Tuesday, April 17, 2012

Card Fees Have A Minute Effect on Gas Prices

A recent report published by the National Association for Convenience Stores asserted that interchange fees have contributed to the rise in gas prices at the pump. In fact, interchange fees have little to do with the price paid at the pump. As gas reaches $4 per gallon, the debit interchange fee remains under one cent per gallon at 4/5 of one cent, or $0.008 per gallon . At this level, debit card fees account for $0.13 of the average $64 gas fill-up of 16 gallons. Even for credit cards, which charge higher rates on transactions, the related interchange cost remains only $0.012 per gallon.

The price of gasoline has more to do with the price of oil, the cost of refining, and taxes than retailers’ costs. The Energy Information Agency (EIA) estimates that only five percent, including all marketing, wages and infrastructure, of the price of gas is due to retailers. For a $4 gallon of gas, gas stations add about 3.2 cents per gallon with less than one cent going to interchange fees.

As the price of crude oil has increased in recent months, gas prices have also risen sharply. Debit interchange fees are not responsible for the rise in gas prices. Of any $1 price increase at the pump, only 1/5 of one cent or $0.002 is due to interchange fees.

See the EIA’s explanation of the factors effecting gas prices.

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