Ashford W. Meikle, Staff Reporter
Trevor Heaven, proprietor of Heaven's Texaco in Mandeville, and JGRA president, in front of his business place. - RICARDO MAKYN/STAFF PHOTOGRAPHER
SOME SERVICE stations are now refusing to accept credit and debit cards for gasolene purchases because of the relatively high transaction costs involved in processing 'plastic' transactions and the slim margins on these transactions, Wednesday Business has found.
"The margins, especially on the 87 (octane) gas, is so low that the bank charges for credit cards just wipe it out," said the manager at a popular gas station in the Cross Roads. He lamented that, "It's like you are buying the gas and selling it at cost."
One dealer described the 87 octane gasolene as "a loss leader ... there is a better margin on the 90 gas."
President of the Jamaica Gasolene Retailers Association (JGRA), Trevor Heaven, said he was aware of the practice.
"We (JGRA) support it one hundred per cent," Mr. Heaven said. "In fact, we actually recommend it."
He noted, "Service station operators have to pay a commission of 1.8 to 3.5 per cent, depending on the card. Because of the declining margin (and depending on whether it is MasterCard or Visa) it does not work for dealers. When you swipe a credit card, you are actually losing money."
There are some 143 members in the JGRA with close to 270 service stations and, according to Mr. Heaven, about 30 per cent of its members have instituted the 'cash only' policy.
The transaction costs (that is, the value on the transaction) for NCB KeyCard is about 1.85 per cent. On Visa and MasterCard this is about three to four per cent. With debit cards, however, there is a flat fee of $12 plus GCT. The latter, according to Mr. Heaven, "is a little bit more manageable."
Based on the margins earned by gasolene retailers, Mr. Heaven said the costs create a significant problem. Describing the credit card commissions as onerous, he pointed out that the banks charge commission on the tax paid (GCT) to the government since this represents the total cost of the product.
The businesssman stressed that service stations do accept credit cards for other transactions such as those conducted in the convenience stores.
"The additional burden of paying the banks the commission is the main reason why dealers are not taking credit cards and until there is an adjustment in the mark-up we take, this is going to be the case."
MARK-UP
Mr. Heaven explained "Esso recommends to dealers that they use a mark-up of $1.72 per litre and at the current prices that translates into a three per cent margin." He stressed though that "Texaco (Inter-national) does not in any way interfere with dealers as it pertains to margins." Still, because of the recommendation by Esso, other service operators have
to adjust their prices accordingly to remain competitive.
However, some gas stations have not instituted the cash only policy. These include Unipet, Epping, Shell and Total. But, according to an industry source, "You have to remember that - for the most part - Shell owns its stations and pretty much can do their own thing."
Mr. Heaven noted, "As prices go up, margins go down." This margin, he says is eroded when gas prices increase. For example, that margin fell to about 2.52 per cent recently when there was the sudden spike in gas prices.
The businessman noted that the association has had several discussions with the banks to reduce the commission but little headway has been made. However, National Commercial Bank has offered some concessions on its KeyCard.
"There is a standing offer on the table for phone card transactions using the e-pin machine system. There is a discounted commission of 1.5 per cent for KeyCard," said Mr. Heaven.
A bank manger told Wednesday Business that the commission charged varied, depending on the merchant as well as the volume of transactions conducted by the merchant.
While acknowledging the security risks involved in cash transactions, the businessman sought to downplay the dangers. "We have discussed that at length with security companies. We don't handle cash that often anymore. It is dropped in a vault and cleared by security companies who make the direct lodgement to banks."
He elaborated, "In addition to that we encourage attendants on the forecourt (gas pumps) not to keep more than $3,000 on their person at any one time. Also, we recommend most of our dealers to have security cameras to monitor their premises."
Mr. Heaven accepts credit and debit cards at his service station. But he told Wednesday Business "I am in the process of eliminating them." At the same time, he noted that "I am in favour of the KeyCard."
The businessman predicted dealers would eventually phase out 'plastic' transactions. "Absolutely ... it's something we have discussed at our management committee meeting. It's a real issue."
Up to press time Wednesday Business was unable to get a comment from the country's two major retail banks.
