New York State is cracking down on gas stations that charge consumers higher prices to pay with credit. Under state law in New York and nine other states, retailers are prohibited from surcharging credit card customers. But NYS Attorney General Andrew M. Cuomo said a recent investigation found about a third of the gas stations on Long Island are violating the law.
In addition, he alleges, some of those gas stations are engaging in false advertising by only listing the lower cash prices on their street-view signs. In several cases, the stations failed to disclose that the price was only for cash transactions. Once at the pump, consumers discovered that they were charged more for using a credit card, a deceptive “bait and switch” practice.
Nine states in addition to New York prohibit merchants from adding surcharges to credit card transactions: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas. Credit card issuers, including Visa and MasterCard, generally forbid credit card surcharges too–although they allow cash discounts.
Service stations are becoming more aggressive about credit because they say they can’t afford the fees their banks charge. These interchange fees are charged by a merchant’s bank as well as by the banks that issue credit cards. In the United States, the typical fee per transaction ranges from 2 percent to 4 percent.
There’s no dispute that both station owners and motorists are suffering because of the high cost of gas. However, there’s no excuse for misleading practices. Consumers could make an informed choice if gas stations would simply advertise the full price for a gallon of gas–along with the fact they offer a discount for cash sales.
Cuomo described Long Island as “a hotbed for gas stations that engage in deceptive practices” by displaying one price to lure drivers and then charging them more at the pump. By withholding the higher credit card price until the consumer has already parked at the pump, the stations prevent honest comparison shopping, he said, adding that his office is sending “cease-and-desist” letters to about 43 gas stations.
“Today’s gas prices dictate that fewer and fewer consumers have enough cash on-hand to pay the ‘cash-only’ price to fill up their tanks,” he continued. “Therefore, it’s inexcusable that business owners would use the lure of lower prices to entice customers and then rip them off.”
New York consumers can report gas stations that prominently advertising a cash-only price on primary signage but note at the pump that credit card customers will be charged more to the Attorney General’s Consumer Helpline at 1-800-771-7755.
No matter where you live–or fill your tank–there are reasons to think carefully about using either credit or debit for gas purchases.
Some gas stations and credit card issuers limit the amount of gas you can buy at the pump. If you have a big gas tank, you may be cut off before your tank is full.
In addition, pay-at-the-pump transactions automatically place a $75 to $100 hold (or block) on your credit or debit account. The hold comes off when the actual charge for the gas is processed. Until it does, you lose access to the funds on hold, even if you only pumped half that much in gas. The blocks can push consumers over their credit limits or, in the case of debit cards, result in bounced checks. And while it is only supposed to last a few moments — until the actual amount of the sale is processed — consumers complain the holds sometimes stay on their accounts three days or more.
- Before you use a credit card that offers a rebate on gas purchases, weigh the cost of paying cash or shop for a station that charges the best price for credit.
- Budget for gas. Then use your debit card to withdrawal a fixed amount of cash before you pull to the pump. Avoid taking cash from an ATM not owned by the institution where you bank, since you’ll be charged a fee. Instead, stop at a grocery store or pharmacy, use your debit card for a small purchase like mints or gum and then ask for cash back. You’ll avoid the foreign ATM fee, though there may be a limit on the amount of cash you can get back.