It's not just the increasing cost of crude oil that's pushing up prices at the pump. Card companies such as MasterCard and Visa also have a hand in skyrocketing fuel costs, a new report claims.
How does paying with plastic impact gas prices? It's all in the "swipe fees" retailers have to pay credit card companies to process debit and credit transactions. As gas prices have climbed to meteoric highs in 2012, so have the fees merchants have to pay to accept credit and debit cards, a National Association of Convenience Stores report says, because swipe fees include a component that varies with the cost of the transaction.
According to their calculations, swipe fees account for about 7 cents of the price of gas at $4 a gallon. Ratchet up gas prices 50 cents, and swipe fees cost almost 8 cents a gallon. Because of the über-competitive landscape of gasoline retailing, merchants have to pass the cost of swipe fees on to consumers, which shows up in higher prices at the pump, the report claims.
Over the course of a year, the association estimates swipe fees add an extra $30 to the average consumers' fuel bill.
"The fees get higher and higher every year," says Doug Kantor, counsel to the National Association of Convenience Stores. "For six years running, the fees have been higher than what the gas station owners make when they sell gasoline."
But while the report paints retailers and consumers as the victim of money-hungry banks profiting off of surging gas prices, those in the credit card industry are crying foul. According to some, it's the retailers that are being greedy. After scoring a victory on Capitol Hill to limit the swipe fees banks and card companies can charge for debit transactions, stores haven't passed on the savings to consumers, critics argue.
In a statement, Trish Wexler, spokeswoman for the Electronic Payments Coalition, told U.S. News, "Last October, the Durbin amendment [in the Dodd-Frank Wall Street Reform Act] slashed what convenience stores pay for debit—the overwhelmingly most popular choice at the pump—by about half. Yet consumers continue to be punished at the pump, with not a penny in savings resulting from [retailers'] windfall in Washington and their Congressional favor."
"Convenience stores promised lower prices when they were lobbying for this new law—but once they got the money, they kept it for themselves," she adds.
What's more, card companies have made a concerted effort to unlink rising transaction fees from rising gas prices. Visa and MasterCard both voluntarily capped or lowered fees for card transactions on fuel sales, and according to MasterCard Head of Global Public Policy Shawn Miles, MasterCard's $50 cap on credit card interchange on gas alone has resulted in millions of dollars in savings for gas retailers.
MasterCard decided to cap fees on fuel transactions of $50 or more in 2007, he said in an E-mail.
"As the cost of fuel has risen, this program has led to retailers having lower payments-related costs with each filling of the tank," he adds. "To date, gasoline retailers have received more than a quarter of a billion dollars in savings."
Despite the cap on debit fees, Kantor argues that the law only applies to institutions with more than $10 billion in assets, which leaves out a huge swath of smaller banks and financial institutions. That means even with the debit transaction regulations, many consumers could still be paying a premium for gas due to swipe fees, he says.
And with more than a quarter of consumers opting to use credit when pumping gas, all bets are off for retailers and consumers when it comes to the fees levied by card companies to process credit transactions, Kantor says. That's because the federal government doesn't regulate credit transactions the way they do with debit transactions.
"There's no legislation on credit card fees right now," Kantor says. "We do think there should be reform of credit card fees, that these are a major problem."
But critics argue that the NACS report is just another instance of convenience store retailers trying to get something for nothing.
"They want to continue enjoying the benefits of our nation's payments system—from lower costs to fraud prevention—without paying for it or providing lower prices to their customer base," Ken Clayton, an executive vice president with the American Bankers Association, told ABC News. "This 'report' is really about convenience stores seeking government price controls that pad their bottom lines, leaving consumers to pick up the tab while they rack up additional profits."
Clarified on 4/12/12: A previous version of this story was unclear in its attribution of MasterCard Head of Global Public Policy Shawn Miles' statement when referring to MasterCard's cap on fuel transaction fees.