why it costs more to pay with your card

Gas prices are historically high in Michigan and won’t be going down anytime soon.

Yet, drivers paying with credit cards are likely to see an even more dramatic sticker shock when the meter stops.

The surcharge that gas station retailers employ to offset the costs of using credit cards over cash or debit cards might make only a small difference during times of cheap gas.

But when prices hit $4 a gallon in Metro Detroit, the small difference can add up fast.

US gas prices hit all-time high

With US gas prices eclipsing their highest mark ever this week, the trips that drivers are making to their local gas stations might feel like the most painful venture yet.

In Michigan, drivers are paying roughly $60 to fill up a 15-gallon tank. While the state is still below the national average after prices rose 42 cents in a week, costs are still historically high. Metro Detroit drivers are paying $3.97 a gallon.

The country broke its previous record set in 2008 on March 8, when the average cost of a gallon of gas hit $4.17. Fourteen years ago, the mark was set on July 17 when prices hit $4.10 a gallon.

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Experts don’t expect any relief in the near term amid President Joe Biden’s decision to ban oil imports from Russia, putting even further pressure on available supplies.

Michigan’s credit card fees – aka convenience fees

The listed price may not be what consumers pay. Back in 2013, the convenience fee was made legal in Michigan as businesses were given the authority to charge customers more for using a credit card. It was an added fee that’s meant to offset the costs of running credit card transactions.

Typically, those transactions add up to between 1.5 to 3% of the total cost. It’s a small amount of money which can cut into retailers’ profits quickly.

When you fill up on gas, it will be roughly 10 cents per gallon more, when paying with your credit card. So that 15-gallon tank will cost you another $1.50 to fill up.

Prior to 2013, retailers were prohibited from tacking on the extra cost. But, according to Detroit Business Law, a class action lawsuit against Visa and MasterCard opened the floodgates to allow retailers to assess a surcharge on customers wh

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While merchants can charge up to 4%, they’re prohibited from making a profit on it. The extra fee is solely for the cost to the credit card companies.

Are convenience fees legal in Michigan?

Yes. Because of the 2013 law, it pertains to all retailers, but it’s gas stations where this change is most noticeable. According to Nerdwallet, the reason is that gas stations have an easier time coming up with the surcharge calculation because petroleum is the primary product they’re selling.

“It’s easy for them to price their product differently based on payment method, but it would be challenging for a convenience store to do the same,” it read.

But Nerdwallet also cites several rules that retailers must follow if they plan to offer the surcharge, from notifying customers about the added fee both at the register and the receipt to prohibiting making a profit on the fee.

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Additionally, these fees can’t be used when someone pays with a debit or prepaid card.

What states outlaw credit card surcharges?

According to the personal finance website Motley Fool, Colorado, Connecticut, Kansas, Maine, and Massachusetts still outlaw retailers using surcharges on credit card transactions.

Prior to the 2013 rule that allowed retailers to do so, many instead offered a discount for those paying with cash. The idea was to incentivize customers to avoid swiping, which helps retailers avoid the added cost.

Many retailers still offer the discount.

Special rules for Michigan gas stations

Because of the ease of an added surcharge, gas stations in Michigan have special requirements in place.

Since July 2017, Michigan law requires gas stations to advertise the difference in fuel costs depending on the transaction method. The rule pertains to all conditions that might change the fuel price, like a credit card payment or a car wash.

The Michigan Attorney General says those changes must be advertised on road signs next to the advertised fuel price.

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They must be “with equal illumination, in lettering of the same style and of at least ½ the size used to post the sale price.”

What gas stations in Michigan don’t charge convenience fees?

While all businesses are allowed to charge the convenience fees and most gas stations do so, it’s not entirely true for all of them.

Speedway notably does not charge convenience fees in Michigan. Neither does Costco or Sam’s Club but a membership is required at both of those retailers.

If you’re looking to safe a couple bucks with each fill up, check the sign first. Stations are legally required to have both the cost for cash and credit displayed before you even pull in. There are some occasions with gas stations that are competing with each other where they may drop the convenience fee in order to get your business.

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