SUN EDITORIAL:

No credit, no problem

Gas station owners preferring cash as credit transaction fees shoot up

Saturday, June 21, 2008 | 2:08 a.m.

As the price of gasoline goes up, so do the transaction fees that gas station proprietors must pay whenever a customer purchases fuel with a credit card.

As a result, the Associated Press reports, smaller merchants are passing the fees along to consumers or, in some cases, refusing to accept credit cards.

For every credit card transaction, merchants are charged an “interchange fee,” which is a percentage of the amount of the sale. Credit card companies use the fee to cover the costs of collecting the payment from the customer. The percentage is fixed — about 2 percent to 3 percent, depending on the card — but because the fee is a percentage of the amount of the sale, it rises with the amount of the transaction.

Pete Krueger, state executive of the Nevada Petroleum Marketers & Convenience Store Association, told Las Vegas Sun reporter Steve Kanigher motorists are using credit cards more often these days. With gas at $4 a gallon, that translates to up to 12 cents per gallon in fees. As a result, small merchants lose money on gas sales.

Raising gasoline prices to cover the fees would place individual stores at a competitive disadvantage with large gas retailers, such as Wal-Mart and Costco. Those businesses can afford to take a loss on gasoline because they make up for it in other retail sales. Convenience stores also rely on inside purchases to turn a profit but customers are spending less inside the stores, Krueger said.

The House is considering legislation, called the Credit Card Fair Fee Act, which would cap credit card rates that merchants are charged.

We think the free market is important and that credit card companies should be allowed to charge fees to cover their operating costs. But it also is important that small businesses are protected — especially in this struggling economy — and that consumers have full access to the services they need.