You're on vacation, you pull up to the pump, pull out your credit card, and notice you're paying more than you would with cash- is this legal? Why can this happen?

In a growing number of areas in the country, this story holds true. Gasoline stations can charge a different price to customers paying with credit. Your first question may be- why? It costs station owners more to take your credit card than taking and depositing cash. There are transaction fees on each purchase that the bank charges the station, the cost of equipment for the station, the cost of processing each transaction from Visa/MC, etc. This all adds up and can reduce a stations bottom-line by up to 3%!

Since stations make less money on customers who pay with credit, some have begun to offer "discounts" to those who pay using cash. Many times those "discounts" mean customers who pay with cash spend 15-cents or more less per gallon than those who whip out the plastic.

Consumers ask if offering lower prices to cash customers is legal... it is a very complicated answer. Each gasoline station has a different agreement with a bank, but many share a similar agreement with an outside party that processes transactions (the biggest being Visa and MasterCard). In those agreements, the station owner generally agrees not to charge more to credit-paying customers. What if a station owner simply gave a "discount" to those paying in cash? That's exactly what many have done. Card issuers generally haven't told stations they can't charge less to cash customers, so that's what many stations have done- offer a "discount".

State laws may vary on the subject as well, but depending on the agreement with banks, stations have been allowed to discount fuel prices for those who pay with cash. Some stations try to lower the high cost of taking plastic by offering their own credit cards which generally cost much less to take, thanks to agreements large chains have with banks who back their cards.

So while charging more to customers who prefer credit is in a gray-area, discounts to cash paying customers likely will continue unless costs to take credit cards drop.

Do you pay more for gasoline with a credit card? Let us know!