Monday Morning Quarter-Buck 05/21/2018: When Saving 5 Cents Costs So Much More


When Saving 5 Cents Costs So Much More

by Kate Welker


This morning I was running behind and realized, of course, my gas tank was dangerously close to empty. I quickly pulled into the gas station and pulled a little too close to an advertisement sign that was placed by the pump. I had to squeeze by the sign to access the pump so while I was filling my tank I was reading over the sign. In large letters was the promotion “5 cents off a gallon” and below a picture of their credit card.

That thought of that sign stayed with me. I love saving money so 5 cents off gas sounds great, but I also know that trying to save a few dollars can sometimes end up costing more in the long term. Are you one to approach promotions like that with caution or do you see a discount and want to sign right up?

I wanted to break out the numbers to see what the potential savings could be. Based on the mileage my husband and I put on our vehicles (and we drive a lot) our potential savings would be around $75 a year.

When you pay for each purchase at the pump that smaller purchase is immediately accounted for. Say you spend $40 to fill your tank. That should be a planned on and manageable number, you have spent it as you consumed the good and those funds are no longer available.

Now let’s say you were to switch to using the gas card for all of your gas purchases. Going into the agreement, you intend to pay it off every month. You would be getting that discount and only making one payment opposed to several each time you bought gas. If you are disciplined and your personality around money can handle that, this can be a great solution.

BUT, what if you are not that disciplined? If you are someone who needs to fill up often, that $40 could turn into a credit card bill for $250 or $500 by the end of the month. Now the mentality of making that payment is different. Instead of that smaller amount coming out of your account a few times a month, there is a rather large sum to be paid for. If you are disciplined, this would be planned for and the money would be set aside. But, if you are not a strict budgeter or need to see and feel the expense for it to be real that $40 on the card was forgotten about and was instead spent throughout the month because your account looked like it had those extra funds.

Looking at that bill you might now be panicked. The minimum payment of $25 can look very appealing. If the bill is $300 and you can only afford $200 at the due date you might figure most of it is good and I will pay the rest next month. Maybe the microwave broke that morning and those funds could be used to replace it. Are you one to forget about something new and possibly miss a payment? Do you think of credit increases as extra spending power? By not paying off that balance, you open yourself up to late fees, at least $25 each, and high interest charges. A small purchase could quickly turn into a snowballing balance and that potential $75 savings now costs several hundred dollars in interest and penalties.

I did not write this to say gas cards are bad. I could easily replace this with your store credit card that offers you a 20% discount and bonus coupons. I’m also not saying you should not have a rewards card, in the right situation with the right person I think they are a very useful option.

What I am saying is you need to know yourself and understand how you manage financial matters and decisions. Its ok to be different, that’s what makes this world so interesting. The important part is understanding how you respond and making that a part of your financial process.