Why do gas stations separate cash and credit card prices? | Why Guy (2024)

FAQs

Why do gas stations separate cash and credit card prices? | Why Guy? ›

Credit card companies charge gas stations a fee to process each transaction. The fee is usually 2-3% of the purchase price. So, that said, gas stations would rather you pay cash.

The reason for that is because of credit card processing fees. These are charges usually around 1.5 to 3.5% depending on the card that the merchant has to pay the credit card company to run the card. You notice it mostly at gas stations because many businesses just bake that fee into their prices.

Gas prices aren't typically set by the station owners, but by the brand franchise (Shell, BP, Speedway, Pilot, Chevron, Marathon). This is calculated using a number of factors including number of nearby stations, size of the station, geographic location, traffic patterns, etc.

Why is this? Gas stations are in fact legally allowed to charge a customer extra if they choose to use a credit card to purchase gas. This is because the gas station owners pay an interchange fee to the payment networks. They often pass this fee on to the consumer to recoup that additional cost.

Using a Debit Card at Gas Stations

In most cases, you'll get the cash rate if you use your debit card. These retailers generally charge their customers less (sometimes as much as a dime) if they pay for their gas with cash or a debit card.

Gas stations often operate with a low profit margin on gasoline sales according to multiple sources including BestCards and Chase Bank, so the additional fees on gasoline purchases made with cards act to mitigate the processing fees that retailers pay.

Credit card fees refer to surcharges that a business pays to credit card companies in exchange for accepting credit card payments. Credit card fees are legal in almost all U.S. states, but it's important to check the legality and compliance regulations where your business is based.

Petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price we pay at the pump.

If you use cash, you eliminate the credit card surcharge and you end up paying the lower advertised price. Some gas stations are actually required to put the credit card price as the advertised price on their signs. Some also put “Cash” next to the price on the signs to let consumers know that it's the cash price.

No one factor drives these wide gasoline price gaps, but land prices are a big part of the equation in California. A combination of market forces, local differences and entrepreneurial prerogatives also helps determine prices from one filling station — or county — to the next.

What is the most cash back you can get at a gas station? ›

Several gas stations offer cash back on debit card purchases, including 7-Eleven, AMPM, BP, Chevron, Circle K, QuikTrip, and Shell. The amount you can receive varies by location, but it typically ranges from $10 to $20. These stations typically have variable cash back amounts and may require a minimum purchase.

Convenience. Credit cards are often more convenient and secure than carrying cash. As long as you can pay your bill in full each month, using a credit card is typically more advantageous than using cash for in-person purchases.

Using cash has the same financial implications as using a debit card, but with cash you may spend less than you would swiping a card because it's more tangible, and you can actually see the money go away.

For debit card users, even when they are using the card like a credit card, they must still have that amount in the bank account.

In 1985, California passed a law (Civil Code section 1748.1) that prohibited merchants from adding a surcharge (an extra fee) when customers pay by credit card instead of cash.

Gas stations

“It's much safer to pay inside, or to use a credit card at the pump, since credit cards have legal fraud protections in place for consumers that don't exist with debit cards.”

Even if you prefer cash purchases, you are legally obligated to advertise credit card prices to your customers. You can display credit card prices as your full price or showcase cash and credit prices, just like a gas station. Remember, most businesses use dual pricing to lessen or offset credit card processing fees.

Taxes may be higher in one part of town, or there may be different requirements for specific fuel blends. However, gas prices can vary because of different wholesale costs or business strategies: Wholesale costs, which may vary by 10 cents to 20 cents per gallons.

Businesses charge more for credit card purchases due to fees they incur per transaction.

If you use cash, you eliminate the credit card surcharge and you end up paying the lower advertised price. Some gas stations are actually required to put the credit card price as the advertised price on their signs. Some also put “Cash” next to the price on the signs to let consumers know that it's the cash price.