Gas station owner Joseph Rinaldi was merely trying to keep his customers satisfied--and prices low --when he initiated his credit card plan.

Customers who wanted the convenience of using their VISA card would pay the 4 percent fee the credit card company charged him. That way, he figured, neither he nor his cash customers would foot that expense.

There was one small problem, noted by attorney Ellen Broadman when she pulled up to a pump at Rinaldi's Tenley Circle Citgo station: "Credit card surcharges are illegal."

Broadman--who works for the Consumers Union--wishes this weren't so. "Consumers," she says, "are paying an enormous hidden charge of billions of dollars to credit card issuers.

"Typically the merchant pays the credit card company between 1 and 6 percent of the purchase price--an expense they add onto the price of the goods and services they sell. So, in effect, cash payers are subsidizing the use of credit cards by others."

This ban on credit card surcharges has been extended through February 1984, as part of the "Cash Discount Act" President Reagan signed into law this summer.

Both consumer groups and credit card companies, says Broadman, favored the act's provision that allows merchants to offer unlimited discounts to cash-paying customers. They disagreed sharply, however, on extending the surcharge ban.

The difference between a "cash discount" and a "credit card surcharge," says Broadman--one of several consumer activists who testified against extending the surcharge ban--"boils down to semantics."

Had Rinaldi upped his price 4 percent and offered cash-paying customers a 4 percent discount, that would have been legal. But maintaining his prices and adding a surcharge was not.

Rinaldi--who stopped accepting VISA cards last week when he learned that surcharges were illegal--thought the law sounded "a little ridiculous." He had just recently begun accepting VISA cards because some customers wanted the convenience. But without passing on the extra charge to the card user, "I'd lose money." Unless, of course, he upped the price for all customers--which he preferred not to do.

Credit card companies, however, say it's unfair to maintain that credit cards are an "added expense." "Accepting cash and checks costs a merchant money, too," says Amy Topiel, vice president and counsel of Master Card International. "There's insurance to pay for handling cash, and extra security may be involved. And bad checks cost merchants money."

Extra sales a merchant makes by accepting credit cards, claims Hugh Smith of American Express, "should drive prices down." There's a "big psychological and practical difference between offering a customer a discount and adding on a surcharge."

If the government lifted the surcharge ban, he contends, "merchants aren't likely to lower their prices. They'd probably just charge credit customers more . . . which is fine if you're rich enough to pay for everything with cash. But it penalizes those who need extended payment, by forcing them to pay a surcharge."

Consumer activists admit that merchants didn't jump to offer discounts to cash customers in 1975 when the Fair Credit Billing Act gave them the green light. (Before that, some credit card companies had refused to renew contracts with merchants who offered cash discounts. Consumers Union sued American Express to stop the practice and won.)

A major reason why merchants haven't offered the discounts, says Broadman, "is that the regulations have been so complicated. Smaller business people, who are most likely to offer them, may have been intimidated by the fear it could be viewed as an illegal surcharge."

One cash discounting plan that has proved extremely popular, she notes, is the SaveSystem plan, now offered through about 300 banks in 23 states nationwide.

Participating banks issue a special card to customers who open SaveSystem (called Savings Plus on the West Coast) accounts. When the card holder pays by cash or "acceptable check," participating merchants rebate from 1 to 12 percent of the purchase price into their SaveSystem account.

"We've got about 60,000 cardholders," says James L. Harris, of Washington Federal, which holds the area franchise, now shared by Dominion Federal and Interstate Federal. "By the end of the year we expect to have 100,000."

"Customers love the extra savings. One person who only shopped in SaveSystem stores earned $142 in rebates in his first five months."

More than 2,000 merchants offer SaveSystem discounts, says Harris, including Fotomat, the Pants Corral, McIntire Hardware and Koons auto dealers. Rebates average, he says, "about 7 percent." To open an account, customers must deposit $50 and maintain that as a minimum balance.

A handful of small businesses offer cash discounts without participating in a larger plan. "It cuts down on our bookkeeping expenses, gives us a better cash flow and brings more people into our store," says Joe Rittmeyer, manager of Radebaugh's Florist in Baltimore, which offers customers 5 percent off cash purchases and 10 percent off "cash and carry."

Nachman's Bicycle Shop in Falls Church tried offering cash discounts for about six months, but stopped, says owner Leon Nachman, "because it didn't pan out the way we hoped.

"We marked all items with two prices--a regular price and a cash discount price. The trouble was, people would say they wanted the cash discount price, then flash a credit card.

"What I'd like would be to lower my prices and charge extra to people who use a credit card. I could mark down all my merchandise by 5 percent if I could do that."

The federal reserve board is currently studying the effect credit card transactions have upon card issuers, merchants and consumers, and will issue a report before the surcharge ban is scheduled to be lifted in February 1984.

A recent announcement by Texaco has helped to stir up the issue again. As of November first, Texaco will be assessing its retailers and wholesalers a processing charge of 3 percent on all credit card transactions.

This measure is necessary, says a company spokesman, "to help meet the tremendous increases in the cost of maintaining the credit card system . . . which is over $100 million a year." Texaco station owners, virtually all of whom are independent business owners, are protesting, claiming they'll have to pass this extra cost on to customers.

Instead, cracks Broadman, "they could offer their cash customers a discount."