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10 Things Gas Stations Won't Tell You
by Jim Rendon
Wednesday, May 27, 2009
Smartmoney.com
1. Good luck finding the best deal.
When it comes to gas prices, most stations are brandedmeaning the name of a major oil company hangs out frontand must buy gas from their proprietary company. They cant shop around. With a lock on sales, the oil companies charge each station a different price depending on various factors, such as the stations competition and its location. That means a station can pay as much as 46 cents a gallon more than one down the street, and that cost gets passed along to you.
Faced with such instability, Gainesville, Fla., resident Steven King plans ahead: If I know Im going out of town, I try not to buy gas so I can fill up after I leave. King says he can save 10 cents a gallon by purchasing gas on the road. Youd be similarly wise to shop aroundwith prices constantly in motion, the cheapest gas may not be at the same station every time.
2. I hate it when gas prices go up.
Stations earn on average between 10 and 15 cents on a gallon of gas. Ironically, they earn the least when prices are highest. When fuel climbs, gas stations must shrink their profit margin to remain competitive, meaning they earn less per gallon than usual. But another big cost during tough times is something they cant do anything aboutcredit card fees, which add up to about 2.5 percent of all purchases. When gas is at, say, $2 a gallon, the station pays credit card companies 5 cents a gallon; when gas hits $3, that fee becomes 7.5 centsmore than half the stations entire average profit. Those credit card fees are miserable for the gas station business, says Mohsen Arabshahi, who owns five Southern California gas stations.
How do station owners make up for lost revenue? Prices go up like a rocket and come down like a feather, says Richard Gilbert, a professor of economics at UC Berkeley. For several weeks after wholesale prices drop, stations can earn as much as 20 cents a gallon before retail prices are lowered to reflect the change.
3. My gas isnt better for your car; its just more expensive.
Oil companies spend lots of money explaining why their gas is better than the competitions. Chevrons gas, for example, is fortified with Techron, and Amoco Ultimate is supposed to save the planet along with your engine. But today more than ever, one gallon of gas is as good as the next.
True, additives help to clean your engine, but what the companies dont tell you is that all gas has them. Since 1994 the government has required that detergents be added to all gasoline to help prevent fuel injectors from clogging. State and local regulators keep a close watch to make sure those standards are met; a 2005 study indicated that Florida inspectors checked 45,000 samples to ensure the states gas supply was up to snuff, and 99 percent of the time it was. Theres little difference between brand-name gas and any other, says AAA spokesperson Geoff Sundstrom.
Whats more, your local Chevron station may sell gas refined by Shell or Exxon Mobil. Suppliers share pipelines, so they all use the same fuel. And the difference between the most expensive brand-name gas and the lowliest gallon of no-brand fuel? Often just a quart of detergent added to an 8,000-gallon tanker truck.
4. If youre smart, youll put that debit card away . . .
Your debit card might be a convenient way to pay for gas, but its a no-win proposition. When you swipe a debit card at the pump, the bank doesnt know how much money youll be spending until youve finished pumping. So to make sure you have the funds to cover the purchase, some stations ask banks to automatically set aside some of your money: That amount can be $20 or more. That means even if you just topped off your tank for $10, you could be out $30, $50, even $100 until the station sends over its bulk transactions, which can take up to three days. If your funds are running low, you might end up bouncing a check in the meantimeeven though you had the money in your account.
Unfortunately, paying inside with your debit card isnt much of a solution either. Many banks charge their customers between 50 cents and $1 for the privilege of using their debit card in any PINbased transaction. The American Bankers Association estimates only 13 percent of consumers pay these fees, but critics say the practice is on the rise and consumers are often unaware of these charges.
5. . . . and dont even consider applying for our gas card.
When it comes to gasoline credit cards, a little research goes a long way. The good deals are great, but the bad deals are really bad. Similar to store cards issued through retailers, gas cards are riddled with drawbacks, says Curtis Arnold, founder of CardRatings.com. APRs are high, starting above 20 percent; many dont offer rebates on gas purchases; and they often lack standard protections such as fraud monitoring and zero liability for unauthorized transactions.
What about a Visa or MasterCard affiliated with a gasoline brand like Exxon or BP? They often offer lower interest rates and significant rebates, but limit your ability to shop around. In December 2005, a few months after gas hit $3 a gallon, Justin Andringa of Minneapolis considered a Shell MasterCard with a 15 percent rebate on gas purchases. But the rebate was temporary; he decided to stick with his Citi Dividend Platinum Select card, which gives him a 5 percent rebate on all gas purchases no matter where he buys it. Im a college student, Andringa says. I need to save money. The deals on these cards are constantly changing. So visit CardRatings.com to find updated information.
by Jim Rendon
Wednesday, May 27, 2009
Smartmoney.com
1. Good luck finding the best deal.
When it comes to gas prices, most stations are brandedmeaning the name of a major oil company hangs out frontand must buy gas from their proprietary company. They cant shop around. With a lock on sales, the oil companies charge each station a different price depending on various factors, such as the stations competition and its location. That means a station can pay as much as 46 cents a gallon more than one down the street, and that cost gets passed along to you.
Faced with such instability, Gainesville, Fla., resident Steven King plans ahead: If I know Im going out of town, I try not to buy gas so I can fill up after I leave. King says he can save 10 cents a gallon by purchasing gas on the road. Youd be similarly wise to shop aroundwith prices constantly in motion, the cheapest gas may not be at the same station every time.
2. I hate it when gas prices go up.
Stations earn on average between 10 and 15 cents on a gallon of gas. Ironically, they earn the least when prices are highest. When fuel climbs, gas stations must shrink their profit margin to remain competitive, meaning they earn less per gallon than usual. But another big cost during tough times is something they cant do anything aboutcredit card fees, which add up to about 2.5 percent of all purchases. When gas is at, say, $2 a gallon, the station pays credit card companies 5 cents a gallon; when gas hits $3, that fee becomes 7.5 centsmore than half the stations entire average profit. Those credit card fees are miserable for the gas station business, says Mohsen Arabshahi, who owns five Southern California gas stations.
How do station owners make up for lost revenue? Prices go up like a rocket and come down like a feather, says Richard Gilbert, a professor of economics at UC Berkeley. For several weeks after wholesale prices drop, stations can earn as much as 20 cents a gallon before retail prices are lowered to reflect the change.
3. My gas isnt better for your car; its just more expensive.
Oil companies spend lots of money explaining why their gas is better than the competitions. Chevrons gas, for example, is fortified with Techron, and Amoco Ultimate is supposed to save the planet along with your engine. But today more than ever, one gallon of gas is as good as the next.
True, additives help to clean your engine, but what the companies dont tell you is that all gas has them. Since 1994 the government has required that detergents be added to all gasoline to help prevent fuel injectors from clogging. State and local regulators keep a close watch to make sure those standards are met; a 2005 study indicated that Florida inspectors checked 45,000 samples to ensure the states gas supply was up to snuff, and 99 percent of the time it was. Theres little difference between brand-name gas and any other, says AAA spokesperson Geoff Sundstrom.
Whats more, your local Chevron station may sell gas refined by Shell or Exxon Mobil. Suppliers share pipelines, so they all use the same fuel. And the difference between the most expensive brand-name gas and the lowliest gallon of no-brand fuel? Often just a quart of detergent added to an 8,000-gallon tanker truck.
4. If youre smart, youll put that debit card away . . .
Your debit card might be a convenient way to pay for gas, but its a no-win proposition. When you swipe a debit card at the pump, the bank doesnt know how much money youll be spending until youve finished pumping. So to make sure you have the funds to cover the purchase, some stations ask banks to automatically set aside some of your money: That amount can be $20 or more. That means even if you just topped off your tank for $10, you could be out $30, $50, even $100 until the station sends over its bulk transactions, which can take up to three days. If your funds are running low, you might end up bouncing a check in the meantimeeven though you had the money in your account.
Unfortunately, paying inside with your debit card isnt much of a solution either. Many banks charge their customers between 50 cents and $1 for the privilege of using their debit card in any PINbased transaction. The American Bankers Association estimates only 13 percent of consumers pay these fees, but critics say the practice is on the rise and consumers are often unaware of these charges.
5. . . . and dont even consider applying for our gas card.
When it comes to gasoline credit cards, a little research goes a long way. The good deals are great, but the bad deals are really bad. Similar to store cards issued through retailers, gas cards are riddled with drawbacks, says Curtis Arnold, founder of CardRatings.com. APRs are high, starting above 20 percent; many dont offer rebates on gas purchases; and they often lack standard protections such as fraud monitoring and zero liability for unauthorized transactions.
What about a Visa or MasterCard affiliated with a gasoline brand like Exxon or BP? They often offer lower interest rates and significant rebates, but limit your ability to shop around. In December 2005, a few months after gas hit $3 a gallon, Justin Andringa of Minneapolis considered a Shell MasterCard with a 15 percent rebate on gas purchases. But the rebate was temporary; he decided to stick with his Citi Dividend Platinum Select card, which gives him a 5 percent rebate on all gas purchases no matter where he buys it. Im a college student, Andringa says. I need to save money. The deals on these cards are constantly changing. So visit CardRatings.com to find updated information.