Several American gas station owners have stopped to accept credit cards. They claim that credit companies make more money than they do from each sale. The costs of accepting credit cards are going up in accordance with gas prices. Nowadays nearly 98 cents for every $50 of fuel price go to credit companies. The gas station owners say that they are no longer able to afford such high surcharges.
Most people have faced significant increase of their expenses as a result of higher gas costs. It can seem that such situation can be extremely beneficial for gas station owners. However, that's not so. Gas stations pay an interchange fee proportional to each credit card user's fuel expenses. As gas price is going up, each transaction has become more expensive than before. So the profits of station owners go down.
The interchange fee is a fixed percentage of the sale price that must be paid to credit card issuers on every transaction. Typically, its amount is less than 2%, but the fee increases with the costs of goods and services. As fuel price reaches $4 per gallon, the station owners need to pay nearly 10 cents per gallon. That significantly reduces the profits at the pumps.
As a result, some gas stations across the country have adopted a "no more plastic" policy. Trying to persuade people to pay with cash and therefore avoid fees, they offer up to 10% discounts on cash transactions. However, this tactics has other disadvantages. About 70% of motorists pay with plastics. They like their convenience, flexibility and an opportunity to earn rewards. If their credit cards are not accepted, they can just go to another gas station. So the owners will lose clients.
Some gas station operators are offering another way round this problem. They agree to accept credit cards which charge smaller interchange fees, for example Chevron and Texaco cards. However, such plastics as are not so popular and wide spread as Visa or MasterCard.
The National Retail Federation says that the recent increase of fuel prices has focused attention on the problems with credit card fees. The cost of processing credit and debit cards remains the same even if the price of gas has gone up. However, it does not cost MasterCard and Visa any more to process a $1,000 transaction than to process a $100 transaction.
High interchange fees affect not only gas stations but other businesses as well. The National Association of Convenience Stores reports that convenience stores paid about $7.6 million in credit card fees in 2007, while making $3.4 million in profits. However, if any company quit accepting credit cards, they would lose business. Consumers could prefer other places where their plastics are accepted.
At the present time Congress is considering legislation which would allow merchants to bargain collectively with the major credit and debit card companies. Other legislation focuses on requiring credit companies to explain the calculation of their fees. However, approving and enacting such innovations needs a lot of time.