibly advertised.

But charging less for cash is explicitly allowed by MasterCard and Visa rules:

MasterCard rules section 5-9:

“A Merchant may provide a discount to its customers for cash payments.”

Visa rules page 10:

“You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment.”


Anonymous says:

Gas station near me in Queens that always has lowest prices started doing this as well. But they have a price listed as $4.05/gal and then a sign on a pump saying that they are starting to charge extra if paying by credit card. So they are not even trying to mask it as a cash discount, just simply say it’s an extra charge.

I just went to another station and paid $4.09 instead, so it was more expensive anyway, but no surcharge for the method of payment. I think by doing that, they will just loose more customers.

Anonymous says:

there is some semantics involved but on the whole it is illegal just as requiring minimum charge for credit card transactions. send bbb a shot as well as the state attorney general and the credit card company. the credit card company will flag the store/merchant.

Anonymous says:

I do as much as I can to avoid unnecessary charges such as this but I can see why you are not keen to get another credit card. However, to save $150 a year I think that I would make the effort.

Anonymous says:

Is it not just plain illegal for the gas station to advertise a price, then when you’ve already taken the product to change the price? The gas station should advertise the higher price in the main sign and put up another sign saying “Cash discount, 10 cents” or whatever it is. They’re clearly just trying to trick people and if I were you people I would just refuse to pay the higher price unless it is obviousl what you’re buying.

At my gas station the rate is in a digital readout so you can’t really make a mistake when you’re pumping. In some places they do give a big discount if you have loyalty cards, but the main sign advertises the undiscounted price and there are other huge signs telling you how many cents reduced if you have “Petro-points” or an Esso Card or whatever.

Luke Landes says:

Flaime: There’s no argument *why* gas stations are offering a “cash discount” (actually a “credit mark-up” if you look at competitive pricing patterns, though they won’t admit that to the credit card companies).

Pricing based on payment method is *not a good policy* and they should either raise the price of all gasoline sales (and they won’t because they know gas is a commodity and customers who frequent low-cost gas stations will switch to whichever station on their route has the lowest price) or accept that gasoline is a loss-leader and find other ways to make profits.

Or they should work together and convince the oil industry to negotiate better merchant transaction fees from Visa and MasterCard, etc.

More important than price discrimination is *misleading advertising* designed to get drivers into the station before they realize they’re paying more for gas than they thought they were.

Anonymous says:

We have the same issues here where I live in CA and i completely agree that the prices on the sign are misleading. Just a couple of hours ago, I drove around the little town where I live and four of the 6 gas stations posted a different price on their sign than you paid at the pump. The infuriating part was that they did not mention if the price was for CASH or credit and, of course, it was the cash price they advertised just to get you in. I went to Seven-11 where the price on the sign is what the gas sells for.

Anonymous says:

The reason the cash discount is amking a comeback is that credit card surcharges are killing gas stations. There was a story about it on NPR either last Friday or Monday this week. While gasoline is at all time highs, and the refiners and oil companies are cleaning up, most gas stations aren’t making a profit on gasonline. They are pulling their profits off food and cigarette sales (which is why a gallon of milk at the convenience store is a dollar more than the grocery store). In fact, more than one gas station has mentioned losing money on credit card sales of gasoline. Hence, the cash discount.

Anonymous says:

KC, you’re not actually saving any money in this scenerio. The cash price is the market rate, they’re tacking on a surcharge for using a credit card. Essentially passing the Visa/MC/Amex transaction charges on to you.

Anonymous says:

I believe debit charges are not considered like credit charges and are not subject to the fees a credit card is.

Personally I’d love to get a discount for paying cash for gas. Although I realize your argument is about their advertising more than it is the discount I’d welcome anything that would save some on fuel.

Anonymous says:

They are allowed to offer a discount for cash purchases, they cannot add a charge for credit card purchases. It’s symantics, but it is perfectly legal.

Anonymous says:

@ Kevin RE: reporting to credit card companies.

Like this?

One of the violations is: “The merchant/retailer is adding a charge for using your MasterCard card.”

Anonymous says:

That sounds incredibly misleading- they obviously know what they are doing by positioning prices that way. I haven’t seen this myself (or I haven’t noticed it). I wouldn’t mind so much if the clerk would come out to my car and process the cash transaction for me, but the best thing about paying at the pump is that I don’t have to walk into the gas station and deal with people. I would definitely take my business elsewhere if I saw this happening.

Anonymous says:

I’ve been nabbed by this before as well. It really isn’t fair… and you know, I don’t think the gas stations are passing on all the savings from the credit card fees they avoid when customers pay with cash. I’ve found that it’s consistently cheaper to buy gas using a cash-back credit card – the cash “discount” is never enough to make up the difference. If the gas stations want me to use cash, they’re going to have to do better than that!

Anonymous says:

I just heard of this earlier this week and had never heard of it before. I don’t think anyone here in the south does this — or I’ve never noticed. Is there a way to report them to the credit card companies? Why not charge everyone the same price even if it were slightly higher?

Anonymous says:

Truck stops have been doing that for diesel for a long time. Flying J for example offers a $0.06/gal discount on cash or cash equivalent purchases.

Anonymous says:

I can’t believe stations are still doing this!

On a related note, I was in Oregon last week for business (also a state they have to pump your gas for you), and pulled into a gas station and did not notice until I went to pay that they had a sign that said “Cash or Debit Only. No Credit Cards”.

Has anyone ever seen a place that will take debit cards but not credit cards? How weird!