My Personal Finance Journey

Personal finance observation, musing and decisions in a journey toward financial independence by 2020 with at least $3 million.

By Topics

0. About (10)
1. My Progress (139)
2. Car & Home (107)
3. Credit (138)
4. Banking (33)
5. Saving (49)
6. Investing (308)
7. Taxes (89)
8. Spending (74)
9. Misc (97)
A. Archive (49)


Feb 2014 (3)
Jan 2014 (6)
Jan 2012 (1)
Apr 2011 (1)
Mar 2011 (1)
Feb 2011 (1)
Jan 2011 (1)
Dec 2010 (1)
Oct 2010 (1)
Sep 2010 (1)
Aug 2010 (1)
Jul 2010 (1)
Jun 2010 (1)
May 2010 (1)
Apr 2010 (1)
Mar 2010 (6)
Feb 2010 (2)
Jan 2010 (7)
Dec 2009 (3)
Feb 2009 (4)
Jan 2009 (8)
Dec 2008 (1)
Jun 2008 (2)
May 2008 (2)
Apr 2008 (5)
Feb 2008 (3)
Jan 2008 (15)
Dec 2007 (32)
Nov 2007 (6)
Oct 2007 (8)
Sep 2007 (9)
Aug 2007 (24)
Jul 2007 (2)
Jun 2007 (1)
May 2007 (3)
Apr 2007 (4)
Mar 2007 (4)
Feb 2007 (13)
Jan 2007 (6)
Dec 2006 (3)
Nov 2006 (7)
Oct 2006 (7)
Sep 2006 (6)
Aug 2006 (4)
Jul 2006 (10)
Jun 2006 (1)
May 2006 (3)
Apr 2006 (2)
Mar 2006 (6)
Feb 2006 (6)
Jan 2006 (3)
Dec 2005 (1)
Nov 2005 (9)
Oct 2005 (8)
Sep 2005 (13)
Aug 2005 (25)
Jul 2005 (16)
Jun 2005 (17)
May 2005 (19)
Apr 2005 (20)
Mar 2005 (24)
Feb 2005 (23)
Jan 2005 (36)
Dec 2004 (40)
Nov 2004 (34)
Oct 2004 (17)
Sep 2004 (21)
Aug 2004 (59)
Jul 2004 (37)
Jun 2004 (31)
May 2004 (29)
Apr 2004 (52)
Mar 2004 (49)
Feb 2004 (49)
Jan 2004 (31)
Dec 2003 (48)
Nov 2003 (52)
Oct 2003 (29)
Sep 2003 (8)
Aug 2003 (5)
Jul 2003 (2)
Jun 2003 (2)
May 2003 (5)
Apr 2003 (2)
Mar 2003 (2)
Feb 2003 (3)
Jan 2003 (29)


Credit Card Rewards Distort Price System?

Contributed by mm | April 7, 2005 8:09 AM PST

The cheapest gas I purchased in recent years was at $1.10/gallon. Nowadays, I will be lucky to find a gas station that is willing to sell me at $2.30/gallon. With the BMW purchase and its unique taste of premium gasoline, I now have to get used to $40 a refill. So, between two neighborhood gas stations, is it always wise to go for the one that shows the lowest price?

Not necessarily. And I am not talking about avoiding driving 50 miles for gas at 10 cents cheaper per gallon, I am talking about how credit card rewards can push someone like me to the outlet with a higher price tag.

In my neighborhood, the discounter Arco usually offers the lowest price. Big names like Chevron and Shell are about 10 cents more expensive. However, my local Arco does not accept credit card, and it charges me 35 cents every time for using debit card. How should I choose?

Arco's non-acceptance of credit cad is really a turnoff for me. if you recall, I can earn 5% cashback from my Citi Dividend Platinum card or Citi Driver's Edge card, and at $2.40 a gallon, this amounts to 12 cents/gallon cashback in a later date. After this simple calculation, it does not take much time for me to decide against paying 35 cents for the pleasure of "cheaper" gas.

Over time, I have noticed more examples like this, in which seemingly non-price factors turn into price factors:

Example #2: Costco does not accept Visa and MasterCard. It does accept American Express, which usually offers 1-2% rebate at most. (Like this Amex/Costco TrueEarnings card.) Still, it creates a 3% price disadvantage for Costco -- if Walmart prices 2% higher than Costco, I will still be better off by swiping my 5% cashback card at Walmart.

Example #3: I admit that Amazon usually offers good value for many products, but for Washingtonians like me, buying from Amazon means paying 8.8% state sales tax. Many out-of-state speciality e-shops can beat, or at least offer the same price as Amazon does -- they got my orders. (Worse, for the limited occasions when I bought from Amazon, they don't even ship from the state of Washington.)

All in all, it's the invisible hand to the higher level. Merchants should not only compete in price: credit card acceptance, and even the physical location, can all find their ways to economic man's financial mindset.

More PFBlog Articles You Might Find Interesting ...

This Post Has Received 9 Comments. Share Your Opinions Too.

jim Commented on April 7, 2005

One benefit of having the Costco Gas around is that it depresses some of the gas prices nearby, at least around me. I've found that the Exxon, which typically has the highest prices of all the stations, has very competitive prices because of the Costco (and are actually better for me because of the 5% cashback).

recog Commented on April 7, 2005

I lived in Georgia in the late '90s, and gas got as cheap as $0.699/gallon! I used to be able to fill up for <$10. I still drive the same car, but it now costs me ~$28 to fill up.

With regard to reward gas cards, Sam's Club gives a $0.05/gallon discount *and* it takes Visa/MC (for gas only). My local grocery store also gives a $0.03/gallon discount for those that have their discount key tag and they accept all forms of credit cards. They even give a $0.10/gallon for every $100 you spend in a month.

Thus, if you're smart about it and combine these deals with a 5% reward card, you can save a good bit of money on gas.
Financial Cognition @

Joshua Ross Commented on April 7, 2005

An interesting aspect to this post is the current use of credit scores in determining price. Texas Utilities recently offered Texas residents with higher credit scores a lower rate on the price per kilowatt hour over residents with lower credit scores.

ncnblog Commented on April 7, 2005

Why not just use plain old cash money? This avoids the hassles, avoids the pitfalls of over-spending with credit cards (we spend an average of 12% more when we use credit than when we don't) and it is accepted everywhere. If you use a simple envelope system and place your cash for gas in your envelope marked "gas" or in your wallet with a rubber-band, you can just pay for gas. The mulit-million dollar credit card companies are not foolish...they KNOW that if they can rope you in with "rewards" and "bonuses" that eventually you will over-extend yourself, and be forced to pay interest and other fees...just my two cents, but do what grand-pa would have cash
I love you blog, and have learned alot from it...please check out mine at

mightybargainhunter Commented on April 7, 2005

I'm all for using gas rebate cards. The CC companies may get a lot of profit from the extra business that the rebates bring, but not from me! :)

I noticed the same price disadvantage between Costco and Wal-Mart. It stems from Costco's desire to cut its expenses -- CC transactions are expensive for the merchant. Costco is able to cut the price because it doesn't have the burden of the cost from the CC transaction (it probably gets a great deal from AE because it uses its cards exclusively).

It's just that now the CC companies are so competitive that they need to get new customers any way they can. They'll always lose out on the customers that use the CC solely for convenience (the company probably doesn't make more than 3% on a gas purchase from the merchant).

Karthik Commented on April 15, 2005

Between "Costco plus TrueEarnings" and "other-gas-station plus Citi card", yes Citi may beat by a couple of percentage points because of its 5% payback. But lets not forget that the 5% has an annual cap of $300. So at 5%, the cap reaches on $6000 expenses per calendar year ($500 per month).

Thus it may make sense to transfer some expenses
off of Citi onto say TrueEarnings card.
Of course if one is not hitting the max of $300
per calendar year with Citi, there is no issue.
I guess that would not be the common case.


Brian Maloney Commented on May 25, 2005

Hey man I feel ya. I have a jaunt of about 40 miles everyday and there is only one gas station in the mix. They also charge me for using a credit card but thankfully, there is a new gas station being constructed in my path so I can't freak anymore. There is really great deals if you consume at hess gas card, or discover has a awesome card that pays back 5% cash all the time. Anyhoo, these cards are kind of an unspoken savior and shaves off like $50 a yr. or more that I can use at the grocery store or whatever.
Keep smart you'll find the right merchant that takes better care of ya than arco.

Hess Gas Card Commented on May 25, 2005

Ceck out these cards, they can help.

ASAP Credit Card Commented on September 23, 2005

Consumers should be aware of "tactics" used by credit card companies to lure them into creating more debt. There are definitely many confusing aspects to using a reward card. But at the same time, if used properly, you can gain a variety of benefits and perks!

Most of the time, these types of cards have higher interest rates than standard credit cards. This is how many people get burned.

But if you only use this type of card as a secondary option to your regular, lower rate card... you can take advantage of the credit card company; instead of it taking advatage of you!

Only use this card for purchases you know you can pay-off within the "grace period" (the time in which no interest is charged). If you know you can't pay it off quickly, use your lower rate card instead. This way, you can earn freebies on purchases you make anyways, without paying interest!

Read More ... 140 Posts In The Same Category

This page was last rebuilt at January 27, 2014 07:41 AM PST.



Consumerism Commentary
Get Rich Slowly
My Money Blog
All Financial Matters
The Simple Dollar


Error 403 - Forbidden

Error 403 - Forbidden

You tried to access a document for which you don't have privileges.

Copyright 2003-2014, All Rights Reserved. (Privacy Policy)