Posted on 06/23/2022 2:03:06 PM PDT by Ebenezer
(Translation)
Facing the constant increase in the operational costs of gasoline stations, there are retailers mulling several options, among these limiting charges through credit or debit cards in order to avoid what they consider a high processing fee from banks, industry representatives interviewed by EL VOCERO pointed out.
At least one gas station already began to limit payment methods, this being a station located on Kennedy Avenue in San Juan, where only cash, American Express, Discover, and gas-brand specific credit cards are accepted.
"Due to the high costs of bank fees and the constant increase in the price of fuel, we find ourselves in the uncomfortable situation of cutting our payment methods" could be read at all pumps. "Until further notice, we will not accept any additional credit and/or debit cards, including ATM cards. We apologize for the inconvenience," the customer is informed.
Other gas stations may implement the same restrictions in the near future.
Carlos Crespo, Chairman of the Gasoline Stations Committee of the Retailers United Center, maintained that more gas stations will join this operational adjustment given that the increase in monthly expenses has doubled.
"It already started. I already hear about several [stations] that are also thinking about doing the same thing because they are losing money. They used to pay, for example, $1,500 for credit-card services monthly, and they are now paying $3,000 or $4,000, the difference of which would help pay the station's rent," Crespo pointed out.
He reported that, of the 1,150 gas stations operating on the island, 60% are in critical condition, "living day by day, because there is no other way to live. Then, whoever pays $40 [in gas] will continue paying $40 but will not have money left to go to the 'minimarket' (convenience store) and shop."
Luis Sepúlveda, Executive Director of the Gasoline Retailers Association (ADG), said that 60% of gas-station sales are paid by debit and credit card, while the remaining 40% by cash. He explained that banking institutions charge a significant cut for each ATM-card based transaction.
"That 60% sold by card is killing us, the bank charges are brutal. Before, most sales were with cash, but with the passing of time, the number of sales by card has increased," Sepúlveda indicated.
Sepúlveda maintained that each debit or credit transaction involves a 20-cent profit; the bank charges the retailer approximately 13 cents, and gas-station owners are left with 7 cents to cover operational costs.
"Retailers find themselves forced to limit their payment options. Typically, credit cards have a high operating cost. To try to prevent the bank from taking the station's profits, the payment options are then limited," he added.
The ADG [Executive] Director reiterated that this administrative measure - though possibly resulting in a drop in clientele - reduces the risk of economic losses and increases the station's profit margin.
"It's highly probable that sales will decrease, but decreased sales are preferable to a retailer losing money. What value is there if you sell 20,000 gallons and lose $1,000? You might as well sell 15,000 and make a $50 or $100 profit. The intent is not to create problems for the consumer," Sepúlveda detailed.
According to the retailer, the increase in the number of ATM and credit card transactions is due to consumers not filling the tank and making more weekly transactions.
The Bank Association Reacts
However, Zoimé Álvarez, Executive Vice President of the Bank Association, maintained that, in past years, banking institutions have not increased the fees for transactions made by credit or debit card.
"Processing fees or banking costs have not increased. We are not seeing a decision from commercial banks here, neither on the costs of the different processing companies that may have increased their prices. Businesses have contracts, most of them based on a percentage of their sales. On occasion, with more transactions, costs related to card authorizations may vary," Álvarez insisted.
"It's wrong to indicate that action is being taken because of high banking costs, because the banking cost has remained the same," she reiterated.
According to Álvarez, the operational cost of gas stations is increasing, while the retailer's profit is fixed as a result of the Profit Margin Freeze Order given by the [Puerto Rico Department of Consumer Affairs] (DACO).
"Their profit is now not proportional. It's a fixed profit regulated by DACO for a while, which means that, with a [gas] truck that cost you $30,000, you had a $15,000 profit. [The truck] now costs you $55,000 but you keep making a $15,000 profit," the executive made clear.
Precisely, gas-station retailers maintain that, in order to keep stations operating, the profit has to be 30 cents per gallon and not the 20 cents established by DACO through the profit-freeze order.
Temporary Relief
Following an announcement last week that the price of gas at the pump decreased slightly, Crespo stated that this relief is temporary and is due to changes in supply and demand, as well as the price of the barrel of crude oil which fluctuated around $105 yesterday.
"Maybe there is more gasoline or more oil than normal at this time. Therefore, your sales hold, then the price per barrel is cheaper in the stock market. That is temporary; just as [the price] decreases, so it increases," he pointed out.
As announced, retailers are also reducing fuel purchases - 5,000 gallons on average -, have reduced staff - substituting them with family members - and others have reduced service hours, among other measures to keep operations going.
Puerto Rico ping
Great, so the entire credit system is now going to collapse.
Somehow, this doesn’t pass the smell test. 60% of gas station revenues are via credit cards. They’ve always paid the 3% credit card fee. Just because gasoline prices are going up, why is the 3% fee now suddenly a problem? That doesn’t make sense to me. It sounds like a cover story for something else.
Hopefully PR Independence.
The Biden Admin wants Digital Currency which would kill everyone’s bank accounts with all those fees
What is 3% at $1 a gallon vs 3% at $5 a gallon ?
They all take Smith and Wesson though
It sounds like the Puerto Rican gas stations are limited to a fixed markup per gallon, but the credit card fee is proportional to the total amount. Thus the per gallon profit after credit card fees go down with higher gas prices. That also keeps them from having different cash and credit prices because they can’t mark up the credit price.
3% is still 3%.
I assume their margins are going up at the higher price.
CC fees are generally a percentage of the transaction.
When the price of fuel doubles (or even triples) those fees go up, but generally the profit per gallon stays the same.
“limited to a fixed markup per gallon”
Yes, that sounds logical.
I assume their margins are going up at the higher price.
at least here in my state, a station owner said he’s making less per gallon at 5 bucks, than he was at 2. the pressure to keep the margin smaller is worse the higher the price gets.
Wow, that is counter-intuitive.
You have proved the old saying about what the word "assume" does.
It came out yesterday credit card debt is at an all time high. There’s been talk of credit companies going bust.
Good, those on tight budgets shouldn't be shopping at high priced convenience stores. Won't be good for the convenience store's profit attached to the gas pumps.
From the article....
“According to Álvarez, the operational cost of gas stations is increasing, while the retailer’s profit is fixed as a result of the Profit Margin Freeze Order given by the [Puerto Rico Department of Consumer Affairs] (DACO).”
The Department of Consumer Affairs is price setting for the gas stations. Government screws everything it touches.
It would be interesting to know what percentage of a your average gas station’s profits comes from convenience-store sales in comparison to fuel sales. Meanwhile, the article implies that gas-station owners in Puerto Rico are really counting on the profits from their “minimarkets” to make ends meet.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.