There have been reports of gas stations refusing to accept credit cards.  Here’s why:

Let’s say the credit card company charges the gas station a 2% fee.  A Honda Accord pulls up and buys 15 gallons.  When gas was $2/gallon, the Accord paid $30 for his gas.  The credit card company charged the gas station 60 cents for the transaction, or about 4 cents/gallon.  The station was left with a few cents of profit per gallon.

Now that gas is $4.50/gallon, the credit card company charges $1.35 for the same transaction, or 9 cents/gallon.  The higher fee pushes the station’s profit into negative territory.  The more the station sells, the more it loses. 

There’s an old Silicon Valley joke about the start-up that told its investors, “We lose money on each sale, but we make it up on volume.”  

To be fair, it’s not an old joke at all.  Before 2001 it wasn’t a joke so much as a business plan.  About that time people remembered their fifth grade math.  Multiply your sales revenue by a negative number, and you get a negative number. 

I hope you’re thinking, “But wait, even though the fee is higher, the station is making more per gallon and should be able to absorb the fee.” 

But alas, the station doesn’t make more per gallon.  The extra revenue is eaten up by oil producers, oil refiners, gasoline transporters, and government taxing authorities that are higher on the proverbial totem pole than the station. 

So what are the stations doing?  Some have stopped accepting credit cards.  Others are joining an effort to persuade the credit card companies to charge lower fees.

What should you, the mighty consumer, do?  Continue using your gas rewards credit card.  The station will make less from your patronage.  If that makes you feel bad, you can console yourself with the hundreds of reward dollars you’ll save each year. 

If you still feel bad, use your rewards dollars to buy Cheetos from the gas station.