ECN Forum Forums General Topics of the Trade General Discussion Area Again With The Gas...

Not sure whats unfortunate about it. Credit card companies charge 2 or 3 percent on the sale. When you make 12 or 15 cents a gallon thats makes the profit for a credit sale non-existant

HotLine, the two-tier pricing is no surprise; indeed, I'm surprised it hasn't become more popular, long before now.

The legal price is the cash price. After all, doesn't the money itself say on it "good for all debts, public and private?" It would be illegal to charge extra for cash.

More to the point, paying with a card - debit or credit - costs the merchant extra. Sometimes a flat fee per transaction, sometimes a percentage. In return for that fee, the merchant gets some value: less cash to worry about, easier bookkeeping, guaranteed payment, etc. With the prevalence of credit card use, the once common station robbery has become a rarity.

Yet, the merchant isn't running a charity. Many of the arrangements merchants have are sort of like the income tax - larger sales pay greater fees. This is the part where the merchant starts losing money on larger sales. This is the REAL reason most pumps limit sales to $50.

I understand that there are fees for plastic tranactions, and the stations are working on a low profit margin. The buzz around here is, you can use plastic in Mickey D's, Dunkin Donuts for a cup of coffee, or Wawa, 7-11, Quick Check, and not have tiered pricing.
The $50 limit I have not come accross yet. A guy with a cigarette boat was in Exxon station gasing up & he was well over $500 on the pump, & still going.

I'm not saying the tier pricing is wrong, and it's nice to get a 'discount' for good old cash, & yes, profit is what the guy is there for; but I guess we (NJ) are used to one price, like it was.

And with all the 'extras' the merchant gets from the plastic, as you stated above; those values should equal the $$ differences.

If your basic gas station owner was making the percent profit that a Dunkin Donuts is selling a cup of coffee there would be gas stations going up everywhere. Do you see new stations being built?? I sure don't, they're closing all over the place. The profit margin in food, coffee or fountain drinks is way different than retail gas

Walrus:
No new gas stations, just existing ones renovating, adding convenience stores, some brand changing, a few tank replacements.

The few I know of that were in the planning stages got rejected by zoning boards. They were convenience chains that sell gas and there was a lot of oposition.

The tier pricing debate still don't sit right with a lot of people.
Are you implying that the profit margin % is now less with the higher per gal price?
5% margin on $2.00/gal, vs 5% margin on $4.00/gal. is how I see it.

$4.13 up the road, $4.15 at Five Points.

Two tiered pricing is catching on at some stations here too, but I've noticed some of them only charge extra for credit, not debit cards.

Ian A.

That's the point most miss, Hotline. The fees charged do not remain constant. The larger the sale, the higher the percentage - or it's a flat fee plus a percentage. A merchant might be making money on a $49 sale, and losing money on a $50 sale.

This is an area subject to intense competition, with all manner of card-processing services out there.

. In Maine if you can get 12 to 15 cents a gallon you are doing well. I've worked on gasoline equipment for most of my professional life. That 12 to 15 cents hasn't changed in the last 30 years. When the price is climbing you can count on less margin, when the price is dropping you can count on higher margins. at 4 bucks a gallon, a 2.5% credit card charge means 10 cents out of the 12 or 15 cents the dealer has to work with. Locations pay 5 figure charges to credit card compaines every month .
Even the major oil companies want out of the retail gas business. My customers(all mom and pops or distributers) make far more money on sandwiches than they do on the millions of gallons of gas they sell every year.
Dunkin Donuts has 20 cents in a coffee you pay 1.79 for yet people line up in droves for it and never whine a bit about it.

To expand on what others have said. A credit card fee of 3% at $2/gal = 6 cents out of the 10-12 cents per gallon markup. Double the price of gas and the fee is now 12 cents out of the 12 cent markup. And you need to wait 3 days for the credit card companies to send you your money.

I am not sure why the pumps default to credit when you put a debit card in.
It may have to do with the fact that a debit card transaction impounds the maximum amount the pump will let you have each time you put the card in. That can impact people who carry a marginal bank balance. It may be more than you have. There is some debate about how long those funds are impounded before they finally bill out the actual amount. I can't think of a hardware/software reason why it isn't instantly when you hang up the nozzle but I understand it is not.