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Archive for Thursday, June 19, 2008

Credit card fees hurting gas stations

June 19, 2008

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

He may be the first in West Virginia to ban plastic, but 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 gasoline 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.

Scott Zaremba, owner of nine Zarco 66 stations in Lawrence, Olathe, Ottawa and Paola, is trying to figure out a way to shift consumers into paying cash, or even opt for debit cards - which carry lower fees for stations.

But with 80 percent of his transactions being conducted on credit, he knows he's facing a daunting challenge.

"It's killing us," said Zaremba, who says that credit companies now make more money on his fuel sales than he does. "It would not bother me one iota to go 'cash only.' The only problem is, the consumer can't do that. The consumer doesn't carry that kind of cash. They've created a credit-driven society."

Making matters worse: Credit companies place a $75 limit on pay-at-the-pump transactions, which can force owners of large vehicles into making two purchases during a single fill-up.

With stations typically paying credit companies a flat fee of 10 to 12 cents per transaction - on top of the percentage rate paid as interchange fees - and credit companies are banking even more money from station owners.

"They double-whammy us every time," Zaremba said.

Back in West Virginia, Randolph's small operation would yield a $60 profit on gasoline sales during a good month. 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 gasoline prices point to the unfairness of the system: Stations are paying more in interchange fees because the price of fuel 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.

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.

Absent congressional action, 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.

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.

Zaremba admits to having considered such a program, but fears the repercussions.

"I've considered the possibility of a cash discount, but I don't want to make my credit card customers unhappy with that," he said.

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

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."

Comments

gr 6 years, 6 months ago

I agree 3of5. It's a mess of their own doing. But, there is a point made about having all that cash collected on hand in the store.But, whether it's drive offs, or cash in the store, the amount shouldn't matter much. Don't they have cameras? Don't we pay taxes for police? Or should we require ALL stores to admit customers only after swiping a valid credit card and putting a hold of $500 until they exit?Simple solution would be to charge the markup based upon percentage instead of absolute. Don't know why they chose a fixed amount to start with. I thought most businesses used a percentage markup. Maybe they were too greedy back when it was 50 cents.

repaste 6 years, 6 months ago

Drive offs have nothing to do with it. Pre-pay laws were heavly lobbied by credit card companies. Grocery store, department store, everywhere we pay extra for credit card profit. It is a built in tax that goes toward no public service, capitalism at its most extreme. 1-4 percent of all our expenditures - to pirvate companies. We are in a serious hole. We have a government run by big corporations -

timetospeakup 6 years, 6 months ago

I know for a fact that the change to prepay or pay at the pump has affected my buying habits. It used to be, I'd buy gas and a snack and pay inside and they only paid the $0.29 per transaction fee once. Now if I want a snack they pay it twice, once when I pay at the pump for gas and the second time when I go inside for my bag of chips. Probably makes them lose money on the chips, but I don't care, if they'd let me pay inside for gas they'd still make money.

Haiku_Cuckoo 6 years, 6 months ago

A few days ago, I went to a gas station here in Lawrence and got a soda and a pack of gum and gave him my debit card, which I run as credit.==========You used a credit card to buy a pack of gum and a soda? Seriously?? Wow. When people say that Americans are too dependent on plastic, they aren't kidding. I keep a zero balance on my credit cards. Why would anyone want to pay interest to the Visa people?

Sigmund 6 years, 6 months ago

Raise the price at the pump by a dime and then give a 10 cent per gallon discount for cash. BTW, Exxon Mobile is selling ALL of its retail gas stations, seems it isn't profitable. Other oil companies such as Royal Dutch Shell and BP PLC have announced similar moves to sell their lower-return retail businesses. The question is who is going to buy them, and how much are they going to pay for them?http://news.yahoo.com/s/nm/20080612/bs_nm/exxon_dcYahoo! News!, " Exxon to exit U.S. retail gas business"Gasoline has always been a "lost leader" designed to get you into the store to buy high profit items like "Big Gulp!" soda's and other junk food. It is hard to get cheaper gas when it costs the retailer more to provide it than what consumers pay for it.

daddax98 6 years, 6 months ago

I have seen some stations in wichita that take cash at the pump. You just put the money in like a vending machine and it gives you change when you are done. These are mostly in the lower income areas where the percentage of people with credit cards is lower

repaste 6 years, 6 months ago

Rammy, you pay that fee, not the staion. They must price accordingly, it comes strait out of your pocket.

denak 6 years, 6 months ago

This is a coincidence. A few days ago, I went to a gas station here in Lawrence and got a soda and a pack of gum and gave him my debit card, which I run as credit. That man complained and compalined about how he was going to be charged 25 cents just for a $2 purchase. I thought he was a little rude about it all but apparently gas station owners are feeling the pinch. Dena

50YearResident 6 years, 6 months ago

It's a damn shame the oil companies are making billions of dollars profit and the gas station is only clearing 2 cents a gallon. There is something wrong with this picture.

fu7il3 6 years, 6 months ago

"Security at gas stations will be improved as well."Can't say I agree with you there. Security is one of the last areas a station is going to spend money on. They already most likely have cameras and a safe. They aren't going to take the savings from lack of credit card processing and invest it in security. They are just going to take it as a profit and hope the profit outweighs the losses due to security.

BrianR 6 years, 6 months ago

As long as gas prices are hurting consumers it is difficult for me to be sympathetic to the fees of others. The problem rests with huge corporations, banks and oil companies, not with vendors and consumers so we (vendors and consumers) shouldn't be pointing at each other for a solution.

storm 6 years, 6 months ago

Gas stations used to have two prices for gas, one for customers paying with credit, and the other of lesser amount for customers paying cash. (Kind of like Dillon's having two prices for groceries, one for people without a grocery card and the other price for people with the grocery card.)Then a law was passed that removed this practice at the gas -stations. Perhaps the law needs to be put back in place. If we do, then just go back to your old ways - choose cash at the pump - it tallies gas at the lower cash rate, then pay with your credit card or debit card in the gas station. If you have children in the car, you'll need to bring them inside or lock them in your vehicle for a few moments while you go in the gas -station.However for safety's sake at the gas - station, writing a check is better because the gas -station doesn't have cash to rob. And you get charged the lower price for gas. As an aside, the financial institution that issues you your debit card pays a fee when you choose "debit" but if you choose credit", the financial institution does not and instead the actual store pays the transaction fee. A debit card doesn't magically turn to a credit card (also known as an immediate loan with high interest) by choosing "credit".

fu7il3 6 years, 6 months ago

I keep a zero balance on my credit cards as well, but I use them for everything. I don't carry any cash.

Take_a_letter_Maria 6 years, 6 months ago

A few days ago, I went to a gas station here in Lawrence and got a soda and a pack of gum and gave him my debit card, which I run as credit.==========You used a credit card to buy a pack of gum and a soda? Seriously?? Wow. When people say that Americans are too dependent on plastic, they aren't kidding. I keep a zero balance on my credit cards. Why would anyone want to pay interest to the Visa people?==================Re-read that Haiku - she used her check card as a credit card instead of a debit card. No interest involved. Does this cost all of us in the long run? Yes, but if it wasn't this there would be something else nickle and diming us to death.And repaste, I call bs on your not a drive off thing rant. If that were the case every place would require prepay or credit everywhere. Believe it or not, there are still a few places anyway that will let you pay after you pump. I'm not going to name any of those places because if they start to get abused (with drive offs) because they haven't changed their policy yet, then I will lose that benefit they are providing.

staff04 6 years, 6 months ago

"There will be minimum purchase requirements for CC and debit card use,This is not a violation of the TOS of the CC companies."--------------------------------------------Marion, I didn't think this was true? I called Visa once to complain about a vendor refusing to accept my card because I wasn't spending $7 or more and they told me that in extreme cases, they will even cancel contracts over it. When I told the person that a ton of places do it, she encouraged me to call and report any businesses that I had the same experience with.

dandelion 6 years, 6 months ago

Gas stations just need to figure out which costs them more money - the drive offs or the credit card charges. I know I'll keep using my credit card until they let me pay inside after I have filled up. SettingTheRecordStraightAs the use of the cards have increased, the card companies should have been able to lower their charges and still make money, but greed keeps them from doing that. Also, because they know they have the public by the genital area, just as the gas companies know they have us in the same place, they have no intentions of lowering prices. They are on this collision course. They can never have enough money, even if it causes an economic collapse. What will all their profits mean if they destroy our society? I heard on NPR that the miles driven on American highways (missed the part about how they measure that) dropped radically. I hope this makes something of a dent.

Haiku_Cuckoo 6 years, 6 months ago

we feel it is rediculous [sic] to have to walk inside to pay for gas========Oh you poor baby! I feel your pain! Forcing people to walk 20 feet is a travesty and is uncalled for! We should write our Congressman. No, better yet, let's call the White House!

Maracas 6 years, 6 months ago

Number3of5, making people pay before they pump was not implemented to force you to use your credit card. That's absurd. It was implemented to keep people from filling up with gas then driving off without paying. The higher the gas prices climb, the higher the chance for drive offs.But maybe you're right. They probably did it just to lose more money to the credit card companies and just to inconvenience you.

fu7il3 6 years, 6 months ago

Most ATM's that aren't your bank's charge you for using them. If they are charging 1.50 for a transaction fee, it is pretty much a wash.

number3of5 6 years, 6 months ago

Most gas stations have forced people to use credit cards to pay for gas. This happened when they decided to make people pay before they could pump gas. So, let them take the loss now. Before this my husband and I always paid with cash. Now we use our bank debit/credit card, but we do not like it. On the other hand we feel it is rediculous to have to walk inside to pay for gas and then walk back in to get your change. Let the stations whine, let them cry, and let them take the loss.

mr_economy 6 years, 6 months ago

Haiku,I zero out the balance on my credit card each month, but I still use it for nearly every purchase. For the responsible credit card user (i.e., credit card companies' worst nightmare), it is an interest-free 30 day loan. Not to mention I have a rewards card, so I earn points/money for spending money, all while building a strong credit score.Cash is a hassle to carry, and should you happen to lose your wallet you can't exactly call the federal reserve and ask for that money back. I do try to always have a 20 with me for emergency purposes, but other than that I'm almost exclusively a debit, but preferably credit card user.

Romans832 6 years, 6 months ago

I remember in the dark ages when cash for gas was cheaper than paying by credit card. I'd be happy for a cash discount. Why should this make credit card users unhappy (Zaremba's concern)? They have months or years to pay it off, if interest is not a concern to them. I can only spend my cash once.

storm 6 years, 6 months ago

The person who purchased a pack of gum and soda did not use a credit card - they used their debit card, therefore the money came out of their account so they're not living on plastic. They only ran it as credit so the charge goes to the store.

countrygirl 6 years, 6 months ago

Let me get this straight--they pretty much make us use plastic if we want to fill up (I'm no good at trying to guess how much it's going to take to fill my tank) and then they complain about the cost of processing the plastic?

maxcrabb 6 years, 6 months ago

I remember working at Pizza Shuttle (yes, i know, this article is about gas, not pizza), and the anger and frustration people would exhibit when they could not use a credit card to buy a pizza for $4.25... (prices have raised since then, it's $4.75)I fear for the day all currency is represented by numbers in a computer, and no one carries actual cash. Someone with the intention to cause problems and with enough access could just make your money disappear. Some might think I'm paranoid, but no one can make your cash just devalue from a fixed amount to zero overnight, if it's on your person. (unless it happened to everyone equally because of inflation)I'm not saying stash your money under your mattress like the 30's, but I don't want to walk around with an RFID chip in my hand waving it buy a scanner to buy a stick of gum, or whatever crazy candy the future will bring us.OK, rant done, have a great day.

SettingTheRecordStraight 6 years, 6 months ago

"American transaction fees are 300% more than bank fees in Europe." - coolSo? What business is it of government to engage in price fixing and manipulation of private transaction?

Haiku_Cuckoo 6 years, 6 months ago

Let me get this straight-they pretty much make us use plastic if we want to fill up===================Wrong. You can always pay with cash. I am not a slave to plastic. I pay with cash and it works fine every time.

50YearResident 6 years, 6 months ago

Paying cash for gas would lead to more gas station hold-ups than the Police could keep up with. Can you imagine how much cash a station would have on hand by the end of the day at $4 per gallon?

Fort_Aubrey 6 years, 6 months ago

It is a pretty sad day when we are told to feel bad for Zaremba and other oil distributors.

daddax98 6 years, 6 months ago

---SettingTheRecordStraight (Anonymous) says:"American transaction fees are 300% more than bank fees in Europe." - coolSo? What business is it of government to engage in price fixing and manipulation of private transaction?---The govenrment already did that when it told gas stations that they could not pass on the additional cost of accepting credit cards to the customers. Every other business is allowed to pass on it's cost of doing business why not the station owners?

repaste 6 years, 6 months ago

$1.65 stay in your car instead of walk in? Thing is, I pay cash I have to help pay for your lazy, I dont get a choice. I have allays paid cash - cards are obviously not for any good of the people as everyday use.

MattressMan 6 years, 6 months ago

I dont know if a 5-10 cents a gallon discount fee will make too many people change their pumping habits.You need gas and dont have any cash, do you A: Drive 2,3,4 blocks or more out of your way to get cash at your bankB: Drive 2,3,4 blocks or more to find (if possible) a transaction fee free ATM to get cash orC: Save the gas you'd be using driving to get cash and just use the credit cardSaving 2 bucks on a 20 gallon fill up isnt worth the extra driving to get the cash if you dont already have it and if you have a vehicle that has a 30,40 gallon tank what's 3 or 4 extra bucks?

Christine Pennewell Davis 6 years, 6 months ago

oh yeah if you can't pay cash do not use the plastic.

maxcrabb 6 years, 6 months ago

And to clarify my point about Pizza Shuttle,If people are all ready unwilling to carry around even $5, and instead just use their credit cards for every purchase day in/day out, then how soon before cash is a relic itself? I think using cash as much as possible as opposed to checks or credit cards is a good idea, as it's a physical transaction you can see for yourself at the time of purchase, and it's easier to keep track of throughout the day, rather than getting a huge bill at the end of the month, with little surprises you forgot about along the way.Also, the merchants you buy from will appreciate keeping the money instead of sharing their profits with a company that insists upon it's own importance, and has created a state of consumerism that is dependent on it's services.OK, seriously done now, thanks for playing, have a great day!

JayCat_67 6 years, 6 months ago

QT over at 31st and Haskell offers a "Pump Start" card. As the name implies, you put it in the pump like a credit card and it allows you to pay inside after you pump because they have all your information in case you're actually stupid enough to try and drive off without paying. I use it whenever want to buy something else with my gasoline and it works out great. On another note, I really wish that the PIN was required whether making a Debit OR Credit purchase. It's way too easy to fill up on a stolen card. And, how often does anyone actually get asked for their ID on any kind of purchase?

WHY 6 years, 6 months ago

I would like to point out that what you are all arguing about is less than a dollar per transaction. .05$ per gallon savings is not worth the hassle of having to go inside and pay in person just so I can lose the change in my seat. If this amount of money really concerns you sell your computer and quit wasting time posting and get a second job.

dirkleisure 6 years, 6 months ago

Here's the most important sentence in this article:"Legislation pending in the U.S. House and Senate would allow merchants to bargain collectively with major credit and debit card companies."Collective bargaining is good for business and good for consumers. Why isn't this already allowed? What are the credit card companies afraid of?If their rates are so defensible, why not defend them with collective bargaining, as opposed to lording over merchants on an individual basis?

Christine Pennewell Davis 6 years, 6 months ago

Just remember it is not the people in your local store making these choices it all comes from the big wigs the people working here in town just do what the boss tells the so take it easy on the clerk inside.

TopJayhawk 6 years, 6 months ago

I have not read all the writings on this issue. But we really have no one to blame but ourselves. Nobody is forcing you to use either a debit, or credit card. So stop whining. And yes we know. Everything is Bush's fault.

maxcrabb 6 years, 6 months ago

So regardless of the pizza multi and bcman, i'm still right about cash?Awesome, thanks for agreeing!Have a great day!

gr 6 years, 6 months ago

"Then a law was passed that removed this practice [cash discount] at the gas -stations."Since when does government control what a private business may choose to do?"Pre-pay laws were heavly lobbied by credit card companies."Ahhh! When another business lobbies for a law.

Godot 6 years, 6 months ago

When will Pelosi, et al, demand that the banks pay a 25% windfall profit tax as a result of the runup in the price of gas?

stbaker 6 years, 6 months ago

Not sure if anyone has commented yet...but pay at the pump is a must for me, as I almost always have my 3 small children with me. Once upon a time, I remember something called customer service (and it was usually really good), where a gas station attendant would fill up the tank, check the oil, and wash the windows. Then, they would take your $$ and return with the change.

Flap Doodle 6 years, 6 months ago

cool, you're spending too much time around girlfriend. You're picking up his habit of name-calling.Stillhavingawonderfulunlinkedinternetlife.

Godot 6 years, 6 months ago

The obvious answer is, "this liberal will socialize......er, uh, you know, uh uh, take over and,.,.uh, uh, you know, take over and run,..." the banks. Courtesy Maxine Waters, D-California.

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