By TOM BREEN, Associated Press WriterWed Jun 18, 1:28 PM ET

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.

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 gas prices point to the unfairness of the system: Gas stations are paying more in interchange fees because the price of gas 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 in an e-mail to The Associated Press.

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 to the AP.

Absent congressional action, gas 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.

Gas 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.

The Connecticut General Assembly recently passed legislation to make it easier for stations to offer discounts for cash purchases, bidding to cut consumer prices by 10 to 12 cents on average.

Discounts for cash customers may not, however, be the stations' salvation.

The National Association of Convenience Stores reports about two thirds of transactions at gas stations were with credit or debit cards in 2007, a figure expected to rise this year.

"The problem with cash discounts is, if people don't have the cash or don't want to spend the cash, you've inconvenienced them," Lenard said.

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

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."

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http://news.yahoo.com/s/ap/20080618/ap_on_bi_ge/gas_prices_credit_cards

Geesh but those margins on fuel are low hey!

When my brothers and I had a station in the 60's and 70' we depended on repair work, the fuel was sold as a convenience, like a lead loss item. At that time I believe the interchange fee's were around 2 or 3%.

Some of the gas stations around me are offering lower prices for cash paying customers to make up the difference with credit card customers.

Does a debit card count as a credit card?

mnemonicj wrote:

Does a debit card count as a credit card?

No, banks pay the debit processing fee, so it should be the same as a cash transaction.

imnuts wrote:

mnemonicj wrote: Does a debit card count as a credit card? No, banks pay the debit processing fee, so it should be the same as a cash transaction.

I think I will be using my debit card to be paying for my gas from now on. I have been thinking about ditching my credit cards anyway cause I don't really use them except for gas, and I pay it off every month. Less money going to American Express and more going to the gas station owner... sounds good to me.

Here where I am the paying for petrol on credit was prohibited in the mid-eighties but that was because our interest rates where skyrocketing at the time. More recently we've been able to add "garage cards" to our credit card facilities but the full amount of petrol purchases has to be paid monthly and not 10% or whatever the figure is of other purchases.

Talking about credit like this, it's crazy that at our supermarkets (grocery stores), if you pay with a credit card they ask if you want it on your "straight" account or on "budget" where you pay for it over say six months. I keep my credit cards in credit and use them as payment methods rather than for credit and it just seems weird to pay for things like consumables long after they've been used.

There is a downside to a gas station owner's decision to not accept credit cards. Right now it costs me about $75 to fill my tank. I just don't walk around with that much cash. It's much easier for me to pay with a CC and it makes it easier to track my expenses.

If Joe's Gas doesn't accept them, I'll just go down the block to Sam's Gas. And if Sam has a convenience store or service bays I'm then also more likely to buy items there and have service done there.

I have a BP gas card through Chase and I pay it off every month, now sometimes more than once a month with the price of gas LOL
I carry a couple other credit cards and use them so I don't have to carry cash, and then pay for what I charge within the week, sooner if it shows up online sooner.
One card, when I got it had a $2000 limit and introductory interest rate of 0%. I would charge things on it so I wouldn't have to carry cash, and then pay for it within a few days. One time I went out and bought a few things and it was declined, which was odd since I knew it had a 0.00 balance. When I got home I called them, and they said they had put a hold on it because I was paying my bill to often and not carrying any balance and it was costing them to carry me or something to that effect. I told them it didn't make a difference if I carried a balance or not because it was 0 interest, they said it would be re-instated. The next day when I checked they had raised my limit to $10,000 LOL