Credit card fees: Some gas stations say 'no more'

[Rajiv]

Credit card fees: Some gas stations say 'no more'

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

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

In a good month, Randolph's small operation would yield a $60 profit on gasoline sales. 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.
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"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.

[Guest]

Re: Credit card fees: Some gas stations say 'no more'

1. It's the responsibility of ANY business owner to know his costs and charge an appropriate price for his goods and services. If you're not charging enough, raise your prices or find another business to be in. As prices rise for gas there's likely pressure on profit margins. But this goes for any business at any time in history.

2. I can drive from one side of town to another any day of the week and see a 13 cent/gal price differential from one store to another for regular fuel, and even higher for premium (some stations charge 20c/gal more, some 30c/gal, so obviously there's some wiggle room here)

So that tells me that some station operators are simply better business people and through higher volume, lower capital costs, and more efficient store operation they can pay the fees and still charge less. Usually the more expensive stores are the ones that fail. Billy bob paid too much for his lot, got a bad deal with his suppliers, etc, didn't do his research and has a bad location where volume is slow due to traffic flow or whatever, and tries to make it up with higher prices, further accelerating his downward spiral.

3. It has long been a problem in the industry that the availablilty of "pay at the pump" via credit cards has reduced the much more profitable sales of overpriced junk food and other crap inside the stores themselves. This is likely just a desperate move to try to force customers to come inside to pay, where they may be tempted by an alluring Slim Jim or tacky keychain. It will of course fail miserably and if this guy persists he'll be out of business soon. I worked in a business that required me to visit convenience stores years ago. But I probably haven't set foot in one in 3 years, and probably average 1 visit inside per year.

4. Sounds like their beef is with Visa/MC/Amex, etc. But it also appears to be a level playing field, so again, if they can't compete, say bye bye. So far it looks like 1 out of tens of thousands of stations have gone this route. Hardly a trend. More fluff journalism pumped out because someone's editor is demanding them come up with a topical oil related story.

[zoog]

Re: Credit card fees: Some gas stations say 'no more'

Here in Portland there are some gas stations which are primarily cash-only. However they will let you use a credit card... for a higher price. Typically their cash price is less than other "normal" stations in the area. Presumably they've found a balance between attracting customers with a lower price but making a profit by avoiding the credit card fees.

[GRG55]

Re: Credit card fees: Some gas stations say 'no more'

1. It's the responsibility of ANY business owner to know his costs and charge an appropriate price for his goods and services. If you're not charging enough, raise your prices or find another business to be in. As prices rise for gas there's likely pressure on profit margins. But this goes for any business at any time in history.

2. I can drive from one side of town to another any day of the week and see a 13 cent/gal price differential from one store to another for regular fuel, and even higher for premium (some stations charge 20c/gal more, some 30c/gal, so obviously there's some wiggle room here)

So that tells me that some station operators are simply better business people and through higher volume, lower capital costs, and more efficient store operation they can pay the fees and still charge less. Usually the more expensive stores are the ones that fail. Billy bob paid too much for his lot, got a bad deal with his suppliers, etc, didn't do his research and has a bad location where volume is slow due to traffic flow or whatever, and tries to make it up with higher prices, further accelerating his downward spiral.

3. It has long been a problem in the industry that the availablilty of "pay at the pump" via credit cards has reduced the much more profitable sales of overpriced junk food and other crap inside the stores themselves. This is likely just a desperate move to try to force customers to come inside to pay, where they may be tempted by an alluring Slim Jim or tacky keychain. It will of course fail miserably and if this guy persists he'll be out of business soon. I worked in a business that required me to visit convenience stores years ago. But I probably haven't set foot in one in 3 years, and probably average 1 visit inside per year.

4. Sounds like their beef is with Visa/MC/Amex, etc. But it also appears to be a level playing field, so again, if they can't compete, say bye bye. So far it looks like 1 out of tens of thousands of stations have gone this route. Hardly a trend. More fluff journalism pumped out because someone's editor is demanding them come up with a topical oil related story.

When one is in a fungible commodity business there is only one business strategy...low cost, low cost, low cost.

Let's face it, retailing gasoline has always been a commodity business despite the heavy brand marketing. Is there anyone on this site willing to pay a premium for, say, Chevron or Shell gasoline because of Tekron, VECTRON 3000, or whatever additive they are peddling this month?

Even in the so called good old days (the 1960's ) gasoline retailers gave away glassware or something to entice you over from the station across the street.

The elimination of the credit card costs is just another cost cutting measure at a time of thinning margins. Clearly some business owners believe that most of their customers are unwilling to pay a premium for the convenience of using a credit card. If they are right then they will profit. If they are wrong, their competition will profit. What's wrong with that?

[Andreuccio]

Re: Credit card fees: Some gas stations say 'no more'

When one is in a fungible commodity business there is only one business strategy...low cost, low cost, low cost.

Let's face it, retailing gasoline has always been a commodity business despite the heavy brand marketing. Is there anyone on this site willing to pay a premium for, say, Chevron or Shell gasoline because of Tekron, VECTRON 3000, or whatever additive they are peddling this month?

Even in the so called good old days (the 1960's ) gasoline retailers gave away glassware or something to entice you over from the station across the street.

The elimination of the credit card costs is just another cost cutting measure at a time of thinning margins. Clearly some business owners believe that most of their customers are unwilling to pay a premium for the convenience of using a credit card. If they are right then they will profit. If they are wrong, their competition will profit. What's wrong with that?

One of the lower priced chain of stations here in SoCal, as well as one of the busiest, is ARCO. They're a subsidiary of BP that only operates stations in California, Nevada, Oregon, Washington, and Arizona. According to Wikipedia, they made a decision in the early 80's to cut costs, and thus have a cash only policy. It doesn't seem to be hurting their business at all.

I personally buy there only rarely. The inconvenience of cash only, the 2% or 3% I get back from my credit card on gas purchases at other stations (which helps to equalize whatever price difference there is), plus the 50c (I think) surcharge for using my ATM there are all disincentives for me. Lots of other people, however, seem to feel differently. If I dealt mainly in cash I'd probably be shopping there too.

[grapejelly]

Re: Credit card fees: Some gas stations say 'no more'

cash only includes debit cards that use the PIN card system that costs the merchants almost nothing compared to the ripoff "check cards" that have the Visa or Mastercard logo.

I deal mainly in cash and use my debit card all the time. Why shouldn't gas stations just start doing what Arco has been doing for years? Most folks have a debit card.

[metalman]

Re: Credit card fees: Some gas stations say 'no more'

cash only includes debit cards that use the PIN card system that costs the merchants almost nothing compared to the ripoff "check cards" that have the Visa or Mastercard logo.

I deal mainly in cash and use my debit card all the time. Why shouldn't gas stations just start doing what Arco has been doing for years? Most folks have a debit card.

give me a coin slot where i can shove silver dollars in for gas... fill my tank with 4 morgans i paid $5 each for in 2001, now worth $16 each.

i got justice. now i want convenience.