Rising Prices, Credit Card Fees Crippling Gas Station Owners
Skyrocketing gas prices are not just creating major problems for consumers but, surprisingly, for gas station owners as well.
Station owners are making less money today because more people are using credit cards to purchase their gas. The rising credit card fees are cutting in to the narrow profit margins, which are a fixed amount for each gallon of gas.
Gas station owners may soon be forced to make changes in their credit card policies in order to make a profit.
At the core of the problem is the cost of the interchange fee charged by Visa and MasterCard.
Visa and MasterCard charge a non-negotiable interchange fee to retailers. This fee is typically 2% of every credit card purchase and is quietly passed along to consumers. Although the percentage of the interchange fee is fixed, the dollar amount of the fee goes up as the cost of gas increases.
But gasoline retailers are making a set amount of cents per gallon, even though the price per gallon of gas has increased significantly. So the station owners are making far less today than they were when gas was $2 per gallon.
Additional credit card fees, known as acquiring fees (authorization, capture and settlement fees), can cost the merchant another 0.5% of the transaction, according to the National Association of Convenience Stores. So the total credit card costs can add up to 2.5% of the transaction.
Gas stations are currently paying 8 to 10 cents per gallon for these credit card costs. The typical markup on a gallon of gas is 11 or 12 cents per gallon. These credit card fees are cutting into the small profit margins that a gas station owner makes off each gallon of gas.
If the cost of gas continues to climb, gas stations and convenience stores could start losing money on gas. They may have to make changes on their payment policies just to stay in business. Station owners may soon have no choice but to offer discounts for cash, charge fees for Visa and MasterCard payments, or stop accepting Visa and MasterCard altogether.
Enticing consumers to another form of payment may be difficult because paying for gas at the pump, with credit cards, is very convenient. NACS estimates that 60-70% of all motor fuels are paid for with a credit card. That number is rising as the cost of gas continues to increase.
Saving money on gas with a cash discount sounds like a good idea, but we are becoming a cashless society. How many of us actually have $50-$60 in cash in our wallet to pay for gas?
Congress has acknowledged that retailers have a valid complaint about interchange fees. Both the House (H.R. 5546) and the Senate (S. 3086) have bills which tackle this issue. Both measures would, among other things, require credit card systems such as Visa and MasterCard to negotiate with merchants to reach voluntary terms and conditions.