Credit Cards Costly for Gas Stations

By ROGER ADKINS
PARKERSBURG – Credit cards are making it tough for local gas-station managers.

At least one gas-station manager in the state has discontinued accepting credit card payments for gasoline transactions because of the transaction charge levied by credit card companies.

Meanwhile, individuals with branded gas station franchises like Chevron and Speedway are stuck because their national contracts force them to accept all major credit cards, said Randy Rapp, owner of Rapp’s Chevron.

“If I didn’t have to pay credit card fees, I could lower my gas prices,” Rapp said. “We have to pass that cost on to the customer.”

It’s getting to the point where gasoline retailers aren’t making enough money on sales to cover the costs of the credit card fees. Rapp said the average credit card fee can be as much as 14 cents per gallon. Retailers are lucky if they make that much on gasoline sales, especially when a load of gasoline costs about $40,000 with $800 added on for freight.

Rapp said in previous days, about 70 percent of customers paid for gas with cash, while about 30 paid with a credit card.

“Now it’s 50-50,” he said. “It’s getting so expensive that the average person cannot reach into their pockets to pay for gas with cash.”

Jan Vineyard, president of the West Virginia Oil Marketers and Grocers Association, said retailers are feeling the pinch at the pumps due to credit card transactions.

“Credit card fees are now the industry’s second largest expense, accounting for 8.3 percent of industry gross margin dollars, second only to total labor expenses,” she said. “We pay the credit card fee on not only the product but on the taxes that we collect for the state and federal governments. Over seventy percent of all gasoline purchases are now made with plastic.”

Vineyard said that number was at 38 percent in 2003.

“Higher gas prices contribute to lower in-stores sales, where margins are more robust, because people have less disposable income,” she said. “Sales of premium and mid-grade, which have healthier margins than regular gasoline, have declined as well.”

Gas station manager Roger Randolph of St. Albans has stopped accepting 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 Associated Press contributed to this article.