Some motorists in California and New York have discovered a peculiar reality at gas stations: It's cheaper to pay cash.
Local reports from Orange County, Calif., and Long Island, N.Y., have found that some gas stations are charging consumers more per gallon if they pay with a credit card versus cash. In some cases, the difference is $2 a gallon!
Is this legal?
Largely yes, says Jeff Lenard, spokesman for the National Association of Convenience Stores. (Convenience stores dispense 80 percent of gas in the U.S., he says.)
"Aside from liquor stores in North Dakota, retailers of any stripe are allowed, even encouraged, to provide cash discounts relative to credit cards," he says. "What's not allowed is to surcharge."
The problem is that surcharging and discounting are vaguely defined, says AAA New York spokesman Robert Sinclair. It's one of those you-know-it-when-you-see-it type of laws.
For example, Sinclair noted a Gulf Station in Medford, N.Y., that was charging $3.99 a gallon for cash transactions on regular versus $5.99 a gallon if you paid with a credit card. Some might call that surcharging.
"This particular station is located at an exit off the Long Island Expressway. After a long haul on the road, a driver nearing empty, they go to the first thing they see," he says. "Interestingly, a couple stations literally two blocks away were charging prices much cheaper for credit card purchases."
In general, gas station owners pocket about 13 cents a gallon in gross profit, according to the Oil Price Information Service. Factoring in taxes, payroll and other overhead, the cost of selling gas equals 15 cents a gallon, meaning gas station owners lose 2 cents per gallon, the NACS estimated.
Gas station owners claim swipe fees by Visa, MasterCard and credit card add up to 10 cents a gallon to the price of gas. That's why some owners decide to offer a cash discount (or a credit card fee, depending on how you see it).
"The most challenging part of offering cash discounting is customer perception," Lenard says. "What many retailers do instead is they blend the two price together and cash purchases subsidize the credit card ones."
In the off-chance you could encounter two prices on a summer road trip, pack some cash. A debit card may or may not be charged the credit card price depending on how it's processed, says Lenard. (Hint: If you have to provide your PIN, it's likely considered a debit transaction and not a credit card one.)
And if the discounting seems extreme, contact your local weights and measures department or state attorney general to report the gas station. Happy trails.
Do you think cash discounting should be legal?
Follow me on Twitter: @JannaHerron.