Pay in Cash, Get Cheaper Gas

THE NEXT TIME you fill up your car's gas tank, think twice about whipping out a credit card. If you pay with cash, the gas station might just give you a discount.

Even though gas prices are skyrocketing, gas station owners aren't reaping bigger profits. On the contrary, each time a driver swipes a credit card at the pump, station owners get hit with a credit card fee that typically ranges from 1.5% to 3% of the total purchase price. As high gas prices force more drivers to pay with plastic, these fees are adding up — and eating into station owners' profits.

As a result, roughly 500 gas stations in 23 states are offering discounts of five to 14 cents a gallon to cash-paying customers. (Some stations have even stopped accepting credit cards altogether.) Among the states where these cash deals exist: Arizona, California, Florida, Maryland, Michigan, New York, New Jersey, Oregon, Pennsylvania and South Carolina, according to Jason Toews, co-founder of GasBuddy.com, a consumer advocacy web site that tracks gas prices.

Expect more stations to jump onboard. As gas prices continue to climb — at a recent $4.07 a gallon, they're already up 37% from a year ago — more drivers will opt to pay with a credit card, thereby inciting more station owners to offer discounts to cash-paying customers, explains Jeff Lenard, a spokesman for the National Association of Convenience Stores (NACS). Currently, "100% of stores are looking at [the discounts] and seeing if they work for them," he says.

In California, ARCO gas stations in Long Beach, San Diego, Point Loma, and Calistoga offer discounts of up to 13.5 cents per gallon to cash-paying customers, according to Toews. Most ARCO stations don't even accept credit cards. Instead, discounts are built into the price of its gas. While the average price of regular unleaded gas is $4.60 per gallon in California, ARCO stations in San Diego charge $4.39.

Similar discounts are also available at the Mobil (XOM) station in Loves Park, Ill., Citgo in Tampa, Fla., Hess (HES) in Newington, Conn., Sunoco (SUN) in Newark, Del., and Shell in Fayetteville, Ariz., according to Toews.

One thing to keep in mind, though, is that gas discounts like these won't make sense if you have to drive more than five miles out of your way to cash in on them, says Gregg Laskoski, spokesman for AAA Auto Club South.

With bulk purchasing, a driver enters into an agreement with a gas station to buy a set amount of gas per week or month at a discounted rate. (Depending on the agreement, a driver can pay with cash or with a credit card, although they'll get a better deal with cash, says Moors.) For gas stations, these purchases offer assurance that they will sell a set number of gallons per week or month — something that is becoming increasingly important as higher gas prices spur drivers to reduce the amount of gas they use. Although very rarely advertised, "consumers can do this right now [since] a lot of service stations...would like to have a certain guaranteed base of sales per month," says Moors. Drivers can approach gas stations on their own or with a large local group (such as a church group or bowling league) and request bulk purchases for members of the organization.

In the Midwest, where drivers tend to commute long distances and gas prices are among the most expensive in the country, these arrangements have grown more popular, says Moors. As gas prices continue to increase, he expects these deals to become more prevalent in other parts of the country as well. "The discount should be at least as good as it is with buying gas with cash," he says.

Corrected on June 25, 2008:
In the original story, we incorrectly stated that the price of a gallon of regular unleaded gas is up 27% from a year ago. In fact, the price is up 37%.

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