I noticed something disturbing last night. I pulled into my favorite low-cost gas station, which happens to be Valero. It’s my favorite simply because it’s the least expensive in the area and it’s right on my route home from work. Apparently they have begun charging 6 to 8 cents more per gallon for payments with credit cards than they are charging for payments with cash. This is a very new development, as the last time I filled up a few days ago, this was definitely not the case.
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I didn’t look at the pump until I gave the attendant my credit card and he began pumping. (New Jersey is still a full-service-only state.) There was nothing on the large sign that indicated that there was now a price difference between credit and cash.
The price difference practically wipes out the cash back bonus I’d receive by using my credit card with rewards, so it will now be more difficult to determine which method of payment will actually cost less in the long run and which gas station to use, as prices vary daily.
I thought it was against the terms of service of a merchant account — and possibly against the law — to charge different prices for cash and credit or to add a surcharge for credit card purchases, all else being equal. Here’s how the stations apparently get around this issue:
Now we all face dual pricing, and as was the case when the practice first popped up, to comply with the law, the pump price has to be the credit price from which the cash discount comes.
But the price advertised on the big signs that draw people to the stations is the cash price. That is misleading. According to North Jersey Media Group, gas stations are “forced” to adopt this policy because merchant fees eat into their profits. I understand that individual stations are put in a squeeze when prices are increasing. Understandably they want to pass that cost onto the consumer without pricing themselves out of competition.
As I’ve been following prices practically day to day, it’s clear that when this was initiated at the stations within the last few days, the cash price is the one that followed the trending line and an extra surcharge was added to the credit card prices. Nevertheless, they can still consider it a “discount” for cash purchases. The regular credit card price should be the one advertised on the large signs, not the discounted price.
Updated August 16, 2016 and originally published June 21, 2007.