Credit Card Use at the Pump Takes a Jump

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Credit Card Use at the Pump Takes a Jump

LANSING, Mich. -- It's becoming increasingly common to use plastic at the pump: 70 percent of gas purchases were paid for with a credit or debit card in the first six months of 2005, compared with 54 percent last year, the National Association of Convenience Stores (NACS) reported.

As gas prices soar, more people are charging purchases to credit cards, even as many are having difficulty paying off card debt, according to the report.

"In general, people either don’t have the cash in their wallets, don’t want to spend the cash they have or are seeking to displace the pain until their next statement," Jeff Lenard, director of communications for NACS, told CSNews Online . "Unfortunately, for too many people, that means that they are already paying $4 or more per gallon once you factor in late fees and interest charges."

The Lansing (Mich.) State Journal reported NACS stated that while a majority of such purchases are charged to credit cards, more consumers are falling behind on credit card payments. A record 4.81 percent of credit-card accounts were 30 days behind in the second quarter of the year, compared with 4.76 percent of accounts in the first quarter -- and gas was the driving factor behind the rise, James Chessen, chief economist for the American Bankers Association, told the Lansing State Journal .

Consumers also are falling behind on credit card payments because of low savings rates, which means "that the buffer people have relied on is no longer there," said Chessen in the report.

Increasing gasoline theft is another reason for rising credit card use at the pump, as more retailers are requiring customers to prepay for fuel. More of these purchases are being charged to plastic, according to NACS, because drivers are reluctant to pay cash and then go back into the store to collect any change.

"We’ve seen more retailers mandating prepay as gas theft has remained elevated," Lenard told CSNews Online . "This is usually the last resort for retailers, since mandating prepay can lead to fewer customers if the competition doesn’t require prepay. It also tends to reduce the likelihood that customers will go back inside the store to buy items that have a healthier margin than gas, which is essentially everything inside the store."

"There are concerns that prepay mandates could lead to more cash customers deciding to pay at the pump by credit card, instead of going through the hassle of going inside the store to prepay," Lenard continued. "The concern for retailers is that you don’t want to switch over cash customers to credit, since retailers pay upwards of 3 percent in transactions fees for credit cards, leading to fees of up to 9 cents a gallon that they don’t pay for cash customers."

"There aren’t many winners with higher gas prices, but credit card companies are one of them," Lenard concluded.