When buying gasoline for business, watch discounts, surcharges

Road map to savings blurred by state laws, court cases


Your Business Credit
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

Ask Elaine a question or read her prior answers in the 'Your Business Credit' archive.

Question Dear Your Business Credit,
Hope you can answer this question! If a surcharge cannot be charged in California and there can't be a cash versus charge price, why do gas stations do it and advertise it? -- Augie

Answer Dear Augie,
You are right that California has a law that says merchants are not allowed to add a surcharge when customers pay by credit card -- but there's a wrinkle.

The Office of the Attorney General in California notes on its website that although California Civil Code section 1748.1 (also called the Song-Beverly Credit Card Act of 1971) prohibits these surcharges, a federal court found this law unconstitutional in March 2015. That court prohibited the Attorney General's office from enforcing the law. The Attorney General's office has appealed that decision, which it believes is incorrect, and says it will update its website when there is a ruling. But right now, it cannot enforce the law.

If gas stations are charging you more when you pay with a credit card, it is possible that some merchants have been following these developments and decided to add surcharges. More likely, the gas stations are offering a cash discount. As I discussed in an earlier column ("Can my business add a surcharge for card-paying customers?"), California Civil Code 1748.1 does not prevent merchants from giving a discount to people who pay cash.

By advertising the discount, merchants are, in fact, protecting themselves. California law says if a merchant offers a cash discount, "but does not fully disclose this to customers prior to their committing themselves to the goods or services, or if the merchant does not clearly explain its policies regarding debit and credit cards, the merchant may be violating California law," the Attorney General's website says.

The National Conference of State Legislatures lists 10 states -- California, Colorado, Connecticut, Maryland, Massachusetts, Nevada, Oklahoma, Washington, Wisconsin and Wyoming -- and Puerto Rico have laws that let merchants give discounts to encourage consumers to pay with methods other than credit or debit cards. To make things even more confusing, a somewhat overlapping group of 11 states have laws that forbid surcharges, with the laws in California and New York under challenge in court.

So what does this mean for you if you are a business owner who needs to purchase a lot of gasoline and want to save at the pumps? Pay close attention to any discounts being offered. Sometimes, they can be substantial. One editor at Consumer Reports who used a credit card at a gas station discovered she was charged 70 cents per gallon more than if she had gotten the cash discount.

Gas prices are low as of November 2015, but as the National Associations of Convenience Stores' NACS Retail Fuels Report recently noted, February is historically when the petroleum industry switches to summer-blend fuels. Since 2000, prices have ticked up an average of more than 50 cents between that point in the year and the seasonal high, often in May. That means many of us will be paying more at the pump in the spring, so cash discounts may come in handy.

To make sure you can take advantage of cash discounts and avoid surcharges, even if there is no ATM in sight, come up with a weekly gas budget and keep that amount of cash in your wallet, separate from money you use for other types of purchases. Just remember to keep the receipts if you will need them to document the purchases as a business expense. Downloading a free scanner such as CamScanner to your mobile phone will enable you to snap pictures of the receipts and keep them in one place. It's easy to do, and by making the most of paying cash, you may save a good amount over the course of a year.

Merchants with a large team of drivers may find this cumbersome, in which case shopping around for a gas card that offers good rewards may offset some of the pain of paying by credit card. You can comparison shop using the directory of business cards on

See related: Merchants can usually add credit card fees, Minimize costs of card acceptance without surcharges

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Published: November 23, 2015

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Updated: 10-22-2016

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