Using Credit Cards at the Pump May Add to the High Price You Pay
As gas prices increase, a majority of consumers are using credit cards to pay for gas at the pump. While this is a good idea if the balance is paid off each month and reward points are earned, paying for gas with a credit card just adds to financial problems if you carry a balance.
A household that spends $300 on gas each month and pays with a credit card will pay at least $540 in interest each year if they carry a balance (15%APR).
Many analysts agree that credit card use has increased with the rise in gas prices. Credit card companies are benefiting from this increased usage. Last week in an earnings conference call, MasterCard's chief executive, Robert Selander, said that credit card payments at gas stations have increased significantly and they are one reason for the strong purchase growth during the second quarter.
Credit card companies also profit nicely from consumers using the credit card at the pump. They charge the gas station an interchange fee of 1.8% of the transaction. "Credit card companies receive 5.4 cents for every $3.00 gallon of gas you buy. As gas prices increase, their revenue increases also. Credit card issuers are one of the few winners with high gas prices," says Bill Hardekopf, CEO of LowCards.com.
"Gas and utility prices are high enough; don't charge these and add them to your credit card balance. The gas you purchased will be gone before you even get your credit card bill," says Hardekopf. "If you want the convenience of paying at the pump, but you are carrying a credit card balance, pay with a debit card instead."
A household that spends $300 on gas each month and pays with a credit card will pay at least $540 in interest each year if they carry a balance (15%APR).
Many analysts agree that credit card use has increased with the rise in gas prices. Credit card companies are benefiting from this increased usage. Last week in an earnings conference call, MasterCard's chief executive, Robert Selander, said that credit card payments at gas stations have increased significantly and they are one reason for the strong purchase growth during the second quarter.
Credit card companies also profit nicely from consumers using the credit card at the pump. They charge the gas station an interchange fee of 1.8% of the transaction. "Credit card companies receive 5.4 cents for every $3.00 gallon of gas you buy. As gas prices increase, their revenue increases also. Credit card issuers are one of the few winners with high gas prices," says Bill Hardekopf, CEO of LowCards.com.
"Gas and utility prices are high enough; don't charge these and add them to your credit card balance. The gas you purchased will be gone before you even get your credit card bill," says Hardekopf. "If you want the convenience of paying at the pump, but you are carrying a credit card balance, pay with a debit card instead."
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