MERCHANT FEES Banks gain increasing profits from fuel sales

Creditors charge gas stations about 2.5 percent of total sales paid with cards.
WASHINGTON -- As the price of gasoline rides the storm tides of two hurricanes, one group is crying all the way to the bank.
Major credit card companies are reaping huge profits from rising gas prices because the fee that banks charge gas stations to process a credit card transaction is based on a percentage of the purchase price. As gas prices go up, the processing fee goes up.
Since last year, the fees that gas stations paid to credit card companies have risen 64 percent, right along with the price of gasoline.
"It's unexpected revenue, because people are just doing what they were always doing," said David Robertson, publisher of the Nilson Report, a credit card industry newsletter. "It's not like a whole new market opened up. There's no behavioral change. It's just more money."
Influx of funds
And lots of it. On a typical day, Americans buy 382 million gallons of gasoline, according to the federal Energy Information Administration. About 70 percent of that is paid for by credit card, said several trade associations representing gas stations. The credit card processing fees paid by gas stations, meanwhile, average about 2.5 percent, these trade groups agree.
So a year ago, when gas prices averaged $1.87, banks involved in credit card processing made about $12.5 million a day on fees. Now, with prices averaging $2.75 nationally, the credit card companies are raking in $18.4 million a day.
That is $183 million more a month, or nearly $2.2 billion dollars on an annual basis in extra money paid to the nation's banking giants just because of rising gasoline prices.
"The credit card processors and banks are reaping enormous profits right now," said Paul Fiore, director of government affairs for the Washington, Maryland, Delaware Service Station & amp; Automotive Repair Association. "That's right out of the dealer's profit."
Burden for stations
Fiore said credit card fees have become the top issue among gas station owners because they have not been able to raise their profit margins to cover the increased fees they must pay to the banks. Typically, a retailer's own bank gets 25 percent of the processing fee, while three-quarters goes to the bank that issued the credit card, said Robertson of the Nilson Report.
The fees are especially burdensome for gas stations, because their profit structure is generally fixed: Stations tack on anywhere from 7 to 11 cents a gallon to get their profit. That margin stays the same, or may even shrink a little, as prices rise, yet the station has to pay more each month to cover rising credit card transaction fees.
Marty Dustin, who manages the Burnt Mills Citgo station in Silver Spring, Md., that he and his father own, said rising credit card fees are rapidly eating up the family's entire profit from the business.
"We are not going to be able to make it on that 7, 8, 9 cents [per gallon] because there's more coming out of the back side," he said

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