Cash Back

Filling up the tank? It may pay to use cash


Many gas station owners, struggling under the weight of rising credit card fees, are offering discounts to customers who pay by cash.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

If you knew it could save you a nickel or more per gallon, would you give up paying for gas with plastic? Many gas station owners, struggling under the weight of rising credit card fees, desperately hope the answer is yes and have begun offering discounts to cash-paying customers.

Paying cash at the pumpThe service station industry can’t put an exact number on it, but experts say the movement is growing. “It’s a trend that’s very popular in some areas, and it will grow across the country,” says Brandon Wright of the Petroleum Marketers of America. “And it’s all about the high costs of processing credit cards.”

When you use a credit card that’s not affiliated with the brand of gas the owner is selling, the station’s owners have to pay their credit card-processing company about 2 percent of the sale.

Struggling with interchange fees
When gas was around $1 a gallon, these costs — called “interchange fees” — were manageable. A 15-gallon fill-up paid for with plastic meant the gas station’s owners had to pay about 30 cents in fees. But when gas skyrocketed to $4.25 per gallon in the summer of 2008, the interchange fee per fill-up hit the stratosphere as well, reaching $1.27 for the same 15 gallons.

Rising costs are nothing new in business, and most companies would just pass those costs on to the consumer. The problem for gas retailers is that they often are restricted in their contracts with oil companies from tacking on more than 10 to 12 cents a gallon to the wholesale price. This means that on those 15-gallon fill-ups, the most profit they can make without violating their contracts is $1.80 per gallon. Subtract a $1.27 interchange fee from that total and that means a profit of just 53 cents for each gallon of gas that a customer buys with plastic.

That math created tension between the station owners and the oil companies and credit card companies and drove some owners to decide that they had to do something.

The owners were squeezed by the oil companies and the credit card fees, so a lot of them said to consumers, ‘Pay us with cash, and we’ll both save money.’

— Judy Dugan
Research director, Consumer Watchdog

“When gas prices were at their peak this summer, both consumers and station owners were hurt the most,” says Judy Dugan, research director with the Los Angeles-based nonprofit group Consumer Watchdog. “The owners were squeezed by the oil companies and the credit card fees, so a lot of them said to consumers, ‘Pay us with cash, and we’ll both save money.’ ”

Discounts vs. surcharges
However, this is where things get complicated. Agreements between retailers and credit card processors, such as Visa and MasterCard, prohibit stores from charging more for purchases made with plastic than for those done with cash. However, it’s OK under these agreements to offer discounts to customers who pay with cash. Even though they essentially amount to the same thing — it’s cheaper to pay with cash than plastic — a semantic loophole means one is fair game and the other isn’t.

In some states, it’s more than just against Visa and MasterCard’s rules, it’s against the law. New York has a law that prohibits retailers from charging a surcharge for credit cards.

Even with the sometimes-confusing rules, the cash-discount trend continues to grow.

For some consumers, the discounts are a draw. “I’m cutting down expenses and not using credit cards, so if I see a station that’s offering a cash discount, I go for it,” says Sylvia Garcia, 38, a high school teacher in Los Angeles. “I just patronize stations that have low prices. I like not having to search for a Mobil or Shell station because those are the cards I used.”

Worth the effort for consumers?
While it might make business sense for a station to offer cash discounts, is it really that much of a savings for consumers? A driver who logs 15,000 miles on a car that averages 18 miles per gallon — and gets a 5 cent-per-gallon discount for cash — would save about $41 per year. To some, $41 is $41, and they’ll gladly take the savings. To others, it’s not worth it to carry the rolls of cash needed to fill a car nowadays, so they’ll stick with paying with a card, experts say.

“Americans are increasingly relying on credit cards for purchases at the pump,” says Trish Wexler, a spokeswoman for the Electronic Payments Coalition. It estimates that 70 percent of consumers regularly pay for gas with a credit or debit card. “A nickel discount on gas that’s nearly $4 per gallon is unlikely to outweigh the convenience, security and speed of paying by credit.”

Beware debit card fees
Using a debit card to pay for gas can be costlier. Because debit cards (or check cards used as debit cards) require a PIN number, they’re considered more secure, and the issuer-imposed fees are smaller. However, experts say some gas retailers charge the consumer a fee for using it. A warning is posted at the pump saying a surcharge will be added to all debit card purchases and specifying how much it is. The surcharge will then appear on the customer’s receipt, tacked on to the price of the gas.

“People often pay a 35 to 45 cent fee for using a debit card,” says Dugan. “If you’re filling up your tank with 20 gallons, that’s one thing, but if you’re just buying five gallons, that’s a big surcharge.”

The tensions between station owners and credit card companies will ebb and flow as gas prices rise and fall. “The saying in the industry is that oil prices go up like a rocket and come down like a feather,” says Dugan. “People are happier that the average price is below $4, but the wholesale prices have dropped further, so the oil companies are letting their dealers make some money. But when prices rise, they’ll be angry about credit card fees again.”

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Cash Back

Charitable donation by credit card gives quick tax deduction

The end of the year is the time to consider wrapping up your charitable donations to qualify for the current year’s tax deduction, and there’s no quicker way to donate than with a credit card.

See more stories
Credit Card Rate Report
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more