Friday, May 23, 2008

Guess who else feels pain at the pump

As depressing as gas prices appear these days, I knew gas station owners/operators (especially independents) weren’t reaping the windfall profits. However, this is a new twist. I knew that station owners tended to make a larger profit on a bottle of water than a tank of gas, but the credit card fees associated with charging customers never occurred to me. Even as oil companies like Exxon and Chevron make record profits, local competition and limited choices of supply tend to limit local station profits.

It seems like everybody pays for gas with credit cards these days, and for good reason. In the old days of paying with cash (back when a $20 bill would buy a tank of gas plus a bag of chips), customers would generally only put $5, $10, $20 of gas into the tank. Of course, this is inefficient compared to actually filling your tank and paying the cost, regardless of the required uneven change. Also, credit cards are safer to carry than cash and offer rewards. Gas cards in particular tend to have special deals, and it seems like most major gas brand credit cards are offering even sweater deals- like 10% off for 60 days with no annual fee. As the article mentions, however, credit card companies do not offer these rewards from their philanthropic arms- they pass on the costs directly to gas station owners, cutting into most of their profit margin. I don’t have a solution for station owners, but it is just something to think about when visiting the pump or pondering the wonders of those little plastic cards.

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