Thoughts and Riches

The difference speaks to a relatively obscure aspect of credit finance called interchange fees. Those are the fees (usually slightly under 2% of a purchase) that the merchant must pay the credit-card issuer. As gas prices skyrocketed, the money paid to card issuers ballooned as well. Today, the fees amount to 9¢ to 12¢ a gallon. That, coupled with a sharp rise in the number of people who use cards at convenient pay-at-the-pump machines, squeezed Flash Foods' profit margins. Those margins have fallen to an estimated 4¢ to 7¢ per gallon. To put the increase in perspective, consider that in 2004 Flash Foods paid $4 million in credit-card fees, but this year it estimates it will pay $14 million.

Gas retailers say that $136-a-barrel oil isn't the only factor driving up costs at the pump. Card companies have long charged interchange fees, but as credit-card use soars, the total cost of interchange fees has risen drastically. About 60% of gas purchases were made with a card last year. While the National Association of Convenience Stores (NACS) doesn't have comparable earlier data for gas purchases, the share of all convenience store purchases made with a card has risen from 32% in 2003 to 56% today.

Labels: frugal