Gas Station Merchants: Here’s How To Lower Costs, Maximize Profits
Some gas stations owners choose not to accept credit card payments, preferring to accept cash or debit cards instead. However, as the credit card is the preferred way to pay at the gas station, as a rule they are widely accepted. That doesn’t mean that owners are always getting the best deal for their gas station payment processing however.
The Burden of Low Profit Margins
The cost of processing credit cards is one of the biggest challenges for gas stations and it’s led some to question whether it is worth accepting credit cards at all. However, for most consumers, the credit card is their go-to option for paying at the gas station.
Statistics from NACS show that of the 40 million Americans who need to fill up daily, 30 million of them chose to pay at the pump. However, for gas station owners, one of the main problems is the low profit margins.
The mark ups on gas sales aren’t vast, and card fees for this sector have been referred to as “staggering”. This has led to some gas stations not accepting credit card payments because once interchange fees are considered, the remaining profits can be too low.
One way some gas station owners use to overcome this problem is to impose a surcharge, and while this is understandable, this is rarely popular with customers. There have been efforts to address this issue, and one credit card company has made an effort to lower transaction fees for merchants. However, there are steps you can take to reduce gas station payment processing fees and increase profits.
Reducing Your Payment Processing Fees & Maximizing Profits
It is possible to reduce interchange fees by working with a company that specializes in supplying credit card processing services for the fuel sector. When a garage owner signs up for a fuel specific program as opposed to a retail one, they can benefit from lower interchange fees.
Accepting fleet cards, which are used by both corporate customers and governments, is another way to increase profits. Branded fleet cards don’t charge interchange fees; gas stations owners are charged a percentage instead.
Moreover, if you are taking B2B transactions, you could also qualify for Level 2 or 3 processing, which can significantly reduce interchange fees.
It is also worth considering that consumers who pay by credit card also buy more, so some would argue that these additional sales make up for the transaction fees.
Choosing the Right Payment Processing Solution
It is not just about finding the right POS system: you need to find the right company to work with. Here are some basic tips to help you narrow down your choices:
- Ensure that the POS system is industry specific so you can qualify for a fuel specific program and accept fleet cards.
- Don’t go for first POS system you find: ask questions, look at rates, compare features and weigh up the ongoing costs to your business, as well as the long-term benefits.
- Make sure the company you are working with has expertise in the area.
Payment Processing Options
There are multiple choices for accepting credit card payments; they can all be integrated alongside your gas station POS system: The choices are:
- Standalone terminals
- Mobile equipment – for accepting payments on the go.
- Pay at the pump processing – for added convenience and speed of service to customers.
- EMV terminals – so gas station owners can get ready for the changeover deadline.
The EMV Revolution
For gas stations owners who haven’t yet switched to an EMV terminal, it is time to start considering it. In October 2015, the EMV liability switch came into force for many US-based retailers.
However, gas stations were initially given until October 2017 to changeover, and if they didn’t they could then become liable for any credit card chargebacks, which the Chicago Tribune estimates would cost gas stations half a billion dollars collectively.
In addition, concerns have been raised that many gas stations were likely to miss the deadline simply because of the complexities involved in upgrading. Also, some station owners have expressed concerns over the costs implications of changing to EMV, but others are opting to use the upgrade as an opportunity to switch to mobile payment systems.
Currently, just a third was set to meet the original deadline, and the Chicago Tribune article predicted that many gas stations won’t have made the changeover until 2021. However, recently Visa and MasterCard moved the deadline 2020, but there are worries that gas stations are at increased risk of fraud until they complete the switch.
Data Security & Fraud Risks
EMV aims to reduce fraud, however, in the meanwhile, fueling pumps have been described as “one of the last bastions” for thieves, as they continue to use credit cards with strips. Strip cards can be skimmed, and there have been numerous reported incidents throughout the United States in the past year.
Moreover, gas stations in remote locations can be targets for fraud, and criminals will often test out counterfeit cards at gas stations at the pay as your pump, as there is less opportunity they’ll get caught.
However, despite these fears, it should be remembered that gas station fraud is among the lowest, with figures from Visa showing it makes up just 1.3 percent of payment fraud in the United States, and payment processing companies have fraud protection and security measures in place to further reduce the risks, but gas stations owners still need to be vigilant.
It is widely agreed that accepting credit cards increases sales by giving customers a convenient way to pay; this is especially important at gas stations, where most consumers want to pay at the pump rather than leave their car and pay in cash at the checkout.
In addition, gas station retailers are also set to go through a period of uncertainty due to the upgrade to EMV and fears of increases in fraud, however, by working with a payment processor with expertise in this area, owners can secure the best deal for their gas station payment processing and get the support they need to make the change when the time arrives.