In a move that could spur all oil companies to raise their gasoline prices by between 2 and 4 cents a gallon, Texaco Inc. has decided to require its service station dealers to pay a processing fee on all the credit card invoices they submit to the parent company.
The extra 3 percent processing charge, which is scheduled to begin on Nov. 1, could mean higher gasoline prices for all customers, including those who pay with cash or use other types of credit cards.
Because federal law prohibits retailers from imposing a surcharge on credit card customers, Texaco dealers may decide to raise their prices across the board to recover the processing charge, credit-card experts said yesterday.
However, dealers also may offer discounts for customers who pay with cash, these experts added.
But each dealer will set his or her own policy, and Texaco officials said dealers are independent business owners who set their own prices.
Texaco's move could prod other oil companies to implement similar processing charges to recoup the increasingly high costs of running their credit card systems.
In announcing its new credit card policy yesterday, Texaco said the fee was needed to "help offset the rising cost of the credit card system, including the cost of money. At present, these costs are not being fully recovered in the pricing of the company's products."
According to H. Spencer Nilson, publisher and owner of the Nilson Report, a newsletter for credit card executives, Texaco has the largest credit card system among oil companies -- 17 million cards and sales of $3 billion last year. The cost of running that system last year was "in excess of $100 million," Texaco officials said yesterday.
Texaco defended its fee, saying it was similar to those already being charged by other credit card systems such as Visa, MasterCard and American Express.
As of yesterday, other oil companies were not ready to follow suit immediately. Exxon Corp. said it is "evaluating several methods to transfer the cost of credit to the credit user . . . Discount for cash is one of the methods being evaluated." However, Exxon said it has not reached any decision.
Shell Oil Co. also said it is looking into the area of credit card costs, but has no plans now. Standard Oil Co. of Indiana said it has no plans to charge for credit now. Neither do Mobil Oil Corp. nor Gulf Oil Corp. In fact, Gulf spokesman Gerald Bradley said the company wants to expand its credit card base. "It's good business for us," Bradley said. Noting that the average gasoline sale now is near $20, he added that many customers prefer using a credit card to carrying extra cash.
Despite the company comments, credit card expert Nilson predicted that "oil companies will start adding service charges because it is costing them a lot of money to run them." If so, Nilson added, "dealers will begin raising prices in six to eight months" by 3 to 4 cents a gallon.
At the same time, many may begin offering discounts for cash, Nilson said. But many dealers are reluctant to have a great deal of cash on hand because of robberies, so the cash discount may be a problem for them, he added.