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Cash or Credit – Which is Best for Paying at the Pump?

When you pump gas, do you pay with a card or with cash? Gasoline co-branded rewards cards offer great incentives at the pump. Similarly, gas stations offer a “discount” to customers who pay in cash. Which payment method can save you the most money?

It’s become increasingly common to see two different prices for each grade of gasoline at the pump – a cash price, and a credit price. Gas prices vary across the country but no matter the state or city, there is one commonality: the cash “discount.”

On the other hand, co-branded gasoline rewards cards offer their own version of this discount. Many cash back cards also reward cardholders at the pump with beefed-up rewards in the gasoline spending category. It’s important to break down and examine the difference between the cash discount and the rewards that can be earned from co-branded gas cards and cash back cards.

Why do gas stations charge extra when you use a credit card?

Credit card issuers charge retailers a processing fee each time that merchant accepts payment via credit card. This fee averages between 1-3.5% of the total purchase and is known as an interchange fee or swipe fee. It’s levied everywhere you swipe your card – at the gas station, the grocery store, and even online.

There is a long history of gas stations charging more for credit card transactions, and it’s tied to the interchange fees credit issuers require. However, the difference in pricing between cash and credit is unique to gas stations. Although similar practices can be found in some restaurants, it is uncommon. Most retailers are unable to charge more for purchases made using a credit card.

The costs of processing a credit transaction eat into the profit margins of every retailer, especially gas stations. Filling stations have a remarkably low profit margin when it comes to gasoline sales. Due to intense competition from other gas stations, gas is often priced at just a couple pennies per gallon over cost. This means that gas stations do not make much profit from gas sales. Instead, they must rely on the volume of sales and the sale of items from their convenience stores – beverages, snacks, gum – to make a profit.

This is one of the primary reasons that consumers see two prices at the pump. Using a credit card can be lucrative for the cardholder, if they have a rewards card. Unfortunately, gas stations charge an average of 5-10 cents more per gallon for credit purchases. This leads to another question: do consumers save more money by paying for gas with cash, or with a rewards credit card?

What’s Best for Gas – Cash Back or Co-Branded Rewards Card?

There are two types of credit cards that will reward users for paying at the pump. Each has its pros and cons. Both offer unique ways to save money at gas stations across the country. While both types of credit card are rewards cards, the way those rewards are earned set them apart. To earn gas rewards, consumers can choose from: co-branded gasoline rewards cards, and cash back credit cards.

Using a Co-Branded Gasoline Card for Gas

Co-branded gasoline credit cards offer rewards and discounts at gas stations. Like most retail cards, these perks are often limited to purchases made at the gas station the card is co-branded with.

The Shell Fuel Rewards Mastercard, for example, features tantalizing discounts on fuel purchases – but only when they’re made at Shell gas stations. The rebates earned with this card can only be applied to Shell purchases.

The biggest caveat with a co-branded gas card is that the perks they offer are not available at every gas station. However, the rewards from co-branded gasoline cards can be combined with the rewards from the loyalty programs of these brands. This can boost the rewards the cardholder earns significantly, if they have joined the loyalty program.

In the case of the Shell card mentioned above, Shell offers a 5-cent discount per gallon for cardholders. The company also offers an additional 5 cent discount to loyalty program members with Fuel Rewards Gold Status. Joining Shell’s loyalty program doubles the money a cardholder saves per gallon at the pump.

Using a Cash Back Credit Card for Gas

Cash back credit cards that feature rewards in the gasoline spending category are another good alternative when paying at the pump. The main thing to consider here is the rate at which cash back can be earned for gasoline. Depending on the card, consumers can earn as much as 5% cash back on purchases in the gasoline category. Cash back is issued as a percentage of the total purchase. A rate of 1% would mean that a cardholder earns a reward of $0.01 for every $1 they spend. A 5% rate would reward $0.05 per dollar, and so on.

Discover offers several cash back credit cards that can be used for gasoline. The Discover it® Chrome Gas and Restaurants features 2% cash back at gas stations and restaurants. Alternately, the Discover it® Cash Back card features 5% cash back in a category the cardholder chooses.  Categories include gasoline, restaurants, groceries, online shopping, and more. A cardholder who selects gasoline as their spending category can earn 5% back at the pump.

Paying for Gas with Cash

As the old adage goes, “Cash is King.” However, in the era of smartphones, digital wallets, and online payments, cash not always practical. Carrying cash has become less and less common as technology has paved the way for more convenient means of making payments. Although more and more people pay with cards, cash is acceptable universally. Gas stations typically offer a “discount” for customers who fill their car using cash. In a pinch, folks who want to save money at the pump can use cash to pay for gas. Although those savings aren’t usually significant, they are still savings.

Comparing the Gas Station Cash Discount to Credit Card Rewards

The discount offered by gas stations to customers who pay cash is typically between 5 and 10 cents per gallon. Unfortunately, this is the most money consumers can save when paying for gas with cash. Joining a gasoline loyalty program is a good way for intrepid consumers to get a better discount. However, these loyalty programs require the use of a debit or credit card; cash is not accepted as payment by these loyalty programs. Members who might try to save even more by combining this cash discount with their program rewards will be out of luck.

Cash back cards offer rewards per dollar spent, while gas rewards cards usually offer rewards per gallon purchased. When used properly, the perks offered by both types of card can easily outweigh the cash discount that gas stations advertise. Here’s how:

According to the AAA, at the time of this writing the national average price for regular gasoline is $2.42 per gallon. The current valuation of cash back rewards from Discover is $0.01 per 1% reward. A cardholder using the Discover it® Cash Back card to purchase gas at a 5% reward rate would earn $0.05 for each dollar they spend. This equals a reward of approximately 12.1 cents for each gallon they purchase. The Discover it® Chrome Gas and Restaurants, with its 2% cash back rate, would earn approximately 5 cents per gallon. Filling your tank by purchasing 20 gallons using either of these cards would save $2.42 or $1.00, respectively.

Co-branded gasoline credit cards take a slightly different approach. The Techron Advantage® Visa® Card offers savings of 3-7¢ per gallon based on the fuel grade; if you purchase regular fuel, those perks are relatively low. However, cardholders can earn an additional savings of up to 20 cents per gallon based on their monthly spend. The Shell Fuel Rewards Mastercard offers a higher discount – up to 10 cents per gallon. However, it requires Gold Status membership to the Shell loyalty program in order to receive the best bargain.

Get Pumped About Gas Savings

Most people rely on their car to get them from A to B every day, whether it’s a commute to work or picking the kids up from soccer practice. As such, Americans usually buy gasoline at least once a week. Using cash to pay for gas can certainly save money, thanks to the “discount” that most gas stations provide. However, there are other ways to increase your savings that don’t require an ATM. Rewards credit cards offer an intriguing alternative, with a variety of ways to save. Depending on the credit card, these perks, discounts and rewards can easily outpace the cash discount offered by most gas stations. For those who wish to maximize their savings, the BestCards team recommends using a credit card at the pump.

About: Allan
Allan Guzman Chinchilla

Allan is the Managing Editor at BestCards.com. In addition to leading a robust team of writers in the pursuit of thorough credit cards expertise, he is an avid fan of films, food, traveling, and Star Wars.