CHICAGO – Credit card fees are hitting retailers below the belt, reports Medill News Service. And thanks to high gasoline prices, more consumers are pulling out the plastic to pay for their gasoline and holding on to their cash.
Bill Shireman, executive vice president of Gas City Ltd. in Frankfort Ill., loses money every time a customer pays for gasoline with a credit card, reports the news source. One of his customers, Mary Robinson, has never even purchased her fuel with cash and does not intend to.
"With the rising prices of gasoline, I can't afford to pay with cash," Robinson said, adding, "I always purchase with credit cards."
Shireman pays a bank about 3 percent in interchange for each gallon of gasoline purchase with a credit card. "That means the higher the price of gas, the more money the banks make," notes the news source.
Scott Imus, president of the Indiana Petroleum Marketers Association, commented that it's common for credit card companies, such as Visa and MasterCard, to be making more of a profit per gallon than the retailer. On average, writes the news source, a retailer's [gross] gasoline margin is about 6 cents to 12 cents per gallon. Tack interchange fees averaging 9 cents per gallon, "the average station makes only 3 cents per gallon, and some stations aren't breaking even."
According to Imus, that credit card fees are the second highest expense for Indiana retail stores, next to rent.
"It's an expense, no doubt," Shireman said, adding, "You can't do anything to compensate for the costs."
The news source notes that according to U.S. Energy Department statistics, "Americans buy 382 million gallons of gasoline per day" and that approximately 70 percent of those purchases are made with a credit card.
As current gasoline prices hover around or above $3 a gallon throughout the nation, banks are making an average of $24 million a day on fuel purchases, notes the news source.
"It's outrageous," NACS spokesman Jeff Lenard told the news source. "Absolutely unnecessary. Visa and MasterCard need to explain."
In September 2005 NACS and other merchant groups filed a class action antitrust lawsuit alleging that Visa, MasterCard and other banks are engaging in collusive practices to fix credit card interchange fees. In April 2006, an amended, consolidated complaint against Visa, MasterCard and several major banks was filed by a broad range of merchant groups, including NACS, in the Eastern District of New York.
Meanwhile, Rhonda Bentz, vice president of Visa USA, commented to the news source that Visa will "vigorously defend interchange and our rules protecting cardholders against check-out fees levied by large retailers and national chain stores."
"The large retailers and national trade associations behind this lawsuit are trying to get all the value of electronic payments without having to pay for it," said Bentz, adding, "Worse, the suit seeks to increase retailers' profit by imposing a new checkout fee on customers who pay with plastic."
"These [credit card] companies are virtual monopolies," Lenard said, adding that the fee structures "are out of line with" the U.S. marketplace.
"U.S. consumers pay among the highest interchange fees in the world," Lenard said. "We have the best technology and a low rate of fraud, but our rates are rising. It just doesn't make sense."
Imus added that credit card processing fees "are a real problem" for the convenience and petroleum retailing industry, noting that the fees are making it more difficult for retailers to make ends meet.
However, retailers probably won't see their customers put away their plastic in favor of cash anytime soon, writes the news source.
"Using credit cards is just faster and more convenient," said a Gas City customer, noting, "And with the price of gasoline these days, the plastic is just necessary."