Store owners struggle over credit card fees
By JIM EPPERSON News Herald staff

As Americans continue to scrape change from their car ashtrays to buy a gallon of gas, one business group is reaping huge profits from gasolinepump sales, according to the merchants selling the fuel.

But it is not who you think it is. Believe it or not, convenience store owners are feeling some of the same effects of high gas prices as consumers, while credit card companies are "making out like bandits."

The single biggest expense for convenience stores- just behind paying for the store's labor- is credit card fees. Credit card companies like Visa and MasterCard are charging retailers an average of 2.5 percent on every charge at the pump, according to statistics from a national convenience store organization. As the price of gas goes up, so does the credit card interchange fee, a charge retailers are assessed for accepting a credit card.

The price of gas influences everything from a milk container made from petroleum to the price of bread traveling to a rural part of the state. The price is getting so bad for conveniencestore owners, Terry Pickard witnessed the first "drive-off " by an 18-wheeler. Pickard bought his first convenience store near Kilgore in 1976. The tractor-trailer truck-driver left a $500 tab at Fastop, which Pickard had to paid out of his pocket.

"You just don't expect that from a big truck," Pickard said.

While the credit card interchange fee - a percentage - goes up when gas prices increase, gas sales begin to decrease and so do sales inside the store, Pickard said. Consumers start driving less and spending less and, although rare these days, some drive off with gas.

"A person has just so much disposable income, and they can't adjust to the rising cost of fuel so something has to give," Pickard said.

What gives are the sales on hard candy in the store isles and carbonated drinks in the clear refrigerator doors of the store. As a result of fewer sales and more expensive interchange fees, convenience-store owners are hardly making a profit - if any at all, according to the National Association of Convenience Stores (NACS).

"Credit card companies are making more than convenience store owners," NACS spokesperson Jeff Lenard said. "Convenience-store owners are losing money at the pump."

However, credit card companies view this as comparing apples to oranges, and a national organization that speaks on behalf for credit cards said they do not make more than merchants.

Trish Wexler with the Electronic Payments Coalition, a group of local community banks and credit unions, large national banks, and payment card networks like Visa and MasterCard, said the credit card companies are charging for a business expense.

Wexler said the fee merchants pay is for a service. In exchange, the cards pay for things like fraud, risk, and the float on money.

"Merchants want to shift their costs of doing business onto their customers, who will suffer the most as fees go up, rewards go away, and access to affordable credit is restricted," Wexler said. "Can't imagine a worse time in our economy for such an outcome."

But when prices go up store owners begin paying more in fees in credit card interchange fees and more people start paying with credit to relieve their pocketbooks from higher gas prices, Lenard said. Convenience stores are left to either maintain a consistent profit margin and lose customers or shrink their margins and sacrifice profits.

Lenard said legislation has been introduced in Congress that will try to make fees more transparent. Convenience store owners are "asking for a seat at the table to talk with credit card companies" about the set fees. If an agreement cannot be reached, then the legislation asks that an arbitrator set the fee.

"It's a hidden tax, you never see it. It costs the average family about $400 in the hidden tax," he said.

But the Electronic Payments Coalition, a broad-based group of local community banks and credit unions, large national banks, and payment card networks like Visa and Master- Card, strongly oppose the bill. The organization said in a statement that the bill would "set rates and terms" for access to the benefit of accepting electronic payments.

The Electronic Payments Coalition said the Congressional bill, H.R. 5546, will set price control legislation and that consumers will see no economic benefit.

"The electronic payments system is a premier American example of the endless economic opportunities the free market brings to all parties involved," said Betsy Haglage, who spoke on behalf of Electronic Payments Coalition in a statement.

But Rick Johnson, the President of the Texas Groceries and Convenience Association, said the credit card fees are ultimately passed on to the consumer.

"Obviously all costs associated with delivering a product is passed to the consumer," Johnson said. "The credit card companies are making out like bandits."

Visa referred all calls to the Electronic Payments Coalition and MasterCard was not available for comment.