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One goes up, the other comes down

One recent bit of nutmeggy goodness in my home state is a push in the legislature to again allow gas stations to offer a cash discount. I’m annoyed by the rhetoric of this, so I thought I’d bring my venting here.

Why call it a cash discount? Why not call it a credit surcharge? That’s what’s going on, isn’t it? The gas is one price, and if you pay that price, fine, but if you put it on a card, it incurs an extra cost for the station, and they want to pass that cost (or some portion of it) back to you. That seems reasonable to me; allowing them to discount for cash seems less so.

Of course, I don’t really see why they should be allowed to pass the surcharge for gas on to you, and not be allowed to pass on the surcharge for, f’r’ex, a gallon of milk purchased in the little convenience store attached to the station. Or, for that matter, why gas stations should be allowed to add that surcharge, but grocery stores and clothiers and restaurants should not. I would be OK with allowing everybody to do that, if they wanted. I can see arguments against it, and if I had to vote on such a bill, I don’t really know which way I’d lean. But only allowing such a surcharge at gas stations doesn’t make much sense to me. Why is gas different from milk? I mean, other than the obvious, which has nothing to do with credit charges?

I also wouldn’t mind some better regulation on the credit card industry on how much they are allowed to charge vendors, and how much they are allowed to squeeze. That would be swell, and would probably do more to ease inflationary pressure than allowing a credit surcharge.

Which is where the rhetoric comes in. It’s not that it’s inaccurate, exactly, to call it a cash discount. It’s not as if there is some normative price, below which is a discount and above which is a surcharge, and we can tell which is which and apply the appropriate name. It’s that calling it a cash discount puts the focus on the discount, where calling it a credit surcharge puts the focus on the credit, and from a public policy point of view (and the legislature is presumably taking it up as public policy, not as a deputy sales force for the gas stations), the focus should be on the credit.

Tolerabimus quod tolerare debemus,


Even less than the oil companies, no politician really wants to take on the credit companies, nor the auto companies, the insurance companies, the power companies, nor for that matter do they actually want to tackle campaign finance reform.

There's bread, see? And butter. And the butter goes on one side of the bread, and the politicians know which side it is.

Oh, and there's no reason to tackle widespread political corruption, 'cause that's illegal, so it doesn't happen.


It's my mistily-accumulated-from-the-internet impression that the differences between gas station gas and gas station milk are:

  • The retail price of a gallon of gas is highly competitive and close to the retailer's wholesale price.

  • The cost of groceries (and "groceries") at gas stations is comparatively uncompetitive and inflated by convenience.


  • A purchase of milk has more profit cushion to absorb the credit-card surcharge, and

  • A cash-paying customer, being required to visit the cashier instead of standing asocially at the pump, is also more likely to pick up some groceries (or "groceries") inside.

The reason to call it a cash discount instead of a credit surcharge is that the credit card merchant agreements allow cash discounts but don't allow credit surcharges. So allowing a credit surcharge by law won't affect anything, since merchants still won't be able to do it according to their contracts.

And the difference between gas and milk is that a cash discount is currently prohibited on gas, but isn't prohibited on milk. The change in the law would just bring them into parity.

Disclaimer: I don't actually know CT law, but I've seen similar laws in other states.

Your point about the functional equivalence and rhetorical disagreeability of calling what is functionally a credit surcharge a "cash discount", whether it is because of state law or credit card merchant agreements, is spot on, of course. It's ridiculous that merchants have allowed themselves to be strong-armed this way, and in practice a number of merchants do ignore the merchant agreements and implement credit surcharges and minimum purchase requirements and other reasonable approaches to the financial reality that credit cards cost quite a bit to accept (and cost even more for small purchases on a percentage basis). I don't, since I don't deal in cash much -- I try to leave enough room in my pricing to accommodate the unpredictable and unauditable gouging from the credit card processing industry.

I was about to splutter that if the contracts claim there is a serious distinction between a cash discount and a credit surcharge, then the contracts make no sense. But then, you know, I realized that they don't have to make sense, they just have to have a good chance of their nonsense being interepreted in favor of the credit card companies.

And, yeah, bread and butter. The problem is that the Other Party seems to genuinely feel that the Bankers are the Good Guys, and that My Party is divided between, oh, a fifth who seem to agree with the Other Party, another fifth who seem to be focusing on the bread and butter and couldn't give a crap about Good Guys or Bad Guys, another fifth who keep their mouths shut because they seem to think that if you go around saying that Bankers are the Bad Guys that people will lock you up in a padded cell, and the remaining two-fifths who, you know, lose all the roll calls. Ooh.


For the credit card merchant agreements, it's all about the rhetoric and perception. They limit what you can say and how you can say it, what you can call things, and my favorite terms are from AmEx where they explicitly don't really care what you do in most arenas as long as you don't treat AmEx any worse than Visa and MasterCard and as long as you don't bad-mouth AmEx.

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