Higher gas prices are a big problem for both consumers and stores that sell gas. People might think that when gas prices go up, retailers will make more money, but this isn't always the case. Instead, higher gas prices lead to higher costs, which cut into retailers' profits, especially because credit card fees are going up.
As gas prices in the US keep going up, more people are choosing to use credit and debit cards to "pay at the pump." Most people now prefer to pay for gas with a credit card, debit card, or speed pass, even though it used to be mostly a matter of convenience for people who were in a hurry.
A study done by the "National Association of Convenience Stores" in February 2007 showed that people prefer to pay for gas with credit or debit cards. The study showed that in 2005, credit card fees cost convenience stores that accepted plastic for gas payments an average of $45,785 (USD). In fact, the credit card fees were higher than the average sales of these stores during the same year. In 2005, the average gas station convenience store made $42,196 before taxes.
As the price of gas goes up, most people who need to fill up their tanks prefer to use their debit or credit cards. It could be because people don't carry much cash with them or because they don't want to spend the cash they do have to put gas in their cars! In a way, it's psychological, and it helps temporarily avoid the pain of paying more for gas because the credit card bill comes later, and the gas purchase might not seem as bad when compared to the other things you bought that month.
Also, many people pay for all of their monthly expenses with a credit card, either because the credit card has a rewards programme or because it's easier to make a single payment to the credit card each month than to pay for things as they come up. The National Association of Convenience Stores says that about 65% of people prefer to use a credit card to pay for gasoline.
It is estimated that credit card fees cost about 3% of a transaction. This includes the interchange, acquiring, and PIN-based debit transaction fees. Small convenience stores that sell gas to customers are really struggling because credit card processing fees are getting more expensive. This is mostly because more people are paying with credit cards.
Some gas stations are thinking about giving discounts to customers who pay for their gas with cash. This would help them avoid some of the rising costs that come with accepting credit cards for these kinds of transactions. For every customer who pays with cash instead of a credit or debit card, the price of a gallon of gas will go down by 1 cent to 6 cents. The discounts are meant to make people less likely to use credit cards, and the money saved on credit card fees is then shared with customers who help retailers save money by paying with cash.
