Cash at the gas pump: Is credit better after all?
There are some second thoughts now on the push toward cash - rather than credit-card - payments at gasoline service stations. With cash payments, service station operators face higher paper work costs, greater employee problems, and increased risk of crime, according to H. Spencer Nilson, publisher of The Nilson Report, a newsletter that follows the credit card business.Skip to next paragraph
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Mr. Nilson says the cost of handling cash at service stations is about 4 percent, compared with 3 percent or less for bank cards.
Disputing this is George Babikian, senior vice-president of marketing at the Atlantic Richfield Company, which eliminated credit cards last year. He says the real cost of maintaining credit is ''tremendous'' - close to 7 percent - while the cost of handling cash is ''less than one-half of 1 percent.''
And as for financial risk of cash vs. credit, ''credit card fraud is far greater, and there have been so many cases of fake cards with employee collusion ,'' Mr. Babikian continues. ''Bad-debt expense with credit cards, even in the best operations, runs roughly one-half of 1 percent of sales.''
Three of every 4 gallons of gasoline now sold in the nation are for cash rather than credit, Mr. Babikian reports. He says that going to cash payments, coupled with lower prices, has resulted in the average Arco service station pumping more than 125,000 gallons a month. This compares with 70,000 just before credit cards were abandoned and to the industry average of 45,000 to 50,000 gallons, he says. Credit card elimination and reduced prices helped raise Arco's 1982 gasoline sales volume 11 percent from the previous year, despite an industrywide drop in gasoline demand, the company says.
While saying crime at service stations is ''bad enough as it is,'' Mr. Nilson notes that cash sales mean additional cash on the premises. That invites robberies. Service station robberies rose 5.4 percent in 1981, he says.
''Robberies have increased 8 percent since 1977, although there has been a 15 percent drop in the number of stations,'' Mr. Nilson reports. ''In 1981 there were 22,934 station robberies for a total loss of over $8.5 million. One out of 8 stations was held up.''
The solution may be in more automation - and a trend back to plastic. The Amoco Oil Company, for example, in a major credit card drive through mid-February, is mailing 10 million credit applications to motorists with pre-approved credit.
Meanwhile, the Shell Oil Company reports that a credit card campaign it started last fall has yielded 2 million new accounts.
''By 1987 all the major petroleum marketers except Arco will have phased out 85 percent of their credit card systems in favor of debit cards,'' Mr. Nilson envisions. ''Within 10 years all but a few stations will be using card-controlled fuel systems exclusively and will run completely unattended.''