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Big Bank Credit Card Fees Hurt Consumers & Station Owners With Every Fill-Up, Industry Data Shows

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Written by Mike   
Monday, 23 April 2012 07:52

Consumers pay higher gas prices and the average gas-station owner loses money, even as the nation’s biggest banks and credit card companies profit with every fill-up, said the Merchants Payments Coalition today, based on data provided by the leading industry authorities.

The Oil Price Information Service, the authority on gas prices, recently reported gas station owners took in 13 cents a gallon in gross profit – before taxes, payroll and other overhead – over the first quarter of the year. But including overhead, the National Association of Convenience Stores estimates the cost of selling gas was around 15 cents a gallon. That means many gas retailers lost money – about 2 cents per gallon – for the entire quarter in order to stay competitive.

Meanwhile, banks take a bigger slice of what drivers pay for a gallon of gas – seven to ten cents a gallon — than the gas-station owners themselves, most of whom are small business people. That’s because of the “swipe” fee of 2-3 percent that banks collect whenever a customer uses a credit card to pay for gas. In fact, banks and credit cards increase their profits every time gas goes up without spending or doing anything extra for the money.

“To deflect attention from this, banks are misleading the public about their hidden credit and debit card ‘swipe’ fees in a new advertising campaign. They want to convince the public that gas stations are sitting on a windfall when, in fact, many didn’t even turn a profit last quarter in this hyper-competitive business,” said Lyle Beckwith, senior vice president of government relations at the National Association of Convenience Stores, an MPC member.

“The facts are there are no facts to justify credit card swipe fees that are fixed in secret, without competition, and which continue to rise,” said Beckwith.

Stinging from Federal Reserve regulations that capped way-too-high debit card fees last fall, the big-bank credit card industry has actively raised hidden swipe fees on consumers. Credit card swipe fees were not affected by the law – a loophole exploited by the industry. As a result, savings from lower debit card fees realized by retailers have been at least partially offset by rising credit card swipe fees imposed by the card industry.

Gas retailers’ second-highest cost after labor is now the hidden swipe fees they must pay to Visa, MasterCard and the nation’s banks, which take $2 out of every $100 spent by consumers on credit cards. Through price-fixing, the credit card industry has turned the swipe fee into a huge cash cow for itself and banks, especially in the US. More than half the swipe fees banks collect worldwide are from the U.S., whose consumers pay the highest swipe fees in the industrialized world.

Between 2004 and 2011 while the price of gasoline went up 80%, card fees have increased 180%—even though the cost of providing the actual “swipe” electronic transaction has been going down, according to NACS.

A recent report by NACS found that swipe fees imposed by the big banks, Visa, and MasterCard add between seven and 10 cents to the price of a gallon of gas. See here and here.

Consider this gas-station owner interviewed in the April 5 Wall Street Journal (“Pain at Pump is Hitting Gas Stations”):

“In the face of sharply declining demand for gas, Robert Fisher of Phoenix said it’s increasingly difficult for him to make a profit.”

“‘There have been times in the past month when I’ve been losing money for every gallon of gas I sell,’ said the 28-year-old, who co-owns four Chevron gas stations and convenience stores in Arizona, Oregon and Washington with his father, brother and sister.”

“‘It’s a very tough industry,’ he said. Lower convenience-store sales and hefty credit-card processing fees are also hurting the economics of gas-station ownership, many owners say.”

 

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