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Originally Posted by texas*princess
I've heard about it both on radio & the news... but I can't tell if it's affecting the gas stations that I go to. Can someone please explain how it works?
e.g. - I walk up to the pump, the little digital reads above the grade levels read 3.89, 3.99, 4.10 for regular, plus, premium. If I swipe my credit card, is the digial read supposed to change to say 3.99, 4.09, 4.20 if there is a credit surcharge? Or does it stay the same and my card is just charged more?
And can someone explain to me why convienence stores are adding this charge BY THE GALLON? That doesn't seem to make sense to me. I thought the CC-companies charged a flat rate to the store per transation for "using the CC service". Is that not how it works?
And if this is such a huge burden (I can see how it can be for small locally owned stored hence some places that say you can only use a credit card for purchases over $X), why don't they charge EVERY transaction the store makes (random soda/beer/candy/chip purchaces) and not just the gas expenses?
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Credit card fees from a merchant to the credit card company are structured as a base transaction fee plus a percentage of the total sale. This is why many stores require a minimum purchase of a few dollars for you to use a credit card.
It varies by card, but generally speaking the basic fee is 29 cents per transaction plus 2.9% of the total charge. For volume sales- at levels that would apply for your average gas station- the fees go down, but not much. For moderate volume, 2.3-2.5% of the total charge is common with a 25-28 cent fee per transaction.
As for how the cash discount works- it is legal to offer a discount off advertised prices for certain forms of payment, but it is illegal to charge an additional fee for certain forms of payment. The end result is the same, but how you go about it is what matters.
If you want to charge $4.00 a gallon for gas and actually get that amount after fees on customers who use credit cards; it would be legal to charge $4.05 per gallon and offer a 5 cent discount per gallon for cash, but illegal to charge $4.00 per gallon and charge an extra 5 cents per gallon for credit card purchases.
As for the random soda etc. purchases you reference, that is not quite such an issue for a great number of reasons. Point being- the markup and real profit is in non-gas items. So credit card fees do not matter so much.
Think about it like this, when was the last time you saw a gas station that only sold gas and did not have a food mart or mechanical repair services? Gas-only stations don't exist anymore since there is not sustainable profit in selling only gasoline.