Sep

19

Gas PumpGas station owners, regardless of the price of gasoline, have the same static dollar level profit built into each gallon. Whether gas is $1.50 or $3.00 per gallon, they make only $0.06 per gallon profit.
 
Credit card companies don't pay the gas station owner $1 for every $1 charged — they pay $0.98 for every dollar charged (the reduction discount to the actual amount charged ranges from 1% - 5%, with 2% the average), making the credit card company very profitable even if you pay your balance off in full every month.
 
That discount decreases the profitability to the vendor. At $3.00 per gallon, when you charge your gas, the gas station owner can see all or most of his profit disappear due to the credit card discount. In some cases, he can lose money! 

Clive Burlin adds:

A BP gas station down the road from my house that had been closed for tank repairs is preparing to reopen. Passing by this morning I noticed they are going to have two pricing tiers: one for credit, the other for cash. Is this a pricing scheme already in use elsewhere in the USA or it it a harbinger?


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  1. Adam Nelson on September 19, 2007 12:38 pm

    The credit card companies don't allow two price structures in their agreements with the gas stations, although a gas station is allowed to forego credit cards. I'd suspect that overnight sales are a pretty attractive incentive (when they can actually make money on those sales).

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