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.