Wednesday, December 12, 2012

Kroger Fuel Rewards

For a while now, Kroger has had a "fuel rewards program". For every $100 you spend at Kroger, you get a one-time savings of 10¢/gallon (up to 35 gallons or something) valid at either Kroger fuel stations, or at participating Shell stations. At Kroger fuel stations, you can use as many "fuel points" at once as you want; for instance, you can save 30¢/gallon one time instead of 10¢/gallon three different times. That's what I did last week, and so I paid $2.96/gallon instead of $3.26/gallon.

Sounds great, right? Well...let's do the numbers. How much money are we really saving here? Since a standard fill-up for me is between 9 and 10 gallons, this program is saving me $1 per $100 spent at Kroger. So if you have a 10 gallon gas tank, this is basically a 1% cash back rewards program. Except that it's actually less than 1% because of their "silly rules" - e.g. points expire after (I think) two months, and you can't combine points from multiple months to get the discount.

Well, anyway, here's the point I wanted to make. Credit card companies have long advertised things like "save 5¢/gallon when you use our credit card!" Why? Because we tend to overvalue fuel savings relative to savings on other things. 5¢/gallon seems like a lot to us because we see the price of gas posted everywhere, and for some reason we obsess over even very minor savings when we go to the pump. (This xkcd comic comes to mind.) Even though I do spend over $100 per month on gas, it's all kind of silly. But what this means is that if you're a company like Kroger, and you want a rewards program that sounds better than it really is, you can't do much better than with fuel rewards.

I'm not actually sure how much additional money Kroger makes off of this in the long run. I don't shop at Kroger more than I otherwise would because of the fuel rewards, but I do refuel at Kroger and Shell more than I would otherwise. But only when I can get the discount, of course. As for other rewards programs, the cash back I get from my credit card does actually encourage me to use the credit card more often...but since I always pay off the balance in full every month, the credit card company isn't making any additional money from me off of that, either. Do these rewards programs actually work?

2 comments:

maplestar said...

I don't know if it does any good for Kroger, but it does for our family, largely because of the "extras" above the point per dollar.

My wife gets her prescriptions at the Kroger pharmacy, but instead of being point per dollar, they are at a flat rate of 50 points per prescription, so those can add up fast.

The other deal is on gift cards (and also my prepaid phone cards). They are always "double points," but many times a year "4x points." So we will often gift ourselves with restaurant gift cards on our way to eat a meal, or if we're buying something from Best Buy or Amazon, making sure to buy a gift card to pay for it, so we get the points.

Our only problem? "Our" Kroger doesn't have gas pumps. And the Shell stations in our area are generally abysmally priced. When we lived only a couple of miles from a Kroger with pumps (and decent gas prices) it was great...now...it's just a nice perk to every couple of months get a really cheap tank of gas.

Leah said...

The credit cards do make some money from you using them - they charge a fee to the merchant which is typically higher than the percentage they give back to you. I still do it though, because that cash back is better than getting nothing. We used our credit card points to buy one of our plane tickets to australia this year :) of course, that might just indicate that we spend too much in general.