Credit card fees eat up gas station profits

— -- Rising gas prices have not only punished consumers. Increasingly, they're also squeezing many gas-station owners.

As gas prices have jumped, station owners' profit margins have shrunk because they now must pay higher fees to credit card companies to process payments. Those fees are so high, says the National Association of Convenience Stores, that they've slashed already slim profit margins and made it hard for stations to make money on gas sales.

If they can't turn a profit at the pump, station owners say, they may have to ask drivers to share the financial burden — in the form of higher prices for convenience-store sundries such as drinks and candy. And some gas stations have just stopped accepting credit card payments.

In 2007, credit card fees cost convenience stores $7.6 billion — more than double the convenience store industry's profits, the National Association of Convenience Stores says. Most of the card fees come from gas sales, says spokesman Jeff Lenard.

When a driver pays for gas with a credit card, retailers must pay an average 2.5% of the sale price to process it, the association says. With gas prices exceeding $4 a gallon, business owners are paying more than 10 cents a gallon, on average, for each card transaction. That nearly consumes what the Oil Price Information Service says was station owners' average of 12 cents a gallon in gross profit over the past month.

As gas prices rise, many station owners say they've had to lower their profit margin per gallon to try to attract more customers.

Peter Madigan, executive director of the Electronic Payments Coalition, representing card companies, says, "There's a cost associated with electronic payments." Processing rates, he adds, are based on the cards' "value" to merchants as well as banks' exposure to loss if a sale is fraudulent.

Lawmakers are paying closer attention to the impact on retailers. A bill in Congress would force credit card companies to negotiate card-processing rates with retailers and have a panel of judges set the rates if agreement can't be reached.