Pilot: No more Visa, Mastercard at the pumps

| 8/1/2007

John Baumann pulled up to the Pilot Travel Center in Louisville, KY, Saturday and read a temporary sign that stunned him.

Pilot Travel Centers LLC – which boasts of being the largest over-the-road diesel retailer in the U.S. – is the latest truck stop chain to stop accepting Visa and Mastercard at the pump.

Baumann, an OOIDA member and company driver from Michigan City, IN, said he just wants to use his card at the pump to save time rather than go inside and pay at the fuel desk.

The change was made so Pilot could stop hemorrhaging “significant” quarterly losses due to chargebacks, according to Mitch Steenrod, senior vice president and chief financial officer for the Knoxville, TN-based Pilot.

Chargebacks are a credit card process by which credit card banks bill merchants after a cardholder claims either fraud or incorrect charges, according to the New York State Department of Taxation and Finance.

Chargebacks are used when credit card fraud occurs, and occasionally during “friendly fraud,” when a consumer uses their card but reports it as a fraudulent charge.

If a customer uses a credit card and disputes the charge or the amount charged, Pilot has little evidence to fight a bill from the card company, Steenrod said.

“If it’s done at the pump terminal, I can’t prove it because I don’t have a signature, so there’s no way to stop it,” Steenrod told Land Line Magazine.

Steenrod said Visa and Mastercard enter into contracts with merchants and have operating rules that the card companies can change, which can make it difficult for merchants to navigate.

“(The media) would like to hammer on Pilot… for not taking these cards, but it isn’t us,” Steenrod said. “The credit card companies give you rules you’ve got to follow, operating rules, and they’ve got the latitude to financially force you to follow the operating rules. That’s why we have to do what we’re doing.”

Flying J drew fire from trucking customers in May after announcing its ban on Visa cards at its truck pumps. Flying J officials have not returned repeated calls from Land Line seeking comments about the Visa ban.

Retailers have long battled interchange fees, in which the credit card companies charge merchants an average of two percent of the cost of every purchase for processing the transaction.

Steenrod said interchange fees meant nothing compared to chargebacks.

“We all know what we’re getting into with the interchange fees – what we don’t know is how much in return charges we’re getting,” he said. “That’s what’s precipitated everybody to shut it down.”

With nearly 300 retail locations in the U.S., Pilot Travel Centers LLC brought in $11.8 billion in revenue during 2006 for co-owners Pilot Corp. and Marathon Petroleum Co.

Steenrod said Pilot officials are preparing to unveil an alternative solution for truckers to pay at the pump in the next issue of “Challenge,” the company’s magazine.

Until then, Steenrod acknowledged that drivers will probably be frustrated by an inability to pay at the pump with Visa or Mastercard, two cards that reportedly control 80 percent of the credit card market, according to a July report in Progressive Grocer magazine.

“They’re mad and they should be,” Steenrod told Land Line. “I’ve talked to Visa and explained to them that while you think you’re penalizing the merchant you’re really penalizing the customer. Now, their transaction is significantly delayed and they’re infuriated. In reality, the credit card companies are doing a disservice to the consumer.”

The companies have typically allowed only $50 and $75 pre-pay amounts for diesel fuel, which suggests Visa and Mastercard know little about customers filling up big rigs, Steenrod said.

“We’ve incurred significant penalties for letting it go on,” Steenrod said. “It’s kind of a one-way street when it comes to credit cards, and Visa and Mastercard … it’s on the verge of being malicious.

“This has nothing to do with us not wanting the business ... we tried to grit through it and we couldn’t. In the last three months, it’s taken me 260,000 fuelings – not gallons but fuelings – to cover what we’ve lost in credit card activity.”

– By Charlie Morasch, staff writer