Motorists who watch the dollar dial on the gasoline pump rapidly spin skyward as they fill up their tanks might think the proprietor of the store is raking in the profits. They might think again, especially if they’re not carrying with them the $50 or more in cash needed to fill a lot of tanks these days.
As the price of gasoline goes up, so do the transaction fees that gas station operators must pay when the purchase is made with a credit card.
As a result, according to an Associated Press report, some smaller merchants are passing the fees along to consumers. Or, they’ve simply stopped accepting credit cards.
For every credit card transaction, merchants are charged an “interchange fee,” which is a percentage of the amount of the sale. Credit card companies use the fee to cover the costs of collecting the payment from the customer. The percentage is fixed — about 2 percent to 3 percent, depending on the card — but because the fee is a percentage of the amount of the sale, it rises with the amount of the transaction.
Because a tank of fuel is becoming a major purchase, motorists are using credit cards more often. Some stores are actually losing money on gas credit card sales.
Raising gasoline prices to cover the fees would put smaller stores at a competitive disadvantage with large gas retailers, who can use lower gas prices to boost sales of other retail items. Small stores rely on inside purchases to turn a profit, too, but with pay-at-the-pump and other conveniences, customers are spending less time picking up items inside.
The U.S. House of Representatives is considering legislation, called the Credit Card Fair Fee Act, which would cap credit card rates that merchants are charged. In a free market, credit card companies should be allowed to charge reasonable fees to cover their costs. However, small businesses must also be protected, especially in a struggling economy, and consumers deserve access to services they want. Care must be taken in drafting such legislation so that all parties in the transaction are treated fairly.