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Credit Card Processors Think Consumers Are Saving Money And Not Spending




Last week, I wrote about how I thought Wall Street affected manufactured spending. It was a lot of fun to analyze a situation that’s not entirely tangent to what’s normally covered on the blog. In spirit of that, there’s another article I saw on the Wall Street Journal about how Mastercard, Visa, and Discover interviewed consumers in regards to the low gas prices.

All three companies stated that the low gas prices have not translated into discretionary spending. Instead, the consumers are looking at the money not spent on gas into savings or towards paying down debt.

As readers of this blog already know, in order to save money at the pump, gas prices need to be over $2/gallon for a 5% cash back card like Discover. I say that because there are various regions in the US where there is a price discrepancy between paying cash or credit. If it’s under $2/gallon it doesn’t make sense to pay more using credit per gallon of gas, it’s literally burning your money.

But that positive outlook doesn’t mean consumers feel emboldened to splurge with their savings at the pump, and card-company executives said spending growth would have been higher if consumers had put their gas savings toward more big-ticket items rather than savings.

The interesting part about that quote is the author of the article paraphrased executives looking for growth. I’m curious how their business intelligence teams ran the reports for the key performance indicators for the executives. Did they group by the MCC code and see gas spending in the first quarter of 2015 compared to the comparable date in 2014 against overall spending this year and prior year? Could it be because savvy shoppers know how to save money at the pump from the persistently high prices in the last 5 to 6 years? Real savings can be found using the fuel programs as described on Doctor of Credit, by Frugal Hack.

This part I liked too:

Another 25% is being used to reduce debt, while the rest is being spent on small purchases like groceries, clothing and fast food.

Was it because of all the bonus points/cashback that offered department store, groceries, dining categories?

It goes to show you that the fall of gas prices of over 20% has led the credit card processing companies to lower their growth expectations.

… but the lower gas prices put a lid on the companies’ growth rates. Discover Financial Services Inc. made similar statements last week, and it blamed lower gas prices for lowering its growth rate.

 

3 comments… add one
  • You can still save with a 5% card at under $2 a gallon by using a CC to buy gift cards in the store and then using the gift card at the pump. Most stations pass the cash discount on to gift card users.

    Reply
    • That’s a great point, I forgot about that! Haven’t bought gas gift cards for actual use in a long, long time

      Reply
      • It works pretty well for me although I have been running into more stations recently that refuse to accept credit cards for the purchase of gift cards. I am considering buying quite a few in advance in order to max out the Discover quarterly bonus and maybe earning some Speedy Rewards in the process… I just wish Speedway would bring back bonuses for gift card purchases under $100.

        Reply

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