Using Credit Cards to Buy Gasoline
The Oil Drum points out that many people are paying for gasoline with their credit cards.
Convenience stores, which sell about three-quarters of all gasoline sold in the nation, have seen the use of credit cards for motor fuel purchases rise to 70 percent of all gasoline purchases from about 54 percent last year, according to the industry group.
The article rightly notes that gasoline that costs $2.60/gallon can easily morph into $3/gallon if the balance is not paid off right away due to interest, finance charges, etc. So unless you expect to see some significant drops in the price of oil in the near future this might not be the best strategy for dealing with the higher gasoline prices.
Update: So far virtually all of the comments have been of the nature:
Well, I use a check card that works like a credit card, so this study is bogus.
This just doesn’t wash. Check cards are not something new. I’ve been using one for quite a while now. So this sudden surge in the use of cards (check, debit, or credit) is most likely due to something else. What has changed recently? Prices have gone up. So we have two hypotheses:
- People are using their cards more just because.
- People are trying to defer the increased cost of gasoline.
I think the second hypothesis is the more likely right now. Merely noting the existence of check and debit cards does nothing to weaken the second hypothesis because conditioning on this information applies to both hypotheses. In other words, the debit/check cards have been around before and during price increases and will likely be around afterwards. Hence, why should people increase usage simply because of the price increase? Because it is faster to pay at the pump with a check card? This was true prior to the price increase, hence is at best a very weak explanation. People are carrying less cash all of a sudden? Okay, but either it is a pretty interesting coincidence or it is not an explanation. I wouldn’t bet on this one. Gasoline prices have gone up and people’s budgets are being strained? Now that looks more reasonable. So, could this increase mean that there is no deferring of increased gasoline costs? Sure, but I think this is least likely possibility.