# Why do some gas station charge upo to ten cents less per gallon for cash customers?
**URL:** https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952
**Category:** Factual Questions
**Created:** [July 12, 2014, 10:59pm UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952 "2014-07-12T22:59:48Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@chiroptera](https://boards.straightdope.com/u/chiroptera)
#### Post date: [July 12, 2014, 10:59pm UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/1 "2014-07-12T22:59:48Z")
I see this a lot where I live. I understand that businesses pay a (very small) surcharge for credit/debit card transactions but this one seems to be counterintuitive.
Personally, I will bypass a gas station that charges ten cents more per gallon for non-cash customers because I’d rather run my debit card and fill up my tank. If I really need to gas up and that’s the most logical option at the time, I’ll get $10 or $20 or whatever worth of gas to get me by, then fill up when I see a reasonable price that won’t ding me for paying with a credit or debit card. Either way, I am going to willingly spend more per transaction at the gas station that lets me use a card without penalizing me. Even if I go inside to buy a Red Bull or some other frivolous item along with my gas, I’m still only going to fill my tank at the cheaper-per-gallon station.
I don’t think I’m an anomaly so what gives with this practice?
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### Author:  [@Joey\_P](https://boards.straightdope.com/u/Joey_P)
#### Post date: [July 12, 2014, 11:22pm UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/2 "2014-07-12T23:22:54Z")
> [@chiroptera](#):
>
> I see this a lot where I live. I understand that businesses pay a (very small) surcharge for credit/debit card transactions
I’d have to look to get the exact number, but I think I pay about 3%\* of what I swipe back to the the processor (all said and done, credit, debit, all the other fees, everything). In the retail world, that’s not ‘very small’ that’s HUGE. I know people that own gas stations and they tell me there’s very little, if any, money in gas, it’s all in the in-store sales. (IIRC the markup on gas is 6%\*\*). Giving you a discount to pay cash works out better for them (I assume, I’ve never worked out the math) and, now that I think about it, it gets you to walk into the store.
\*I don’t know what gas stations pay. Different types of stores have different rates and I can virtually guarantee gas stations have higher rates because of all the fraudulent use of cards at the pumps.
\*\*If it’s 6%, that means if the gas is $3.80 per gallon, the owner is making 23¢ per gallon, gross, not net. That’s profit on sales, not what he’s putting in his pocket. And let’s not forget that ‘very small’ 3% (in my case) that he’s paying to the credit card processor, so now it’s 11¢.
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### Author:  [@TNWPsycho](https://boards.straightdope.com/u/TNWPsycho)
#### Post date: [July 12, 2014, 11:34pm UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/3 "2014-07-12T23:34:11Z")
As the owner of a retail store, i pay right around 3% for credit card processing. And another $60/month just to have the machine.
So when operating on razor thin margins (like myself) or a gas station. That 3% can mean the difference between making a living and needing a second job.
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### Author:  [@jnglmassiv](https://boards.straightdope.com/u/jnglmassiv)
#### Post date: [July 13, 2014, 12:06am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/4 "2014-07-13T00:06:33Z")
> [@chiroptera](#):
>
> Personally, I will bypass a gas station that charges ten cents more per gallon for non-cash customers because I’d rather run my debit card and fill up my tank.
Until [pretty recently (Jan, 2013)](http://usa.visa.com/personal/get-help/checkout-fees.jsp), retailers weren’t allowed to add a surcharge for credit card users under their agreement with the card processors. Some states still regulate the surcharges.
This may be distinct from offering a discount for cash purchases, though.
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### Author:  [@california\_jobcase](https://boards.straightdope.com/u/california_jobcase)
#### Post date: [July 13, 2014, 12:13am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/5 "2014-07-13T00:13:35Z")
Paying **extra** for cash in hand is the current thing at many stations. Here’s how it works-
The gas station chain gives a discount for using their “member’s” card. This card is tied to the customer’s checking account and functions as a debit card. Everybody without the card pays ten cents more per gallon, including cash customers. Apparently, doing this costs the station less than a customer using a regular credit card or debit card.
Also, if a foolish customer overdraws his account using the station’s card, there are hefty fees to pay to the station as well as the bank. I can’t help but think that the station is hoping to profit from them.
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### Author:  [@drewtwo99](https://boards.straightdope.com/u/drewtwo99)
#### Post date: [July 13, 2014, 12:13am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/6 "2014-07-13T00:13:41Z")
I personally hate the practice as well and refuse to patronize any business that does this. I will still go to a gas station that accepts cash only, however. But a business that has a big sign that says “fuck you!” to certain customers deserves none of my business.
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### Author:  [@Joey\_P](https://boards.straightdope.com/u/Joey_P)
#### Post date: [July 13, 2014, 12:16am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/7 "2014-07-13T00:16:50Z")
> [@jnglmassiv](#):
>
> Until [pretty recently (Jan, 2013)](http://usa.visa.com/personal/get-help/checkout-fees.jsp), retailers weren’t allowed to add a surcharge for credit card users under their agreement with the card processors. Some states still regulate the surcharges.
> This may be distinct from offering a discount for cash purchases, though.
IIRC from the merchant agreement, it wasn’t legal to upcharge for using a credit card but you could give a discount for using cash. If you did that, you had to make it very clear that the discount was for cash (and not the other way around).
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### Author:  [@Ruken](https://boards.straightdope.com/u/Ruken)
#### Post date: [July 13, 2014, 12:17am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/8 "2014-07-13T00:17:59Z")
It also bring people inside where the higher margin good are sold.
I have a cite re:profit on had when I get back to my computer. It really is crap.
Handling cash has a cost too, but I don’t have a handle on r marginal cost once you’re above a certain threshold.
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### Author:  [@Joey\_P](https://boards.straightdope.com/u/Joey_P)
#### Post date: [July 13, 2014, 12:21am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/9 "2014-07-13T00:21:26Z")
Here’s what mastercard has to say about it as of May 2014:
Just a quick bit of terminology, “discount” is the fee the store pays the credit card processor for the use of their services. If you put the word ‘fee’ in there instead of discount, it’ll make more sense, for those of you that don’t deal with this on a daily basis.
> [@](#):
>
> A Merchant must not directly or indirectly require any Cardholder to pay a
> surcharge or any part of any Merchant discount or any contemporaneous
> finance charge in connection with a Transaction. A Merchant may provide a
> discount to its customers for cash payments. A Merchant is permitted to charge a
> fee (such as a bona fide commission, postage, expedited service or convenience
> fees, and the like) if the fee is imposed on all like transactions regardless of the
> form of payment used, or as the Corporation has expressly permitted in writing
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### Author:  [@jnglmassiv](https://boards.straightdope.com/u/jnglmassiv)
#### Post date: [July 13, 2014, 12:30am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/10 "2014-07-13T00:30:05Z")
> [@Joey\_P](#):
>
> IIRC from the merchant agreement, it wasn’t legal to upcharge for using a credit card but you could give a discount for using cash. If you did that, you had to make it very clear that the discount was for cash (and not the other way around).
That’s what I thought.
The point I was trying to make though, is that by using the card and paying the list price, you aren’t getting ‘dinged’ as suggested by the OP. It is rather a discount for cash.
However, I realize that these duck quacks sure sound like dings.
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### Author:  [@ethelbert](https://boards.straightdope.com/u/ethelbert)
#### Post date: [July 13, 2014, 4:00am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/11 "2014-07-13T04:00:12Z")
> [@drewtwo99](#):
>
> I personally hate the practice as well and refuse to patronize any business that does this. I will still go to a gas station that accepts cash only, however. But a business that has a big sign that says “fuck you!” to certain customers deserves none of my business.
They’re not saying “fuck you”, they are saying if you want to use a credit card, you need to pay for it. It is probably more true that businesses that do not do this are saying “fuck you” to their cash customers, because they are making the cash customers pay the three percent without those customers getting the value of using a credit card (those businesses really have no choice because of their agreement with the credit card companies).
Let’s imagine for a minute that the credit card model was different. When you paid for something with a credit card, three percent (or whatever the bank charges for the transaction) was added to your bill. You would understand the true cost of that convenience and you might elect not to pay it (right now you pay it anyway, whether you use cash or not). A great deal of money would stay with the consumer and the retailer rather than be siphoned off by the banks. I also guarantee you that the fees would come down.
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### Author:  [@california\_jobcase](https://boards.straightdope.com/u/california_jobcase)
#### Post date: [July 13, 2014, 4:31am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/12 "2014-07-13T04:31:06Z")
As mentioned before, the places that require their own card to get the gas discount are _penalizing cash customers_. Surely there are costs associated with having people use these cards too, and the discount only works on gasoline, not stuff bought in the stations’ stores. How, other than huge overdraft fees and possible increase of impulse item sales, do these debit membership cards increase the stations’ bottom line?
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### Author:  [@runningdude](https://boards.straightdope.com/u/runningdude)
#### Post date: [July 13, 2014, 4:43am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/13 "2014-07-13T04:43:44Z")
> [@california\_jobcase](#):
>
> As mentioned before, the places that require their own card to get the gas discount are _penalizing cash customers_. Surely there are costs associated with having people use these cards too, and the discount only works on gasoline, not stuff bought in the stations’ stores. How, other than huge overdraft fees and possible increase of impulse item sales, do these debit membership cards increase the stations’ bottom line?
They get you to buy gas at _their_ store, and get into the habit of shopping there for convenience items.
The owners make very little on gas, and need to get you in the door to buy things. I’m pretty sure gas costs more at rest stops near major highways in part because many people are more likely to stop and only buy gas there.
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### Author:  [@furryman](https://boards.straightdope.com/u/furryman)
#### Post date: [July 13, 2014, 8:30am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/14 "2014-07-13T08:30:25Z")
To me it almost seems like fraud. You pass by a gas station with a big sign advertising 10 cents less a gallon, you think to yourself “Great I’ll stop there!”. You stop and suddenly see a tiny sign that says “Cash only”. I avoid all those places, it just seems wrong to me.
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### Author:  [@chiroptera](https://boards.straightdope.com/u/chiroptera)
#### Post date: [July 13, 2014, 10:28am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/15 "2014-07-13T10:28:01Z")
> [@Joey\_P](#):
>
> IIRC from the merchant agreement, it wasn’t legal to upcharge for using a credit card but you could give a discount for using cash. If you did that, you had to make it very clear that the discount was for cash (and not the other way around).
The stations that do this here have signs very clearly stating that the higher price is for credit, and the lower one for cash. My work van has about a 30-gallon gas tank so it can easily cost me over $100 to fill it up. Obviously it’s more convenient for me to fill it using my debit card, and if there’s no cost difference, that’s what I’ll do. That way I’m spending more at that particular station since they’re selling me all the gas I can fit in my tank.
But I’ve never worked in retail, and didn’t realise the fees and cost margins could be so critical. One thing I’ve noticed is that the gas stations that do this tend to be in low-income areas…perhaps doing a cash discount makes sense if the majority of customers are more likely to use cash anyway, and less likely to fill up the gas tank?
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### Author:  [@JustinC](https://boards.straightdope.com/u/JustinC)
#### Post date: [July 13, 2014, 10:55am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/16 "2014-07-13T10:55:46Z")
It’s a cliché, I know, but where I am a 30 (imperial) gallon tank would cost the equivalent of $308 to fill. Handing over nearly 200 quid - even if it’s for business purposes - every few days probably isn’t pleasant. To me it makes business sense for the retailer to give a discount for cash\* as they’re not giving thousands to the card oligopoly every month and you’re probably going to pick up a few sundries while you’re in there.
\*Not that that happens in the UK, yet.
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### Author:  [@Musicat](https://boards.straightdope.com/u/Musicat)
#### Post date: [July 13, 2014, 11:08am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/17 "2014-07-13T11:08:15Z")
A related question…I’ve seen signs that said, “please use credit, not debit.” Why? I would think a debit transaction would be more desirable to the merchant as instant money while credit is not. Or at least it used to be that way when paper was involved; now I don’t see why either transaction, being electronic, should be anything other than instant. Are there lower merchant fees for debit?
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### Author:  [@Isilder](https://boards.straightdope.com/u/Isilder)
#### Post date: [July 13, 2014, 11:20am UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/18 "2014-07-13T11:20:29Z")
> [@Musicat](#):
>
> A related question…I’ve seen signs that said, “please use credit, not debit.” Why?
It may perhaps due to a concern for the possibility of loss , if the network is hacked.
Eg the Target hack.
The terms of the Debit system are that bit more strict, in that the assumption is that any transaction is valid,
while for credit cards the obviously fraudulent transaction may be reversed easier… it gets down to individual bank policy and so on..
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### Author:  [@Joey\_P](https://boards.straightdope.com/u/Joey_P)
#### Post date: [July 13, 2014, 12:29pm UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/19 "2014-07-13T12:29:58Z")
> [@chiroptera](#):
>
> The stations that do this here have signs very clearly stating that the higher price is for credit, and the lower one for cash. My work van has about a 30-gallon gas tank so it can easily cost me over $100 to fill it up. Obviously it’s more convenient for me to fill it using my debit card, and if there’s no cost difference, that’s what I’ll do. That way I’m spending more at that particular station since they’re selling me all the gas I can fit in my tank.
>
> But I’ve never worked in retail, and didn’t realise the fees and cost margins could be so critical. One thing I’ve noticed is that the gas stations that do this tend to be in low-income areas…perhaps doing a cash discount makes sense if the majority of customers are more likely to use cash anyway, and less likely to fill up the gas tank?
On the one hand, I don’t see why it would make a difference. OTOH, credit card processors might charge an even higher rate to gas stations in high crime neighborhoods. You’ll notice that upthread I mention that I (and someone else) said my rates were about 3% but I know gas stations pay more due to people testing out cards at gas stations so they get a lot of chargebacks. In high crime neighborhoods, you could probably count on that being at least double. That makes it even more worthwhile to get people to not use their credit card.
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### Author:  [@Joey\_P](https://boards.straightdope.com/u/Joey_P)
#### Post date: [July 13, 2014, 12:34pm UTC](https://boards.straightdope.com/t/why-do-some-gas-station-charge-upo-to-ten-cents-less-per-gallon-for-cash-customers/692952/20 "2014-07-13T12:34:05Z")
> [@Musicat](#):
>
> A related question…I’ve seen signs that said, “please use credit, not debit.” Why? I would think a debit transaction would be more desirable to the merchant as instant money while credit is not. Or at least it used to be that way when paper was involved; now I don’t see why either transaction, being electronic, should be anything other than instant. Are there lower merchant fees for debit?
I’m not sure about that one. Merchant fees are typically lower for debit so it’s not that. All the money for a day’s sale comes in (more or less) at the same time, so it’s not that.
The only thing I can think of is that when you use that you tend to get an authorization on your card for (IIRC) $70 that gets adjusted to the correct amount a day or two later. There’s usually a [sign](http://www.ripoffreport.com/d/c47a3208-cc30-4d5c-a9dd-3d5f8dc84410/gashold.jpg) on the pump that explains this but they might be getting sick of people calling and yelling at them for overcharging them.
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