Cash discounts for gas could dupe card-users
By Allie Johnson
October 17, 2013
Want to get the best price when you fuel up your car, truck or SUV? If so, you should know that some gas stations charge different amounts depending on whether you pay with cash or a card.
Gas station cash discounts have been around for several years, but they've drawn more attention since all retailers got the green light early in 2013, as a result of a federal court settlement, to begin tacking on a fee to credit card purchases (which are typically more expensive to process).
Even though they are allowed to charge more for credit, it's a risky move for merchants.
“About 70 percent of consumers are paying with plastic, and you don't want them to feel alienated,” says Jeff Lenard, spokesman for NACS, The Association for Convenience and Fuel Retailing.
To avoid turning off credit card users, some merchants are incentivizing cash by offering a discount, instead of charging extra for credit cards. Yet, although a cash discount isn't technically a credit card surcharge, many consumers don't see a difference, Lenard says.
So what should you do if your gas station is charging one amount for cash — and another for plastic? Here's how to make sure you're getting the best deal.
Cash discounts for gas: good or bad for consumers?
When gas stations do offer a cash discount, it typically shaves about 5 cents per gallon off the cost of fueling up, Lenard says.
These discounts can really add up — especially for consumers with big vehicles who drive a lot, says Linda Sherry, director of national priorities for Consumer Action.
“If you don't drive that much or don't have a family you have to ferry all over, this might be less of an issue,” Sherry says. But, overall, cash discounts are “an opportunity for consumers who don't mind carrying cash,” she says.
But other experts say cash discounts really just penalize card users.
“You're calling this a cash discount, but it's a clearly a premium credit card users are paying,” says Luke Landes, founder of Consumerism Commentary.
One problem with cash discounts is that they can cause confusion about the real price of the gas, both Sherry and Landes say.
“We've heard from folks who thought the cash price was the price,” Sherry says. “Then they pulled out their credit card and were charged a significantly higher amount.”
Cash discounts also can throw off customers who use debit cards, assuming they'll get the lower price. Retailers typically pay much lower fees when their customers use debit rather than credit, but often don't pass on that benefit.
In fact, if you pay with a debit card, gas stations usually — but not always — charge you the credit card price, Sherry says.
However, some gas stations have recently started offering debit card discounts, according to Lenard.
How to gas up for less
If you want to get the best price on gas, experts recommend following these six tips:
1. Scout out prices. Pay attention to advertised prices or check GasBuddy.com to find good deals on gas, Sherry recommends. If you're seeking a cash or debit discount, keep an eye out for sandwich-board–style signs, Lenard recommends. Most states require that the standard (higher) price be the one most prominently displayed — usually on the tall signs most visible from the street — so price breaks typically are advertised on smaller placards.
2. Don't drive too far for gas. Some frugal consumers make the mistake of traveling way out of their way to try to save money, Lenard says. In a 2013 NACS survey, more than 35 percent of consumers said they'd drive 10 minutes out of their way to save 5 cents a gallon, he says. Crunch the numbers, though, and you might find that you're driving 20 minutes round trip and burning $1.65 in gas to save less than a dollar.
“It might make more sense to find a store near you,” Lenard says.
3. Do the math. If your local gas station offers a cash discount, but you have a credit card that gives you, say, 5 percent cash back on gas, calculate which is a better deal.
“You just have to sit down with a pen and paper,” says Sherry. When comparing prices, Consumer Action has found that, with a 5 percent cash-back rewards card, consumers typically save a bit more. For example: If gas is $4 a gallon and you buy 10 gallons, you'd have to get a cash discount of 20 cents per gallon to match the deal the credit card offers. While it's rare to find a rewards card that offers 5 percent back consistently, a few rewards cards, including the Chase Freedom card and the Discover “it” card, offer 5 percent on gas purchases for a few months out of the year. Two or 3 percent cash back for gas is more common among rewards cards — and, depending on how many gallons you put in your car and the price of gas, you could still come out ahead by using your card.
4. Stick with one station. It's important to keep an eye on prices, but experts say you can avoid having to crunch numbers every time you fuel up by picking one station that offers what you want. Consumer blogger Landes, who pays for his gas with a credit card, says he patronizes a local gas station that offers competitive pricing with no cash discounts.
5. Consider a loyalty program. Some gas stations offer loyalty programs in which you can pay for gas with an ACH debit from your bank account and get a discount.
For example, regional chain Cumberland Farms has SmartPay, which offers a discount at the pump of 10 cents per gallon, links to your checking account and lets you pay with a SmartPay card or an app on your smartphone. Maverik, another regional chain, offers a loyalty card tied to a discount of 2 cents per gallon and a debit card with a price break of 6 cents per gallon.
“It's kind of like an easy pass on bridge,” Sherry says of how these cards work.
6. Overcharged? Ask for a refund. If you do fill up your tank, pay and then realize you got charged more than you thought you were paying, say something, Landes recommends.
“Anyone who feels they were duped should go into the convenience store or find the gas station manager and complain,” he says.