It is probably one of the first places most families feel the pinch when prices at the gas station rise dramatically. It’s becoming increasingly common to see two different prices for each grade of gasoline at the pump – a cash price and a credit card price. Why is this the case?
The fact is that gas stations are legally allowed to charge customers extra if they choose to purchase gasoline with a credit card. This is because gas station owners pay an interchange fee to the payment network. They often pass this fee on to the consumer to recoup the additional cost.
The interchange fee is part of every credit card transaction processed by the merchant. However, the merchant doesn’t keep the money itself. It is passed back to the card issuer to cover the cost of processing the transaction and the risk associated with lending the credit.
How much more do gas stations charge when using a credit card?
For credit card purchases, gas stations charge an average of 5 to 10 cents more per gallon.
According to the National Association of Convenience and Petroleum Retailers (NACS) (open coverage), credit card processing fees at the pump average about 2.5% of the total transaction price. As of October 2022, the national average per gallon of gasoline (open coverage) is $3.76, which would result in a processing fee of approximately $0.09 per gallon.
In general, gasoline sales margins at gas stations are typically low. Fierce competition from other nearby gas stations means they usually charge a few cents more for a gallon of gasoline.
Is it better to pay for gasoline with cash or credit card?
One method of payment is not necessarily better than another. Paying with cash means you save a little on the total transaction, and because you’re not using a credit card, you’re not likely to incur any interest charges.
However, if you have a rewards credit card, you will receive rewards points or cash back. In some cases, you may be able to accelerate your income in categories such as gas stations. In addition, using a credit card is a convenient and secure way to pay because you don’t have to carry cash with you.
How can I save more money on gasoline?
When you save money at the gas station, it frees up financial resources that can be used for other living expenses. Here are a few strategies for saving money on gasoline.
Use a rewards credit card
Some rewards credit cards may offer up to 5% cash back on certain categories of purchases, including at the pump. If you pay your credit card bill in full and on time each month, using a rewards credit card at the gas station may be a great way to earn a portion of your expenses in the form of points. Many rewards cards also offer at least 1% back on all other purchases, so you can earn points even if you shop at the grocery store or dine out.
Pay with cash
Some gas stations offer different prices to customers who pay with cash because they don’t incur interchange fees when using cash. You may find that keeping some cash on hand just for this purpose may be a straightforward way to save.
Carpool or use public transportation
If possible, consider taking public transportation, walking or even biking to your destination. Or, when you’re out with friends or colleagues, try carpooling or splitting the cost of a carpool service. Not only is this good for the planet, but it also saves a lot of money on gas costs.
Ask for an app
Free apps like GasBuddy, Google Maps and Waze offer price comparisons for gas stations across the U.S. and Canada, and much of the information is crowdsourced in real time by gas station visitors. In addition, GasBuddy provides insight into national data and trends, so you can keep an eye on regional changes that affect you. Before you decide where to fill up, take a look at how one of these apps can help you save. In some cases, it may be worth crossing county or state lines to get the best price.
Stay up-to-date on vehicle maintenance
Make sure your vehicle is maintained regularly. This includes oil changes, proper tire inflation and relocation, fuel injection repairs and air filter changes. These factors can have a significant impact on the fuel efficiency and overall performance of your vehicle. In the long run, this may translate into fewer visits to the gas station.
In summary
Many gas stations charge a higher fee for using your credit card at the pump to cover the additional costs they incur from the payment network. For some people, the convenience of paying with a card is still worth it. For others, it may make more sense to use cash. Either way, it helps to do some planning before you head out for gas. Use a rewards credit card to earn points, consult a gas app for price comparisons, and make sure you’re always on top of your car’s maintenance. Use public transportation whenever possible
