Credit Cards Give Double Rewards for Gas Purchases

As if they are not taking enough money out of the pockets of retailers, credit-card companies are offering consumers double rewards for purchases at gas stations and more!

I opened my Optimum Online e-mail today to find a message from my Sony Rewards Visa card, offering me double points for each dollar I spend over $250 each month at restaurants, gas stations, hotels and airlines. The offer is for all of October, November and December. And this isn't the first time I've received such an e-mail.

Now, as a consumer, I think, cool! With gas prices so high, and the lunch prices in Manhattan, I can reach $250 in gas and dining in no time. But putting on my retailer hat, I think, good God, are they not taking enough...now they have to ENCOURAGE people to use their Visa cards at gas stations and restaurants?! With all the work the convenience store industry is doing to fight both Visa and MasterCard, it seems like a slap in the face to me!

Did anyone else get this type of e-mail or hear about it?What are you doing about it?

Are you increasing proprietary debit card rewards during this time-period or countering these offers in any way?

Comments

[Fredric Fernandez]

Quality Merchant Solutions has a free report that explains and educates merchants that are paying too much on their monthly credit card fees. It is an eye opener and our vision is to empower merchants to keep more of their money.

[john clark]

Nice to have a little feedback on this issue. Lisa so the credit card co's set up a variety of rules and do's and don't and so what. they get to change the rules any time they want and that usually means a benifit to their bottom line. we have been sharing the cost of transactions with card customers for over a year now and very seldom come into conflict. way more often than not we see cusomer understanding rather than rebelion. and so what about the customer who gets a 20 oz fountain drink and pays with debit. if that customer feels so upset about spliting the cost of a card perhaps should carry some ware around a doller cash. boy that would be tough. so in the meantime wating for the credit card cops to shut me down i will keep spliting the cost of this convience.i wish this message center had spell check. anyway happy sailing.

[J. Schmidt]

I am surprised at how many fear mongers are out there rearing their ugly heads. I do not work for an oil company, a convenience gas station, or for a credit card company. However, I feel compelled to state the obviously absent facts here.
I do own a small automotive service business and we have been reeling from the increases in credit card processing fees in the past couple of years. We spend on average, between $500-$900 every month, in credit card fees.
Now, from our perspective, the 45% of our customers who pay with cash or check, or even low cost debit cards, are going to have to pay higher prices, just as those paying with credit cards will, because we need to raise our labor rates to cover the ever increasing costs of doing business, specifically for costs associated with increases in credit card usage. Is that fair? If I were a customer who pays my bills with cash or check, should I have to pay more because other customers use a payment form that actually costs the business a significant amount of overhead? (Keep in mind that it takes many repair bills to cover that expense every month. Considering that every sale must also cover other costs too: cost of parts, labor, taxes, building mortgage & property maintenance, tools, training, large equipment (like hoists), etc., and finally, a small fraction for owner profit.)
I only came across this article/discussion as I was looking for information on the legalities of offering a discount to customers who pay with cash (that means actual cash or check), or a little less of discount if you pay with debit card.
It's unfortunate that when ever we feel wronged on an issue, we rarely get to the see the flip side of the argument.
What's really going on with the retail gas price situation is that people are paying with credit cards, buying less in the convenience store (where the only real profits are), and the only ones getting rich are the fuel companies providing the gasoline (certainly not the retail sellers - check it out) and the credit card companies.
Take a real hard look at the credit card industry. The are making great profits, and even though people are filing bankruptcy at an alarming rate (we just had an employee go through it), the credit card companies keep giving cards to young adults without financial sense or experience, especially to struggling college students, and to mature adults that are already too far in debt to be able to pay them off each month. Not to mention the rates Visa, MC, Discover, etc. are charging to retailers to cover the extra costs associated with all the perks and programs promoted to those end card users. Often times the card users never really even benefit from those programs, but the credit card companies sure do!
Our economy is faltering, credit card companies lobby for laws that only protect them and their profits, AND the government will bail them out when they get into trouble. (Like the insurance companies that got bailed out after Katrina - even though they had lots of real estate they could have sold, and were making great profits!) Oil companies are posting record profits too! (Profits are from pumping & refining gas to sell, and from gas credit card fees.) Yet, our government still subsidizes the industry.
Who is going to bailout the little guy, your corner market, local barber, or your auto repair shop when the expenses to their bottom line put them out of business because they can no longer compete with the big retail bullies (like Wal-Mart)? Just look at what happened to many of the little family farms - gone.

[Lisa K]

My brother and I have looked into this and we believe that it is against the credit card processing agreement to charge a "debit/credit usage fee" or a minimum purchase. However, at our c-store, my mom does both, and my siblings and I only do one, a 35 cent charge.

Our understanding is that the credit card companies prohibit you from "punishing" people for using credit, by charging them higher prices or a fee. However, there is nothing against a "cash discount", at least not yet, hence the c-stores that are offering cash discounts on gas.

Given that debit is significantly cheaper than credit for us, I run everything as debit, unless asked otherwise. This way, a 35 cent charge will cover the cost of the transaction up to $15.00.

Do customers get upset? Oh yeah they do, but they underestand. Plus, apparently, everyone (including Wendy's, the fast food restaurant) around us is charging as well... and we have the lowest fee.

Overall, I just wish all the gas stations would get it together and increase the mark up on fuel to include credit card charges. A ton of gas stations around us have gone bankrupt already. My mom keeps her gas prices higher than the station across the street because she DOESN'T want to sell fuel - given that it's usually sold at a loss (margins here have typically been 4-8 cents a gallon). Lucky for her, she's got set of regular customers that come in for the same stuff everyday.

I'd love to hear what others are doing to combat these fees and increase profits!

[john clark]

so this is the end of conversation on credit card fees? we all had better get ready for more. government agencies are now putting peoples money into debit and credit accounts. so the use of plastic will become more wide spread with someone in the middle taking a piece of our pie and there is nothing we can do about it?

[john clark]

The question continues Dear Jennifer,
about the 18 cent per transaction charge on top of the 55 cent interlink and other debit charge making a cost of 73 cents per debit transaction. Due to Circumstances many of our transactions are less than $5.00. A five dollar at 30% margin gives us a profit of 1.50 and thee card cost is almost half of that. If the sale is less than 3.00 the card cost takes all of the profit. We make .75 cents profit on a pack of cigarettes and you can see where that goes. Sometimes a bottle of water and candy bar would be the sale and I could go on and on. What can be done about this? The .18 cent extra charge started about a year ago. Before this charge the cost per transaction although high, was acceptable. How did this extra charge come about?
Thanks for your help in this matter. John clark

mark and mehgan this is a copy of a letter i receintly sent to my credit processer. am waiting for the answer. this whole situation is only going to get more expensive as time goes on. what is every one else doing about it. mark which cngressman and senators did you send comments to? john c

[Mark Button]

This is what I am doing to combat the credit card fees. First off, I DO impose a $5.00 minimum. And I tell the customers why. IF I sell something for under $5.00, depending on what it is, I could actually LOSE money. So they now understand. (mostly)

AND...I tried the "cash discount" for gas...it was totally unexpected results! I have about 28% of my customers paying for their gas with cash already. So, what I did was try to figure out what percentage discount I could give for a cash purchase. I came up with a 5 cent discount for cash. What happened was that the 72% of the people that were already using credit cards, only 15% of them went to using cash instead. The problem was is that I already had 25% of the people using cash, so they got 5 cents off too. So the net result was a loss. 5 cents a gallon (at a current cost per gallon of $3.21) is about 1.5%. The C.C> companies are charging 1.67% PLUS the transaction fee...

Think long and hard before you start offering cash discounts---it was hard to get out of it once started.

I have repeatedly wrote my congressman and senators about the exhorbitant C.C> fees, please do that---because they have a bill coming up next year (fall---2008) dealing with that exact issue.

Mark

[Mehgan]

Well, half a dollar for a bottle of water may be a lot for some people. If you were to do something like that, I'm sure it would need to be clearly posted and communicated to the customer. More so than just a cardboard sign taped to the register.

However, I can not say whether or not that is even legal. I haven't seen the details of credit card contracts, or heard of the idea. Has anyone else out there heard of or tried this?

[john clark]

mehgan, you understan that there is a cost for plastic. i do not want to force an amount of purchase, i want to make the sale which brings satisfaction to both of us. what if i asked you to share in the expence of using plastic. say that i have a 50 cent card charge. you get your water and snack i get the sale we (you, i and the card processer) are all happy.

[Mehgan]

I have experiences with a number of small retailers and minimum purchases, and they tend to work one or two ways, both of which I have experienced recently:

A deli/c-store near my office posts a $5 minimum on credit/debit purchases. But there have been a number of times when my lunch purchase amounts to less than the minimum. Fortunately for me, the kind cashier allows me to pay with my debit card anyway. Although I do feel bad every time I do it, and wonder what good the sign is if every customer gets the same treatment.

And secondly, while a small c-store in the train station along my commute does not post a minimum purchase sign, they strictly enforce it. I wanted water and a snack, but I was told the minimum purchase was $10 for credit/debit. Now I understand the purpose, but I wasn't about to pick up more things just to reach the minimum, and left slightly upset, and thirsty.

From a retailer standpoint, I completely understand the purpose and goal of a minimum purchase amount. But when it’s not enforced, or communicated, it does the retailer no good -- customers will use their plastic for purchases, or walk away if they can't, possibly with a negative experience.

On another note: What about offering discounts for cash transactions?

[john clark]

SO what about this for tip. there is a convience and a value to both the retailer and consumer when using plastic as a method of payment. why not share the expence. i do here some are doing it or setting some kind of minimim purchase using plastic. what do you think of that mehgan?

[Mehgan]

I agree with you about starting a credit-card comapny john!

It seems that all retailers are facing credit-card fee issues. But has anyone found a way to lessen the affects? I'm sure everyone would like to know some tips.

[john clark]

some times i feel purty good when i can gather a 35 to 40%margin on a pop and candy bar sale. now enter payment with a credit card or debit card, which is becomming more and more a prefered method of payment. cost of candy bar and pop = 1.25 retail 2.10 = 40% margin. cost of credit transaction .67 (average cost of transaction) now the margin is 9% or i get to take 18 cents instead of .85 cents to the bank. i should have started a credit card company.

[Larry Bowling]

The time and money that NACS is spending on the credit card fee issue may very well be all for nothing. What our industry needs to learn is how to market fuel to actually make a profit. We allow the credit card companies and the government to make many times over what we make on a gallon of fuel. If we would wise up and add credit card fees to the cost of fuel, the street price would go up immediately. NACS should spend more time developing seminars that teach people how to market fuel correctly.