Cash only gas station lowers prices

CLEVELAND -- If you want cheaper gas, put away your credit card.

The independent gas station on Puritas Avenue near W. 137th is small and plain. Even the signs posted on every pump are hand lettered and then taped to the glass: "Cash Only, No Credit Cards".This gas stion won't take American Express, MasterCard, Visa, or even a bank debit card. The owner's son says the key to their lower prices is the absence of credit."We're keeping it the lowest price we know right now", said Tariq Hashem. "Every time somebody uses plastic, the credit card company is charging us 25 cents per transaction. And we're only making two pennies per gallon of profit."Customers are willing to trade convenience for lower prices. "If you save some money here it's where I'm at," said Chris Bruno. "I have plenty of credit cards. But I'll pay cash to save a few cents."Regular customers like Anthony Carter put in ten dollars of gas at one time and then come back the next day."This Monte Carlo has a big V8 engine and it drinks gas like water", said Carter.A few miles away, the national brand gas stations all accept credit card payments but also charge higher prices. One was 15 cents per gallon higher.But at "Ohio Gas Station Number 1", cash is king. But so is the lower price.Neighbor Laura Ludwig told Channel 3's Mike O'Mara, "they are great people and their price is always low. They are always lower than anybody else."Owner, Tariq Hashem added, "we're always the cheapest. And a lot of people over here like the way we treat customers.

Credit Card Fees: Where are the Free-Market People? |

Interesting comments on   We should debate policy, but we should be clear on the numbers:  Every time a consumer makes a purchase on a credit card, the credit card networks skims a fee off the top.  The fee is typically 2%-3% of the purchase price, but sometimes as high as 15%.  The level of fee relates to the merchant's industry and size and, most crucially, the level of rewards.  Merchants pay more when a customer puts down a cashback/frequent flier super-gold high premium card than when another customer puts down a plain-vanilla card.  As several readers explained, this means that if a customer pays for $100 worth of merchandise at Home Depot with a credit card, the store would keep somewhere between $85 and $98, depending on the card the customer used.

According to research published by Adam Levitin, credit card transactions cost merchants, on average, about six times as much as cash transactions and twice as much as check or PIN-debit card transactions.

Because Mastercard and Visa prevent it, the merchant doesn't have the option to charge $10 extra to use a credit card rather than cash, even if the credit card costs the merchant $10 more. 

The numbers cited in Save $6 Billion came from different sources.  The report on the total dollars for these fees ($57 billion) came from .  The numbers for convenience stores and gasoline purchases ($6.6 billion in fees, 65-86 cents per transaction came from ).  I estimated the cash costs based on the  on the relative costs of cash and credit cards. 

We've had some really good posts, but, if I may, I want to re-frame the question just slightly:  Whatever your views of credit cards and consumers, why shouldn't merchants be allowed to pass along higher costs of credit cards--and pass along the savings when customers use cash?  I know how the consumer advocates feel about this, but where are the free market people?  Why aren't those who believe in unrestricted markets jumping up and down over this restraint on trade and demanding that merchants be allowed to determine their own pricing structures?  Isn't this an issue on which two ends of the political spectrum should unite? 

Rewards Cards Only Reward the Credit Industry |

Many Warren Reports readers wrote to us following Professor Warren's .  If you haven't done so already, I encourage you to listen to her discussion about the credit card industry.

In the coming weeks I'm going to try to highlight on this blog some of the stories and feedback that folks have asked us to look into and publicize.  Let's start with merchants rather than consumers.

One small business owner wrote regarding the high costs that card processors charge retailers for every credit card transaction.  These fees can range as high as 6 to 7% depending on the volume of transactions and type of card, with rewards card incurring the highest fees. 

Interestingly, some consumers don't realize that the rewards percentages that kick back into their accounts are not coming from the credit card company.  Rather, the business on the other end pays that amount (and then some) towards the transaction.

Many consumers might find these types of redistributions perfectly acceptable, but the point is often missed that businesses often compensate for these expenses by raising prices. 

Moreover, as our reader points out, retailors are not allowed to give discounts to customers who pay by cash or check.  Doing so will cause them to lose the "privilege" of accepting credit cards as a form of payment.

Thus, the merchant's credit card-related expenses get transferred to all customers, those with rewards cards and otherwise, and everyone ends up paying more for every item and every purchase.  What good are those rewards if you're simply paying more up front?

The only group making a profit or deriving a benefit from these arrangements is, of course, the credit card industry.  Our reader suggests that this "smacks of a monopoly." 

But the credit industry wants you to believe that your "1% cash back" or miniscule airline miles reward is a little something extra that you wouldn't receive if you paid by cash.  They're right, to some extent -- but only because they've forced all of us, cash customers included, to systematically pay extra up front.

Sort of puts a damper on the whole reward card/incentive program, no?