... started filling up and looked at the pump to see that the price per gallon was 5 cents more than the sign... we've all had this happen. I got back in the car and said, that's the cash price.
This is an interesting point. My understanding is that it used to be illegal for companies to charge different prices for paying with cash vs credit card (the credit card lobby persuaded congress to pass a Federal law in the US at one point). The law said that if a company or retailer accepts a credit card, they have to agree not to charge different prices.
I think I read somewhere in the news in the last few years that the retailers were fighting this law and somehow got it changed or repealed such that they can now charge different prices to customers depending upon the payment method used. Also some states still have laws forbidding the charging of different prices.
To me this makes perfect sense for retailers such as gas stations because the credit card companies charge them a transaction fee (also called a merchant fee, interchange fee or swipe fees), usually about 3%-4% for small purchases every time a customer uses a credit card to pay.
Usually companies or retailers that accept credit cards raise the prices of their products by about 3% in order to pass this fee off to all the consumers to pay.
Further, credit card companies use a portion of the interchange fee profit they make to pay for the credit card rewards programs or cash back programs that are so popular with consumers. For example, they get 3% from the customer initially, they give back a portion, i.e. 1.5% in the form of various rewards.
This system works well for credit card companies because the consumers are encourage to spend more because it makes them feel as if they are "earning", being rewarded or gooding a deed for their efforts. Also, by encouraging consumers to earn rewards, this encourages the customers to use their credit card to pay for as many of their transactions as possible in order to maximize their rewards. This behavior to "earn" your rewards is also pushed aggressively in theirs ads as well. In turn, this places more pressure on all retailers and companies to accept credit cards because the credit card method of payment becomes more entrenched in the financial system as the most frequent, most preferred or standard method of payment.
Due to the law change, I would not be surprised if you see more of this in the future where retailers and gas stations charge different prices based upon the method of payment used.
I agree with the OP's general conclusions. The math would suggest that, in the future, you have to look more carefully at your credit card agreement to see exactly which products/services earn you extra, or double or triple rewards and use the credit card primarily for those products. And use cash to buy products where there is a large penalty for paying by credit card, i.e. if there is a large difference or spread between the cash price and credit card prices especially for products where no are extra double or triple rewards points being earned.
