Have you ever noticed that certain gas stations will offer a discount if you choose to use cash rather than plastic? Some gas stations will give a 10 cent per gallon discount if a customer pays with cash.

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Gas stations charge less for cash transactions at the pump due to the fact that they must pay a surcharge of anywhere from 1 to 4 percent to process credit or debit card transactions. In order to cut costs, gas stations have provided incentives for customers who pay with cash. However, don’t be so quick to run to the ATM. If you have a credit card that offers cash back or rewards points, find out which can save you more money in the long run.

## Cash vs. cash back credit cards

Most gas stations charge a difference of 10 cents, but some charge up to 15 or 20 cents more for using debit or credit when fueling. Here is an example, using Joe Money, of how much savings you can expect to make on a typical visit to the gas station.

Joe Money usually fills up on 10 gallons worth of gas. The gas station he frequents charges \$4.40 per gallon if he uses cash, but charges \$4.50 per gallon for debit or credit card transactions.

If he uses cash, Joe will save a total of \$1 for the 10 gallons he purchased. Currently, his credit card offers 1 percent cash back, but it changes to 3 percent one quarter out of the year, so he decided to calculate when he would save the most money.

If Joe were to fuel up 10 gallons at a rate of \$4.50 with his 1 percent cash back card, he would only receive a total of 45 cents back.

After this quarter ends, Joe’s credit card will give him 3 percent cash back. He would receive a total of \$1.35 cash back if he were to fuel up on 10 gallons worth of gas at \$4.50 a gallon. In this situation, it’s only beneficial to use his card over cash when he receives 3 percent or more cash back.

There are a variety of gas cards that Joe also knows about. Certain gas cards give customers fuel credit. For instance, the Chevron and Texaco Visa Credit Card currently has an introductory offer to earn 30 cents per gallon of fuel pumped when used within the first 60 days of opening a new account. After the introductory offer you must spend at least \$300 on the card to receive 10 cents per gallon in fuel credits; when you spend \$1,000 or more in a given billing period, you receive a total of 20 cents back in fuel credits.

Here is a breakdown of potential benefits Joe can receive by signing up:

• By receiving 30 cents of fuel at the introductory rate for the first 60 days, Joe would earn a total of \$3 back (for pumping 10 gallons worth of gas). Therefore, the gas card would be very rewarding for him within the first 60 days of opening the account.
• By receiving 20 cents of fuel after spending \$1,000 on the card, Joe would earn \$2.
• By receiving 10 cents of fuel after spending \$300 on the card, Joe would earn \$1.

The introductory offer for this gas card is appealing, \$3 back for every 10 gallons worth of gas pumped is a good deal, but that does not outweigh the overall lack of incentives for using the card. The minimum spending requirements may be difficult to reach for some customers. Also, there are limits —  the card has an annual limit of \$300 that can be used for fuel credits. In this example, the Joe will only save money within the first 60 days of opening the card — beyond that, cash would be a better alternative at the pump.

Overall, unless he has a credit card that offers 3 percent or more cash back, Joe finds it is best to use cash when gas stations offer the 10-cents-less-per-gallon incentive.