Retailers Reeling from Credit-Card Fees

Take in 13 cents a gallon, while cost of selling gasoline is 15 cents a gallon

WASHINGTON -- Consumers pay higher gasoline prices and the average gas station owner loses money, even as the nation's biggest banks and credit-card companies profit with every fillup, said the Merchants Payments Coalition (MPC), based on data provided by the leading industry authorities.

The Oil Price Information Service (OPIS), an authority on gasoline prices, recently reported station owners took in 13 cents a gallon in gross profit--before taxes, payroll and other overhead--over the first quarter of the year. But including overhead, the National Association of Convenience Stores (NACS) estimates the cost of selling gasoline was around 15 cents a gallon. That means many fuel retailers lost money--about two cents per gallon--for the entire quarter in order to stay competitive.

Meanwhile, banks take a bigger slice of what drivers pay for a gallon of gasoline--seven to 10 cents a gallon--than the station owners themselves, most of whom are small-business people. That's because of the "swipe" fee of 2% to 3% that banks collect whenever a customer uses a credit card to pay for fuel. In fact, banks and credit cards increase their profits every time gasoline goes up without spending or doing anything extra for the money, said MPC.

"To deflect attention from this, banks are misleading the public about their hidden credit and debit-card 'swipe' fees in a new advertising campaign. They want to convince the public that gas stations are sitting on a windfall when, in fact, many didn't even turn a profit last quarter in this hyper-competitive business," said Lyle Beckwith, senior vice president of government relations at NACS, an MPC member.

"The facts are there are no facts to justify credit-card swipe fees that are fixed in secret, without competition, and which continue to rise," said Beckwith.

Stinging from Federal Reserve regulations that capped way-too-high debit-card fees last fall, the big-bank credit-card industry has actively raised hidden swipe fees on consumers, MPC said. Credit-card swipe fees were not affected by the law--a loophole exploited by the industry. As a result, savings from lower debit-card fees realized by retailers have been at least partially offset by rising credit-card swipe fees imposed by the card industry.

Gasoline retailers' second-highest cost after labor is now the hidden swipe fees they must pay to Visa, MasterCard and the nation's banks, which take $2 out of every $100 spent by consumers on credit cards. Through price-fixing, the credit card industry has turned the swipe fee into a huge cash cow for itself and banks, especially in the United States, said MPC. More than half the swipe fees banks collect worldwide are from the United States, whose consumers pay the highest swipe fees in the industrialized world.

Between 2004 and 2011, while the price of gasoline went up 80%, card fees have increased 180%--even though the cost of providing the actual electronic swipe transaction has been going down, according to NACS.

A recent report by NACS found that swipe fees imposed by the big banks, Visa, and MasterCard add between seven and 10 cents to the price of a gallon of gasoline (see Related Content below for previous CSP Daily News coverage).

Consider this station owner interviewed in the April 5 Wall Street Journal report, "Pain at Pump is Hitting Gas Stations": "In the face of sharply declining demand for gas, Robert Fisher of Phoenix said it's increasingly difficult for him to make a profit. 'There have been times in the past month when I've been losing money for every gallon of gas I sell,' said the 28-year-old, who co-owns four Chevron gas stations and convenience stores in Arizona, Oregon and Washington with his father, brother and sister. 'It's a very tough industry,' he said. Lower convenience store sales and hefty credit-card processing fees are also hurting the economics of gas station ownership, many owners say."