Saturday, August 27, 2005

FAST FACT: Record gas prices leads to possible profiteering and windfall for credit card companies


If you thought the gas companies were reaping huge profits at the expense of our dependency on petroleum, know this: Soaring gas prices means that more consumers are using credit cards to pay for filling up at the pumps. The credit card interchange fee costs motorists as much as $1.50 per fill-up!

The Colorado/Wyoming Petroleum Marketers Association reports that "for every gallon of gasoline or diesel fuel sold today, as much as seven cents or more per gallon is spent in processing the credit card transaction. Credit card fees are a significant factor contributing to the price of fuel."

Credit card transaction fees paid by retailers have been increasing creating a windfall for the credit card processing company on the high cost of fuel. Because the Interchange fees are a percentage of each transaction and is accompanied by other fees that banks collect from retailers every time a credit card or debit card is used to pay for a purchase, the credit card associations' members seem to be profiteering from our nation's record high gas prices. As the price of fuel increases, so to do the profits to the credit card companies, yet there cost of processing the transaction is the same.

In 2003 under half of all motorists used a credit card to pay for gas, today with record fuel costs, nearly 70% of all gasoline purchases are now paid with plastic. The paper-thin margins mean that many gasoline service stations are earning less per sale than what is being recovered by the credit card associations. Due to soaring gas prices, Visa and MasterCard reap a larger profit per gallon then the retailer selling the gasoline, according to The National Association of Convenience Stores.