As Gas Prices Soar, Station Owners Offer "Cash" Incentive to Bypass Credit Card Companies (MA, V)
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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]
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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!
blah blah blah
Are you around 5 years old or what? It used to be (in the 80s) that everywhere offered a different price for cash or credit. the 90s saw that start disappearing as it became too much for consumers to deal with. 1 number, easy. gotta cater to the laziest SOBs out there. Clark - is that OPEC jr. or some other nobody. If Exxon or BP or Shell or a real player starts doing it, then we'll see a problem for V & MA - gas stations are fee-crops for them because the process is 1000 times faster - don't have to go inside and wait and then pay, then go back inside and get refund if I put too much money, or risk forgetting i put more in and completely losing money. With CC, it's just much more accountable and accurate than cash.
cheaper "cash" price
goods can be cheap, prices are low
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Violation
Will Grey on May 9, 2008 11:54 AMAs 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.