Gas Stations Need To Stop Tricking Customers With BS Pricing - The Autopian (2024)

This past weekend I drove an Ineos Grenadier to Moab, Utah and back to LA. It was about 24 hours of driving; add the additional eight or so hours of epic off-roading, and I was burning lots of gas. This meant I was constantly on the prowl looking for the cheapest fuel between California and Utah, and one thing that annoyed me to no end — and that has annoyed me for years — came to mind: The way gas stations advertising pricing is total bullsh*t. I realize this is a random blog, but just allow me to rant a bit.

Cornell Law School defines a “Bait and Switch like this:

A “bait and switch” takes place when a seller creates an appealing but ingenuine offer to sell a product or service, which the seller does not actually intend to sell. This initial advertised offer is “the bait.” Then the seller switches customers from buying the advertised product or service that the seller initially offered into buying a different product or service that is usually at a higher price or has some other advantageous effect to the advertiser.

Per the university, this kind of thing is not legal. “’Bait and switch’ advertising is grounds for an action of common-law fraud, unjust enrichment, and sometimes breach of contract. A ‘bait and switch’ is also a violation of the Consumer Fraud and Deceptive Business Practices Act,’‘ writes Cornell.

Gas station pricing seems pretty damn close to falling under this definition, though if I had to guess, it probably technically clears the bar because of two small terms on the signs “cash” and “w/car wash.” Both of those terms drive me nuts.

First, we’ll start with the cash price thing, because that’s the oneeveryone knows, even though I think it’s the lesser of the two evils.

Cash Price

You’ve probably all seen signs like this. They show the price of gas nice and big, and then in a smaller font, they’ll have the word “cash” to indicate that, actually, this price isn’t what you’re going to be paying because you, like the vast majority of shoppers, aren’t interested in using cash to buy gasoline. What you will instead be paying is a higher price — probably 10 or so cents higher. What’s the deal with that?

Well, it seems there are two answers to this. The less obvious one (to me) is that people who buy gas with cash have to enter the store, and that represents an opportunity to sell more products. Per the National Association of Convenience Stores’ “Consumer Behavior at the Pump” study from March, 2019:

“As in previous years, the top reason that gas customers go inside the store is to pay for gas at the register. While 78% of all customers pay by credit or debit card, a sizable percentage of customers pay by cash inside the store. Fully half (50%) of all female customers pay for gas at the register”

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Ultimately, success for retailers is often determined by how they can attract customers to their lot to buy fuel and also get them inside the store to purchase other items. Or, increasingly, by developing a strong in-store offer that translates to a fuel purchase that may be less dependent upon only the gas price sign.

So if a gas station can offer a discount for cash users, one might feel inclined to head into the store to hand over a few greenbacks. This is the number one reason why folks head into gas stations, with snack buying and then bathroom usage coming in after that.

To buy drinks (42%) and snacks (37%) are the next two reasons that gas customers come inside the store after filling up at the pump. Retailers also could consider the importance of two services that attract customers: More than one in five customers say they used the bathroom (21%) and one in eight used the ATM (13%) the last time they went inside the store. The importance of amenities like bathrooms and ATMs becomes much more apparent when looking at the order of purchases: Most drivers go inside the store before they buy gas (59%). Certainly, this includes the 45% of gas customers who pay inside, but many customers go inside the store before buying fuel, most likely to withdraw money for a cash purchase or use the bathroom.

Here’s a look at what people buy most frequently in gas station convenience stories, in case you were curious:

Of course, there’s a more obvious reason why the cash price is cheaper than the credit price: Gas stations have to pay merchant “interchange” fees, as Chase bank points out in an article on the topic, writing:

Gas stations are in fact legally allowed to charge a customer extra if they choose to use a credit card to purchase gas. This is because the gas station owners pay an interchange fee to the payment networks. They often pass this fee on to the consumer to recoup that additional cost.

An interchange fee is part of every credit card transaction that a merchant processes. The merchants themselves do not keep this money though. It’s passed back to the card issuer to cover the cost of processing the transaction as well as the risks associated with lending the credit.

So you might wonder how much these fees are, and whether or not the price you pay at the pump with your credit card is more than these fees. Is the gas station making more profit if you use a credit card? Per Chase, the answer appears to be: Not really:

Gas stations charge an average of 5 to 10 cents more per gallon for credit card purchases.

According to theAssociation for Convenience and Petroleum Retailing (NACS), Opens overlay, credit card processing fees at gas stations average about 2.5% of the total transaction price. As of October 2022, thenational average for a gallon of gas, Opens overlaywas $3.76, which would make the processing fee about $0.09 per gallon.

In general gas stations typically have a low profit margin on gasoline sales. Intense competition from other nearby stations means they’re often pricing a gallon of gas just a couple pennies over cost.

Still, why do they charge the customer the interchange fee in the first place? If you go into a Target, there’s no “cash price” on the goods, and Target has to pay the interchange fee too, right? I don’t have the answer to this, though I suspect it comes down to “low profit margin on gasoline sales” and of course the fact that, if the cash price is lower, you’re more inclined to enter the store and buy something.

W/Car Wash

This next one drives me mad, because, while I’m used to paying about 10 cents more than the (cash) advertised price on most signs, I don’t expect to have to buy a damn car wash in order to get the price shown.

Seriously, look at that Shell station above in Barstow. The biggest price at the top of the sign is $4.19 9/10 a gallon. If you’re driving along looking for the cheapest price, you’ll see that big number and head straight to the Shell, only to realize that this price only applies if you buy a car wash. This is wack.

First off, it’s worth noting that, despite phone apps that help you find the best price, NACS says the majority of people use store signs to shop for pricing, so having unclear signs is going to bring in potential customers, whom you will then disappoint.

I was one of those potential customers. I arrived at that gas station, finally got close enough to the sign to see the strategically small-fonted “Regular cash w/Wash” text above the advertised price, and then blurted an expletive or two at whoever runs that fuel station. To me, that seems like a Bait and Switch. The price per gallon looks to be $4.19 9/10, but upon arrival, you realize you’ve gotta buy the damn TrueCoat and pay with cash to get that price.

According to NACS, these tactics aren’t exactly ineffective. As you can see in the plot above, in 2019 16 percent of folks paid cash for a discount and 18 percent took advantage of bundles to get a discount.

So that’s why it happens, but it doesn’t make any of it acceptable in my mind. I guess I can understand the cash/credit thing due to the interchange fee, but with the vast majority of folks using credit cards for gas (and it looks like that 77 percent has risen from 2019, possibly due to COVID restricting cash use), having the big advertised price on the sign (which is still the primary way folks shop for gas — looking at signs) be the cash price just seems dishonest. And having that big price require a purchase of something else like a car wash? Get that crap out of here!

Images: NACS