As Gas Prices Soar, Station Owners Offer "Cash" Incentive to Bypass Credit Card Companies (MA, V)
More News related to MA
- Online Payment Processing Group Establishes U.S. Office to Assist Companies in Compliance with Pending Internet Gambling Legislation
- Top 10 News Items 2/1-2/5: 9.7% Unemployment Rate Surprises the Market, Dow Breaks 10,000, But Recovers, Troubles at Toyota Continue
- Calyon Securities Maintains a 'Buy' on MasterCard (MA); Lowers PT to $300
- Deutsche Bank Reiterates a 'Buy' on MasterCard (MA); Pullback Creates Compelling Buying Opportunity
- Wells Fargo Upgrades MasterCard (MA) to Outperform; Raises Estimates
More News related to V
- Visa to Offer Popular 'No Signature' Program to Majority of Merchant Categories In The U.S.
- China's Massive Investment Fund Discloses $9.63 Billion U.S. Portfolio (TCK, MS, BLK, V, more...)
- Multiplied Media announces signing of definitive agreement for acquisition of UnoMobi Inc.
- Top 10 News Items 2/1-2/5: 9.7% Unemployment Rate Surprises the Market, Dow Breaks 10,000, But Recovers, Troubles at Toyota Continue
- Deutsche Bank Reiterates a 'Buy' on MasterCard (MA); Pullback Creates Compelling Buying Opportunity
More News related to Insiders' Blog
- Sprint (S): Q4 Earnings Preview
- NYSE Euronext (NYX) Beats the Street's Q4 Views on Both the Top and Bottom Lines
- Q1 Earnings Preview: Walt Disney (DIS)
- S&P Revises Credit Outlooks On BofA (BAC) and Citi (C) to Negative, Saying No More Free Govenment Handouts
- Airline Stocks Taking-Off as UAL Reports Strong Monthly Traffic Results; Investors Shrug at Flight Delays (UAUA, DAL, LUV, AMR, more)
.jpg)
While shares of Mastercard (NYSE: MA) and Visa (NYSE: V) have seen meteoric runs since they came to the public market, something I saw at a local gas station this week put a dent in my bullish thesis on the credit card processors (see photo).
As you can see from the photo, the gas station owner is offering two prices: a credit card price, and a cheaper "cash" price. The price difference is just five cents per gallon, but is this a trend? Are gas station owners around the country trying to bypass the credit card processors, who sometime make more on a gallon of gas than the store owners? As the price of gas continues to skyrocket the proprietors may find it easier and easier to offer this special "cash" incentive to cash-strapped US consumers.
We asked Mogan Keegan analyst Robert Dodd if such a trend is possible. Dodd said it was unlikely. He said if merchants offer two separate prices, one for charges and one for cash, this would be in violation of the processors rules, meaning they could pull the merchants account altogether - a risk many gas station owners simply could not chance.
Dodd said while certain small merchants may try to bypass the processors periodically, he doesn't think it would ever be material enough to impact results. Dodd notes that inflation (like rising gas prices) is a positive for Mastercard and Visa as dollar volumes rise while costs don't. [LJ]
Related Categories
Insiders' BlogStocks Mentioned
-2.95
+0.22Comments View All Comments
cash price
What most consumers don't realize is that the merchants cannot choose which credit cards to take and not take except by generic Visa/mastercard, Discover, or AMEX. The Credit card companies are pushing these new bonus cards with 1-3% cash back discounts but are paying for them by increasing the fees they charge the merchants who accept them. If we price to be fair to everyone, we get dinged extra for these cards, but we get no recognition from the customer who thinks his wonderful credit card company is doing him the favor. Remember when you use these cards - IT IS THE MERCHANT YOU BUY FROM THAT IS GIVING YOU THAT EXTRA 3% WHETHER HE WANTS TO OR NOT. His only choice is to stop taking credit cards altogether.
Violation
As noted, this was common in the 80's. It died not because consumers used cards anyway, this disappeared because credit card companies collectively dis-allowed in their contracts, the station owners ability to charge different prices. People were refusing to use cards and paying cash to get the lower price. It's unfair in my view because it forces cash customers to subsidize card users and eliminates market pressure on credit card interchange fees. If the credit card is truly worth the convenience, user should be willing to pay the extra fee. Europe allows charging card users extra, and there are bills on the table to allow it again in the US. With strong opposition from credit card companies of course.
Its not a violation -- Its business
This a a trend that I have been seeing in Valero gas station in the San Fernando Valley. For a nickle per gallon its pretty dumb if you ask me. My car can take 17 gallons max. I fill up once every 5-7 days. 17 X .05 = .85 cents. PER FILL-UP 7 * .85 = $5.95 per MONTH $5.95 * 12 = $71.40 per YEAR If the "discount" was 4-5 times that I would be a happy camper. But this is not realistic. I assume CC companies charge 2-3% per transaction. Avg. gallon of gas in California is $4 4*.02 = .12 cents surcharge from CC company per gallon. It does VERY little to help my pocket. It only looks good to a consumers eyes because they like to pay the least they can.
Gimme a break!
I would have to find an ATM, get charged $1.50 to $3.00 just to pay in cash, as well as go inside and deal with the usual uncaring moron running the register? I'll pay with my Visa check card at the pump thank you very much!
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
Different Prices = Merchant Violation
GloryBee on Jul 27, 2009 03:29 PMCheck out this online form at MasterCard's web site: http://www.mastercard.com/us/personal/en/contactus/merchantviolations.html Apparently it is a "Merchant Violation" to charge two different prices for cash vs. credit. Note the check boxes at the bottom: "The merchant/retailer is adding a charge for using your MasterCard card." Report the merchant if they are accepting MasterCard.