Cash rules at some pumps

Americans love their credit cards. But at more and more gas stations, it pays to be part of the cash crowd.

In Costa Mesa, Craig Hummel pocketed a 12-cent-a-gallon discount recently because he used real money at a Valero station instead of his Visa or MasterCard. He bought 9 1/2 gallons of premium for his Mercedes sport utility vehicle and saved $1.14.

“I know a lot of people just go wherever they want for gas . . . but I only come here,” said Hummel, a Realtor from Newport Beach. “Over a year’s time, you save quite a bit. I think more stations should offer it.”

They are. To dodge the rising fees that credit card companies tack on to transactions, both no-name and big-brand stations are charging drivers less when they buy with cash. In California, the savings range from 3 cents to 15 cents a gallon.

The Valero station favored by Hummel was offering self-serve regular for $2.97 a gallon for cash and $3.07 on a credit card a few weeks ago. Not far away, a busy Shell at Brookhurst Street and Talbert Avenue was offering a 6-cent cash discount for regular.

“I’ve always paid cash because I wait tables for a living,” said Fran Block, who stopped at the Fountain Valley Shell. “Cash is king.”

Francisco Galicia, the manager of that Fountain Valley Shell, said he had been offering cash discounts of 4 to 6 cents a gallon for six months. Customers had questions at first, Galicia said, but now “they understand why I’m doing it . . . and they’re responding.”

Fees vary, but on a typical credit card sale, Galicia’s station pays 10 cents plus 2% of the purchase price to the credit card company.

Customers pay too. In 2006, motorists -- whether they used cash, credit or debit cards -- paid an average of 4.2 cents a gallon more because of credit card fees, said Jeff Lenard, spokesman for the National Assn. of Convenience Stores, which represents outlets that sell about 80% of the nation’s fuel.

Fees have been a perennial sore point with all retailers. Complaints have grown louder because money collected through card fees has more than doubled since 2001, and rewards programs have convinced people to use their cards for everyday purchases.

For gas stations, soaring prices have magnified the percentage-based card costs and caused more and more customers to pay with plastic.

“What’s happened is a double-whammy,” said David Robertson, publisher of the Nilson Report, a credit industry newsletter.

Members of the convenience store group, which has sued credit card companies over the fees, paid $6.6 billion in credit card fees last year -- and booked $4.8 billion in profits, Lenard said. “The credit card companies made more at our stores than our store owners,” he said, noting that most of the profit from gasoline goes to the refiners rather than service stations and convenience stores.

Dealers say the problem is at its worst in California, where gas prices have been higher for longer and lengthy commutes mean drivers fill up frequently. It’s not uncommon for 70% to 90% of a service station’s sales to be made via credit card.

Oil companies have played a role too. Chevron Corp., Exxon Mobil Corp., ConocoPhillips and others have offered rebates and aggressively promoted branded credit cards to lock in loyalty.

Auburn, Calif.-based Nella Oil racked up $5 million in credit card fees last year at its 50 Northern California gas stations, where 74% of sales are paid in plastic, said Thomas Dwelle, a partner in the family-owned business.

So this year, Dwelle launched a 3-cent cash-discount program at a few stations -- and found himself in hot water with Visa.

Through a third-party processor, the card company accused Nella Oil of violating its Visa contract by using the word “credit” on its price signs. Visa threatened to charge the company $5,000 a day and cut off the stations’ ability to take Visa credit cards.

Visa demanded that Dwelle use the words “regular” or “standard” instead of “credit” to differentiate the higher price from the cash cost. State regulators opined that Visa’s recommended signage would confuse customers and violate California law, and Visa backed off.

Visa USA declined to discuss the dispute. Visa Vice President Rosetta Jones said in a statement that offering a cash discount “is confusing and naturally implies a surcharge for payment card transactions.” People who use credit cards, the statement continued, “should not have to pay what amounts to an unfair checkout fee.”

Travis Plunkett, legal director at the Consumer Federation of America, likes the trend toward cash markdowns for fuel.

“It is something that dealers should be freely allowed to pursue, with no coercion on the part of the payment systems,” Plunkett said. “Customers who don’t use a credit card should have the opportunity of a discount.”

Still, people have to be vigilant. Under California law, cash discounts at gas stations also must apply to debit cards, and motorists should make sure the station doesn’t tack on a debit-card fee, which can run from 25 cents to 45 cents and eat into the cash-price savings. Arco is known for this, but others are joining in. Look for a warning sign when you pay.

In addition, payment systems at gas pumps can be confusing. At some machines, if the customer doesn’t press the word “debit” before swiping the card, the computer will treat the payment as a credit card sale, and the driver won’t get a cash discount.

Switching to cash isn’t for everyone. If a cash discount isn’t steep enough, Lenard said, “one of the challenges is that a customer might say, ‘Big deal. I get more than that in rewards.’ ”

And dealers risk alienating their credit card customers, who tend to be more loyal than discount seekers. California law prohibits retailers from adding a surcharge for credit card sales but allows discounts for using cash -- and the distinction can be murky in consumers’ minds.

“The marketer thinks, ‘I’m going to be nice to you, I’m going to give you a discount for paying cash,’ and the consumer thinks, ‘Hey, they’re penalizing me when I want to use my credit card,’ ” said Tom Robinson, chief executive of Robinson Oil Corp., owner of Rotten Robbie gas stations, which don’t offer cash markdowns. “It’s interesting how often that backfires.”

elizabeth.douglass@latimes.com

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Price cut

What’s happening? More gas stations are offering customers a discount on gasoline if they pay with cash or a debit card instead of a credit card.

What’s behind it? Escalating credit card fees are eating away at station owners’ profits. There are no fees on cash purchases, so dealers are able to give back some of their savings to customers through the discounts.

What’s in it for motorists? They can save 3 cents to 15 cents a gallon at stations that offer the cash deals.

What are the downsides? Few sites have pump-side machines that take cash, and it’s less convenient and more time-consuming to trek to the station’s cashier to collect the price break. And if the station imposes a debit card fee, it cuts into the cash-price savings.

How can I find stations with cash discounts? It’s not easy. There are no directories or station listings of outlets that offer cash bargains on fuel.

-- Elizabeth Douglass