Gas stations are legally able to charge extra for using a credit card. A surcharge passed on to the customer allows them to recoup the fees that the Visa and Mastercard payment networks charge them for transactions. Gas stations operate on thin margins—they make most of their money on things like candy, soda, and cigarettes—and lag behind changes in market price, so they’re unlikely to start ratcheting down what they charge immediately, especially if more people start to drive.
Constituents of Gasoline Prices
The price of gasoline is made up of four factors:
- Taxes
- Distribution and marketing
- Cost of refining
- Crude oil prices
Of these four factors, the price of crude oil accounts for nearly 70% of the price you pay at the pump, so when they fluctuate (as they often do), we see the effects.
Gas stations with higher prices are likely to provide more direct access to other important places. Market competition can lower fuel prices. This includes a relatively less urban location, a nearby carwash or convenience store, and proximity to other gas stations.
Legal and Market Factors Influencing Gas Prices
Setting Gas Prices
Can a gas station sell gas at any price they want? Gas stations can set their own prices, but they must consider factors like oil prices, transportation costs, taxes, and competition from other stations. Most gas station owners actually earn very small profit margins on gasoline sales.
When oil prices rise, many gas station owners take losses on fuel sales rather than raise prices and risk losing customers to competitors with lower prices.
Non-Fuel Sales and Profits
Fortunately, most gas stations rely more on selling non-gas items than gasoline itself to earn profits. Items like snacks, drinks, cigarettes, car washes, and more carry higher profit margins. So while the gas gets customers to stop at the station, convenience store sales keep many gas stations profitable.
Additional Charges for Card Payments
It is legal for gas stations to charge more for credit because credit card companies charge merchants a fee, or interchange fee, when consumers use their cards. This fee covers the processing cost and the interchange risk that companies take on. As a result, retailers must make up the cost in other ways, such as charging customers more for using credit cards than cash.
Debit Card Holds
When you pull up to the pump at your local gas station, you may have experienced a hold being placed on your debit card. This is done as a protective measure by the gas station to cover any potential fraudulent activity. It’s important to note that this kind of hold can last from anywhere from several minutes up to several days. The amount of money held during these holds typically ranges between $50 and $125.
Some gas stations charge more for using a Credit Card to offset the transaction processing fees imposed by Credit Card companies. This practice encourages customers to pay with cash or debit cards, which are cheaper for the gas station to process. Credit Card fees and interchange rates are fundamental to the payment card industry.