Cash rules at some pumps

Members of the convenience store group, which has sued credit card companies over the fees, paid $6.6 billion in credit card fees last year -- and booked $4.8 billion in profits, Lenard said. "The credit card companies made more at our stores than our store owners," he said, noting that most of the profit from gasoline goes to the refiners rather than service stations and convenience stores.

Dealers say the problem is at its worst in California, where gas prices have been higher for longer and lengthy commutes mean drivers fill up frequently. It's not uncommon for 70% to 90% of a service station's sales to be made via credit card.

Oil companies have played a role too. Chevron Corp., Exxon Mobil Corp., ConocoPhillips and others have offered rebates and aggressively promoted branded credit cards to lock in loyalty.

Auburn, Calif.-based Nella Oil racked up $5 million in credit card fees last year at its 50 Northern California gas stations, where 74% of sales are paid in plastic, said Thomas Dwelle, a partner in the family-owned business.

So this year, Dwelle launched a 3-cent cash-discount program at a few stations -- and found himself in hot water with Visa.

Through a third-party processor, the card company accused Nella Oil of violating its Visa contract by using the word "credit" on its price signs. Visa threatened to charge the company $5,000 a day and cut off the stations' ability to take Visa credit cards.

Visa demanded that Dwelle use the words "regular" or "standard" instead of "credit" to differentiate the higher price from the cash cost. State regulators opined that Visa's recommended signage would confuse customers and violate California law, and Visa backed off.

Visa USA declined to discuss the dispute. Visa Vice President Rosetta Jones said in a statement that offering a cash discount "is confusing and naturally implies a surcharge for payment card transactions." People who use credit cards, the statement continued, "should not have to pay what amounts to an unfair checkout fee."

Travis Plunkett, legal director at the Consumer Federation of America, likes the trend toward cash markdowns for fuel.

"It is something that dealers should be freely allowed to pursue, with no coercion on the part of the payment systems," Plunkett said. "Customers who don't use a credit card should have the opportunity of a discount."