I have a scenario where I get $.05 off per gallon of gas if I pay with cash. I also have a credit card that gives me 3% back at gas stations. Where is the cutoff pric,e per gallon, to where I would be given the best deal? My math knowledge has long since left me, but I know there is a way to calculate it.
If gas is $3.00 per gallon (to use round numbers) then $0.05 off give you gas at $2.95. A 3% discount give you gas at $2.91.
To figure it out exactly, you want to know “3% of what number is 0.05?”
0.03x = 0.05
3x=5
x= 5/3
x= 1.666
$1.66 per gallon is the break even point.
Perfect! Thank you very much!
[nitpick]
You’re not really getting 5¢ per gallon ‘off’ when paying with cash, you’re being charged 5¢ per gallon ***more ***to pay by credit card. The math is still all the same (of course only when you pay the card balance off in full each month with no interest charges)…
Yes, except that phrasing it one way is illegal, but the other is not.
I was in Connecticut when gas stations figured out this trick (25 yeas ago?). I was told state law prohibited charging people more for paying with a card. But then somebody figured out that nothing prohibited offering a discount for cash.
Which amounts to the same thing.
I do remember one station that did it as “cash back”, though. As in, you pump 5 gallons of gas, you pay for 5 gallons of gas, then if you paid in cash the cashier gives you 5x5 cents back. Most cashiers were savvy enough to let you just give them the net cost, but the register expected you to pay the full (credit) price, then receive a refund for your savings.
And, of course, the reason for them doing this is pretty obvious: the card companies charge the store (a lot) to process the card transaction. WAY more than such processing actually costs. It’s the same reason the card company can offer you “cash back”: they charge the store more than that.
So (except at stores that offer a “cash discount”) every time we pay with cash, part of what we pay goes to subsidize the people who are paying with cards.
My favorite work-around? I shopped at a store where, if you paid cash you’d get a coupon for a discount on your next visit that was 10% of whatever you just spent. (Like, spend $4.20, get a coupon for $0.42 off). The coupons came off the total before sales tax was computed. The store owner said he was charged about 10% for processing cards, and a similar amount for depositing checks. (Again, 20 years ago. Since then laws have reduced how much the card companies can charge.)
<nitpick> $1.67 <nitpick>
You forgot to close your nitpick tag; now, all the posts will be nitpicks until it’s closed properly. </nitpick>
See? All better.
No actually he opened a nitpick twice so you’ve got to close it twice for it to actually be all better. </nitpick>
Ahhh.
<nitpick>Actually $1.667, because gas stations quote prices to the tenth of a cent.</nitpick>
If we’re going to pick nits let’s do the job right 
Well, to sort of un-nitpick… everyone who’s ever seen a station price with anything but 9 tenths at the end, raise your hand…
I recall seeing a few, mostly as attention-getters, in the gas price chaos of the early 1970s. Never before or since.
It’s just an invisible way to actually charge a penny more per gallon. I mean, really, when was the last time any of you thought of gas at any price but the three significant figures? But that penny adds up, station fill after station fill.
Well that’s not exactly true. I doubt there is a law against charging more for credit than it dies for cash. What is likely illegal is charging a fee for credit cards on top of the advertised price. If the sign says $1.99 per gallon, you can charge credit card users $1.99 and offer 10¢ off for cash. What you cannot do is advertise your gas at $1.99 and then charge extra for using a credit card.
Yeah, it’s not a law. It may be a violation of the agreement between the merchant and the credit issuer, but that’s at worst a breach of contract, like requiring a minimum purchase for credit card usage.
True for actual selling prices, but $1.667 is a theoretical break-even point, not an actual sell price. You just care if the sell price is above that or below it.
A quick search found an article at the Huffington Post that said:
(emphasis mine)