Gone are the days when cash was king.  Debit and credit cards offer the convenience of cash with built-in perks such as airline miles, points exchangable for merchandise, and cash rebates to name a few, all without the bulk of paper stacks or the need to carry heavy coins.  But, with the rising costs of fuel negating any profits, and the apparent lack of legislation against it, many gas station operators are begining to offer discounts to customers who pay in cash in an effort to also avoid paying credit card processing fees and maximize their profits.  Word is that this effort may soon be extending to other retail markets as well.  However, while it may benefit business owners, it may not necessarily be in the consumers’ best interest to return to cash as the preferred method of payment.

Say for example that the average cost of regular unleaded gasoline is $4.00 a gallon (simply to make the calculations easier) and operators are willing to give a $.10 discount for cash customers,  which equates to a 4% savings.  Sounds pretty good unless you would normally use a credit card which pays back 5% such as the Chase BP Visa Card or the Discover Open Road Card.  That 4% might still sound pretty good if you hardly purchase gas, but if you are a frequently filling up, a difference of 1% can be pretty significant.  Then there is the one fact that nobody seems to be mentioning–where to get the cash.  In order to receive this discount, you need to pay in cash, which means that you probably will have to increase the number of trips to the ATM, which equates to increased gas consumption.  Such added mileage, depending upon how often you hit the bank, or how far out of your way you need to travel, may not only negate the discount in part but perhaps the additional mileage will increase your fuel consumption to a point where it would be chepaer to pay the full price and not have to add additional trips to the bank.

There is a theory, one that was even suggested in a CNN report on July 19, that such discounts may also begin to spread to other reatilers as well.  That may very well work to help businesses increase profits by cutting down on credit card interchange fees, and even save those who have an aversion to credit some money.  Not everyone will benefit, or even want to take part.  If you are a participant in a program such as Upromise (which I explore in a prior post entitled “Worried about the rising cost of a college education? Discover Upromise.“) or any other rewards program, you will be losing out on those benefits as well.  A good number of people use rewards cards knowing that they can earn enough for free airline tickets, concert tickets, hotel stays, etc which would be lost by paying in cash to save money.  Maybe the cash savings will be enough to pay for such rewards outright, in which case the effort would be justified.  Then again each person would have to sit down and calculate that for themselves before making any decision.

Another key point to consider is the amount of interest you would be losing by keeping cash on hand rather than in high-yielding savings or money market accounts.  If the main objective of using cash is to save money, then the discount would have to be higher than the interest rate at which savings is earning for this concept to work in favor of the consumer.  Some may argue that the lost interest is negligible since there wouldn’t be much time to accumulate before the credit card payment would be due, but if the priority is to save money, it makes more sense to earn 3.25% in interest rather than take the cash out to save only 2% (for illustration purposes only).

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Of course, this can all change tomorrow and become a non-issue.  But, until it does, one would be wise to examine these cash discounts from all angles befor making a decision to make the best use of both their money as well as the rewards from using credit/debit cards. online pharmacy ultram

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