Today I did something I haven’t done for years — I paid cash for gas.
I did it because the station was offering a cash discount, but it got me wondering whether the discount was worth losing the frequent flier miles from a credit card purchase. After working out some math, I decided it was better to pay cash in this case, although there are several factors to consider.
Here’s my reasoning:
I bought just under 13 gallons of gas at $2.799 a gallon for a total of $36.10. Had I used the credit card, it would have cost $2.859 a gallon or $36.85.
So I saved 75 cents.
The $36.85 purchase would have earned me just under 37 miles on my Citi American Airlines Mastercard. If you consider that airlines miles are generally considered to be worth 1 to 2 cents each, that means the purchase got me airline miles worth somewhere between 37 cents and 72 cents.
I guess you could factor in the bother of having to walk in to pay at the cash register and figure it evens things out. But that works only if you think the value of the miles is closer to 2 cents than 1, and I don’t really think that.
Of course the equation varies with the amount of the discount. And some cards offer double miles at gas stations, which alters the equation again.
I used to have one of those cards that paid double miles at gas stations — a Delta American Express — but I switched to a Blue Cash card because I thought it offered a better return. In fact, I’ve been meaning to get rid of the AA Mastercard as well because I generally don’t find airline affinity cards all that worthwhile any more.
An additional consideration when deciding whether to pay gas is the problem of credit card skimming. But that’s another blog entry.