For those of you like me who like – well, used to like – an end-of-the-month gas bill, the credit card era appears primed to become the latest victim of runaway gas prices.
It’s inevitable. Retailers trying to sell gas on razor-thin margins found themselves turned into loss-leader retailers by credit company surcharges. Often as high as 3 percent of the sale, the credit card charges erase any profits retailers make.
Sad news. Personally, I wish the credit card companies would make their cash elsewhere. And with their evolution into national payday loan companies, complete with outrageous interest rates, that’s exactly what they’re doing.
Speaking of profiteering, chew on this little gem: Wall Street doesn’t want Congress to crack down on the speculation that many experts believe is responsible for the runup in oil prices.
I wonder if this little forecast from one of the foxes that went down to the congressional henhouse Wednesday might have something to do with that concern.
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Retailers could do more to deal with the credit card costs than they are now doing. Our company accepts credit cards and has discovered some interesting details. First, the discount rate for all credit cards is not the same. The cheapest is Visa/Mastercard, Discover is in the middle, and American Express is the highest. There is a 2 1/2 % difference between Visa and AX. AX is so expensive that we chose not to accept their cards. Our prices have to be set to accept the discount rate of Discover and we make an additional 1 1/2 % margin on Visa.
We encountered a problem with one particular bank on a Visa card issued by them. We chose to add an extra 3% fee to the invoice if a customer wanted to present a card issued on that bank. It was an issue with a bank, not with Visa. Kansas law prevents the adding of a fee for credit card transactions. We increased all prices by 3% and granted a discount for all cards except that one. The bank received some complaints about the practice, eventually fixed the problem, and we eliminated the practice.
Think what would happen if retailers priced the product according to the impact of the discount rate that was applied to them. If Visa was 1 1/2 % less than the other cards and the price reflected that, it would not take consumers long to figure out that was the card to use. It would not take credit card companies long to see that the discount rates assessed to their retailer clients was no longer a secret and consumers were making purchase decisions on that disclosure. I’ll bet the discount rates would start dropping.
How about it, who’s first?
Doesn’t this mean that cash customers have to pay the higher credit card established price?
Isn’t the x factor here, though, the wholesale fuel buying power of QT and Kwik Shop? We’ve had several independent operators tell us that they need to charge more for fuel, but can’t because they are forced by the market to compete with the two major convenience stores.
It does mean that cash customers have to pay the credit card price. Some retailers offer a discount for cash. The problem is that credit cards are so darned convenient.
The idea is to get retailers to create a pricing structure that accurately reflects their own cost of doing business. When consumers are able to control the competitive environment for credit card activities then card companies will become more interested in taking care of consumers. The retailer is caught in the middle.