This past weekend I drove an Ineos Grenadier to Moab, Utah and back to LA. It was about 24 hours of driving; add the additional eight or so hours of epic off-roading, and I was burning lots of gas. This meant I was constantly on the prowl looking for the cheapest fuel between California and Utah, and one thing that annoyed me to no end — and that has annoyed me for years — came to mind: The way gas stations advertising pricing is total bullshit. I realize this is a random blog, but just allow me to rant a bit.
Cornell Law School defines a “Bait and Switch like this:
A “bait and switch” takes place when a seller creates an appealing but ingenuine offer to sell a product or service, which the seller does not actually intend to sell. This initial advertised offer is “the bait.” Then the seller switches customers from buying the advertised product or service that the seller initially offered into buying a different product or service that is usually at a higher price or has some other advantageous effect to the advertiser.
Per the university, this kind of thing is not legal. “’Bait and switch’ advertising is grounds for an action of common-law fraud, unjust enrichment, and sometimes breach of contract. A ‘bait and switch’ is also a violation of the Consumer Fraud and Deceptive Business Practices Act,’‘ writes Cornell.
Gas station pricing seems pretty damn close to falling under this definition, though if I had to guess, it probably technically clears the bar because of two small terms on the signs “cash” and “w/car wash.” Both of those terms drive me nuts.
First, we’ll start with the cash price thing, because that’s the one everyone knows, even though I think it’s the lesser of the two evils.
Cash Price
You’ve probably all seen signs like this. They show the price of gas nice and big, and then in a smaller font, they’ll have the word “cash” to indicate that, actually, this price isn’t what you’re going to be paying because you, like the vast majority of shoppers, aren’t interested in using cash to buy gasoline. What you will instead be paying is a higher price — probably 10 or so cents higher. What’s the deal with that?
Well, it seems there are two answers to this. The less obvious one (to me) is that people who buy gas with cash have to enter the store, and that represents an opportunity to sell more products. Per the National Association of Convenience Stores’ “Consumer Behavior at the Pump” study from March, 2019:
“As in previous years, the top reason that gas customers go inside the store is to pay for gas at the register. While 78% of all customers pay by credit or debit card, a sizable percentage of customers pay by cash inside the store. Fully half (50%) of all female customers pay for gas at the register”
[…]
Ultimately, success for retailers is often determined by how they can attract customers to their lot to buy fuel and also get them inside the store to purchase other items. Or, increasingly, by developing a strong in-store offer that translates to a fuel purchase that may be less dependent upon only the gas price sign.
So if a gas station can offer a discount for cash users, one might feel inclined to head into the store to hand over a few greenbacks. This is the number one reason why folks head into gas stations, with snack buying and then bathroom usage coming in after that.
To buy drinks (42%) and snacks (37%) are the next two reasons that gas customers come inside the store after filling up at the pump. Retailers also could consider the importance of two services that attract customers: More than one in five customers say they used the bathroom (21%) and one in eight used the ATM (13%) the last time they went inside the store. The importance of amenities like bathrooms and ATMs becomes much more apparent when looking at the order of purchases: Most drivers go inside the store before they buy gas (59%). Certainly, this includes the 45% of gas customers who pay inside, but many customers go inside the store before buying fuel, most likely to withdraw money for a cash purchase or use the bathroom.
Here’s a look at what people buy most frequently in gas station convenience stories, in case you were curious:
Of course, there’s a more obvious reason why the cash price is cheaper than the credit price: Gas stations have to pay merchant “interchange” fees, as Chase bank points out in an article on the topic, writing:
Gas stations are in fact legally allowed to charge a customer extra if they choose to use a credit card to purchase gas. This is because the gas station owners pay an interchange fee to the payment networks. They often pass this fee on to the consumer to recoup that additional cost.
An interchange fee is part of every credit card transaction that a merchant processes. The merchants themselves do not keep this money though. It’s passed back to the card issuer to cover the cost of processing the transaction as well as the risks associated with lending the credit.
So you might wonder how much these fees are, and whether or not the price you pay at the pump with your credit card is more than these fees. Is the gas station making more profit if you use a credit card? Per Chase, the answer appears to be: Not really:
Gas stations charge an average of 5 to 10 cents more per gallon for credit card purchases.
According to the Association for Convenience and Petroleum Retailing (NACS), Opens overlay, credit card processing fees at gas stations average about 2.5% of the total transaction price. As of October 2022, the national average for a gallon of gas, Opens overlay was $3.76, which would make the processing fee about $0.09 per gallon.
In general gas stations typically have a low profit margin on gasoline sales. Intense competition from other nearby stations means they’re often pricing a gallon of gas just a couple pennies over cost.
Still, why do they charge the customer the interchange fee in the first place? If you go into a Target, there’s no “cash price” on the goods, and Target has to pay the interchange fee too, right? I don’t have the answer to this, though I suspect it comes down to “low profit margin on gasoline sales” and of course the fact that, if the cash price is lower, you’re more inclined to enter the store and buy something.
W/Car Wash
This next one drives me mad, because, while I’m used to paying about 10 cents more than the (cash) advertised price on most signs, I don’t expect to have to buy a damn car wash in order to get the price shown.
Seriously, look at that Shell station above in Barstow. The biggest price at the top of the sign is $4.19 9/10 a gallon. If you’re driving along looking for the cheapest price, you’ll see that big number and head straight to the Shell, only to realize that this price only applies if you buy a car wash. This is wack.
First off, it’s worth noting that, despite phone apps that help you find the best price, NACS says the majority of people use store signs to shop for pricing, so having unclear signs is going to bring in potential customers, whom you will then disappoint.
I was one of those potential customers. I arrived at that gas station, finally got close enough to the sign to see the strategically small-fonted “Regular cash w/Wash” text above the advertised price, and then blurted an expletive or two at whoever runs that fuel station. To me, that seems like a Bait and Switch. The price per gallon looks to be $4.19 9/10, but upon arrival, you realize you’ve gotta buy the damn TrueCoat and pay with cash to get that price.
According to NACS, these tactics aren’t exactly ineffective. As you can see in the plot above, in 2019 16 percent of folks paid cash for a discount and 18 percent took advantage of bundles to get a discount.
So that’s why it happens, but it doesn’t make any of it acceptable in my mind. I guess I can understand the cash/credit thing due to the interchange fee, but with the vast majority of folks using credit cards for gas (and it looks like that 77 percent has risen from 2019, possibly due to COVID restricting cash use), having the big advertised price on the sign (which is still the primary way folks shop for gas — looking at signs) be the cash price just seems dishonest. And having that big price require a purchase of something else like a car wash? Get that crap out of here!
Images: NACS
Just to add, the stations aren’t paying credit card interchange costs on each gallon. Its a fee applied to the total amount, which can be a fixed amount and a variable amount based off of the card brand (Visa, MC, Amex, yadda yadda) and type (rewards vs non rewards. The $0.10 / gallon BS drives me nuts. They’re making a few dollars more off of every fill up just to cover, maybe $0.50 in fees (basing off of a full fill up of like 20 gallons).
That is why in Europe, it is illegal to add a general surcharge when paying with a major credit card.
I’m gonna be honest that I don’t even think about this because every gas station I have been to charges cash price for using my debit card.
What bothers me is those who fill up, then leave their vehicle to go inside the station. Maybe they are paying with cash… except the station I go to regularly, only takes credit cards.
Never go to a Bucees then. They have 100 pumps but only 8 are open because people go inside the 70,000 sf store and shop for 45 minutes.
The most significant reason by far that my wife wanted an EV was to avoid gas stations. She just connects to the charger when she gets home for the equivalent of 90¢ per gallon.
When traveling, she connects to the fast charger for 15 minutes and she’s done – exactly one price, and no cash OR credit card or any other interaction is required. She visits the store while it charges, since electron spills aren’t a possibility.
Not for everyone, but avoiding gas stations and all their games is just priceless to her. And to me.
I for one am happy I no longer have to stop at petroCanada every 3 days. I charge at home or at work (for free) if any of the places aren’t taken. Last week was my first week with it and it cost me 10$ to charge at home when in gas a week was 125$
What really bugged me was when you used to pull into the wrong row of pumps and realized it said Full service instead of Self service and someone was going to touch your car and charge you for it. I’m glad that trend is dead where I live.
I live in Florida, bought my last car in Connecticut and drove it home. I specifically stopped in Tarrytown before the Tappan Zee, so that I would have a full tank to not have to worry about stopping in New Jersey at all.
New Jersey: the only state where the citizens are too inept to pump their own gas!
I recalled several stations in Dallas, Texas with two price columns during the 1980s and 1990s: one for cash, other for card. The price difference between them was quite large (about 15–20 cents per gallon more, which was quite a lot back then).
In Germany, we have what is called Mindestbetrag (minimum amount) for card payments as to offset the interchange charge (which is really tiny at 0.02% for debit and 0.03% for credit). However, some retails, restaurants, and such set Mindestbetrag from €20 to €150.
This is really extortion because you are forced to add other items to fulfil the minimum amount. They are not always posted at the front entrance or in the visible places so you have to ask first. When that happens to me, I asked why wasn’t this information posted at the door or cash till in the first place. Many times, I just cancel the order or purchase and walk away.
You’re not in Kansas anymore Dave Toto!
I have never conceived that the price of gasoline would be different whether I payed cash or card. Definitely not a reality in my neck of the woods. Probably a stupid question, but because I buy litres and pay with Moose Dollars, what’s with the 9/10 ? What is that supposed to refer to?
9/10ths of a cent. So they can say it’s less than $4.20/gal. I’ve lived with this my entire life and it doesn’t make any sense to me either.
9/10 of.. a CENT !? Ridiculous.
It’s stupid. Really wish they’d ditch that. It might have made some tiny difference back in the olden days when gas was under a buck a gallon, but at today’s prices it’s just dumb.
Even the whole 5 or 7 cents back per gallon deals are hardly worth bothering with anymore. If someone sent me a coupon for 0.02% off at the grocery store, I don’t think I’d even spend my time cutting it out of the junk mail flyer.
Missed opportunity!
$4.20 is high.
My ridiculous conspiracy theory is that they kill the receipts on the pumps to force me to come inside so I buy things, to the point that even if I intend to go in for a snack I refuse to buy it if I’m forced inside
Sidney, NE. The no-name station got me. Once. Ridiculously low price on the big sign. I filled up and realized that it was (no, I wasn’t paying attention, shame on me) at a higher price than normal, let alone the sign price. I went in and the attendant cut me off almost before I even started to talk. The ridiculously low price was only on one pump. Literally one pump. No refunds and they had their stock answer down pat. The business I was going to all immediately knew what I was talking about so it was well known in town. What a scam.
Based on 50% of female customers going into the store to pay for gas, let’s assume 30% of male customers do, so call it 40% of customers.
25% of those buy lottery tickets.
That means one in ten people who gas up buys a lottery ticket.
That’s CRAY.
Three kinds of people in the world. Those who understand math/ statistics, and those who buy lottery tickets.
The one guy that beat those odds is laughing at you all the way to the bank.
Totally fair. But he’ll be back to the counter for scratch offs again.
You go back, Jack, do it again
Wheel turning round and round
I own multiple convenience stores in Texas, and many people misunderstand the industry and how retailers are charged by fuel suppliers. If you’re upset about a 10-cent difference between cash and credit prices, you should know how much money fuel suppliers make—that would really frustrate you. The real price gouging happens there, not in the $1 premium we try to make on premium fuel.
Most gas stations don’t make any money on regular gas credit pricing. For example, on June 3, 2024, my fuel cost from Chevron is $2.81 per gallon. My cash price is $2.89, and my credit price is $2.94. That’s a 13-cent spread on credit without accounting for the processing fees, which are about 7.4 cents. This leaves me with a gross profit of 6 cents per gallon (not take-home). Our cash prices are close to our cost with a small margin. We increase the credit price to avoid running at a loss. Additionally, cash flow is another reason for the cash price—it allows us to have more money on hand to make quick purchases. When you pay by credit card, the money first goes to the fuel supplier’s account and only transfers to the retailer’s bank account after 2-3 days.
Some people have mentioned that some stations don’t differentiate between cash and credit prices and offer low credit prices. These retailers often get back-end rebates close to 12 cents per gallon because they might have more stores or be fuel suppliers themselves. If you purchase unbranded fuel, although the price is cheaper, those retailers are making more money off the consumer due to lower costs.
I hope my input helps people understand that small business owners don’t make a tremendous amount of money in this business. We get squeezed because big companies charge us more since we don’t have the volume to negotiate better pricing, and larger convenience store operators offer better pump prices and receive back-end payments, ultimately making more money off the consumer.
I understand that fuel is a major expense for many households, but please support your local mom-and-pop convenience stores.
Thanks for sharing your perspective from the inside.
In my neck of the woods gas stations only advertise the regular price on the sign – you have to drive up to the pump to find out how much 93 is going to cost you.
Surprise, surprise, 93 prices vary WILDLY. I regularly drive up to pumps, look at the price, and drive away. It’s routine to see the price vary by more than $1.00/gallon from highest to lowest. If I’m in a tight spot, I’ll buy a couple gallons to get me by, but I’m not rewarding this bullshit with a full tank purchase.
History does repeat itself. I remember when credit cards for the common person (BankAmericard, Master Charge) became popular. The majority of gas stations had a lower price for cash. That faded away with time but here we are again. I pay the card charge rather than stand in line at the soda/lotto ticket dispensary..
Have you thought about just paying with cash?
The thing that would annoy me about paying for gas with cash is I like having a full tank. So I go inside, waste some time in line, take my best guess, and pay. Then I go back outside, pump my gas, and realize I was off by half a gallon. At today’s prices, that’s a couple dollars, so I’m going to then have to go inside and get my money back. I’ve burned two trips inside when paying at the pump takes 20 seconds.
I suppose the solution to that is to buy a high MPG car with a HYUUUUUGE gas tank. Something like a ’96-’97 Passat TDI wagon with a ventnectomy to hold 25 gallons. Those were rumored to have a range of up to 1500 miles.
In addition to the inconvenience of dealing with people, waiting in line, going in twice to get change–even just estimating less than a full tank so I don’t need to go back in for change means I can’t do “fuel added / trip odometer = MPG” accurately, plus you don’t get a receipt. I much prefer having the receipt to record on my budget spreadsheet or else I have to text myself the amount.
You can get a receipt. Just say yes when asked. Then you can throw it on the messy pile along with all the rest. Or just write the data off the pump in a logbook so its all right there without the mess: date, price paid, miles, cost/gallon and gallons pumped. Takes 30 seconds. You can figure your MPG the too.
Dealing with people? Oh that does suck but its a sacrifice I’ll make because me going inside is what brightens that poor cashiers whole day. Maybe the entire week.
My MB has a 22-gal tank and a 150-mile range.
Plus the trip to an ATM in order to have cash to begin with.
I can’t even recall the last time I payed for something using cash. Oh, yes, I can.. it was having to go to an ATM so I could get cash to tip the bartender at a business function’s open bar. Other than that, though?
Cash misses you.
I’ll have you know that real Americans carry cash, mister!
Username checks out. 😉
Yes, yes it does.
The Circle K’s around me in Arizona do a similar thing with their gas prices, they show the lower one which is only accessible if you have their fuel rewards card. I just stick to getting gas at Costco, as it’s quite a bit cheaper than most of the gas stations, particularly for 91 octane. Driving 28k miles a year, the membership has more than paid for itself in the first month or so.
Pro tip for shopping at any merchant that uses a reward card: they always have an “enter your phone number” option instead of swiping your card, and some good samaritan has created a reward account with them under the number <the local area code> 867-5309. So just enter that number and you get the reward discount.
281-330-8004
If everyone knows about this pricing, it’s not “bait and switch” anymore. You know you’ll pay for credit purchase. Besides, Dave you’re driving a ridiculous ply expensive and useless INEOS and you’re about money? Really?
I don’t own it!
You must be new here to think Tracy would own such a thing.
Are there state laws about this? In NY I only ever see both prices (cash/credit) listed, and always in the same size and font etc.
The “price if you buy a car wash” should be completely illegal, at least outside of Florida where the laws are written by the Queen of Hearts.
In NY it is legal to charge more to use a credit card if you show moth prices. It is not legal to show a percentage as an extra fee for using a credit card. A lot of small businesses do charge a percentage fee and get away with it because it’s hard to enforce.
The way I usually see that done in small businesses is that they don’t charge more for card transactions… they offer a “cash discount”. 🙂
We have small businesses in our area, including restaurants and hair salons, which charge a 5% surcharge for using a credit card. This is illegal in NY.
Yeah, and like I said, both numbers are given equal amount of real estate on the signs, which all seems fair and honest. David’s examples are all problematic.
The one I find most dishonest is gas stations that advertise a cash price and then the credit price is significantly more than $0.10/gallon more expensive. I’ve seen $0.30-$0.40 more/gallon for credit and that really feels like a bait and switch because you don’t find out until you are at the pump.
Just drive away, to the next place.
It’s always at the most inconvenient locations, and they know it.
In those cases, I put in just enough to get me somewhere more convenient.
I paid cash back when you could pump first and then pay. I’m not making two trips inside to fill up.
But my question is, in the “100% Hand Wash” sign, do they actually wash your car by hand? Or is it a “hand wash” machine that’s going to rip off your car antenna like any other car wash machine.
The obvious answer is to start buying up convenience stores / gas stations, become fabulously rich, and not worry about stuff like cheap gas. If Pilot/Flying J was good enough for Warren Buffet, surely the local corner store is good enough for David.
Since I drive very little (no commute to work), I generally try to fill up with ethanol-free gas. Costs more but does less damage if it sits in the tank for a while. Find stations here:
https://www.pure-gas.org/
How little? Regular ethanol gas lasts over a year in the tank here in my desert climate, but it can be a much shorter life if you live somewhere humid.
Oh man, do I feel stupid!
It looks like drinks and snacks are the biggest sellers at convenience stores/gas stations and here I have been purchasing gas station flowers for all of the objects of my desire. A nice “Rose” with a hint of Diesel fuel scent really gets their motor running! 😉
(((not))
Here, you dropped this –> )
The biggest shock to me here is there is still only a 10% upcharge for premium octane ?!?! Around me (DC exurbs) they have started gouging a full $1.00 per gallon more for supreme. With gas around $3.50, that’s almost 30% higher.
Most of CA it’s now 20 cents between tiers instead of 10, but we’re also starting closer to $4.90 for a gallon of 87…