The Problem With Using Plastic At The Pump

It's estimated that the average American has about a three percent "cushion" in their budget for things to go wrong; which sure doesn't leave much wiggle room for real emergencies like a busted transmission or extended time off from work.

From the looks on peoples faces at the gas pumps and the quiet chatter I hear as we all wait our turn to pay a kings ransom for a paupers portion of gas; I know that the increase in gas prices over the last six months is causing serious financial strain on the American consumer.

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Within the last year gas prices went from an average of $1.59 per gallon to more than $3.00 per gallon. Sure gas prices in other countries are higher then they are here - which by the way is no consolation to us - but now more than ever our lack of financial planning and saving is hitting hard.

Feeling the pinch at the pump is causing many to dramatically change their buying habits; and spending habits as well. More and more cash-strapped consumers are pulling out the plastic at the pump in an effort to cover the costs.

According to the National Association of Convenience Stores, "A year ago 54 percent of Americans were using credit and debit cards [to purchase gas]. Right now, it's close to 80 percent."

Unfortunately millions of Americans feel they have no choice but to use credit cards to buy gas. The problem isn't so much with the credit card use; it's in the consumable nature of the what's being purchased. As the old adage says, "If you can eat it, don't charge it." Which basically boils down to this; financing food and fuel (and other quickly consumed items) isn't smart because you'll burn it at a rate far faster than you can pay for it.

The average car holds twelve to fifteen gallons of gas, so having to fill your tank once a week at the rate of $3 per gallon is upwards of $45 or more like $65 if you're driving an SUV.

Calculate that four fill-ups will cost $180, add to that the 17% interest rate of traditional credit cards or the 22.9% of "gas cards" and you're actually paying between $30.60 and $41.22 (or the equivalent of one tank of gas) more per month when you pay with a credit card.

Now compound that cost with the fact that the average American family is carrying $9,000 in credit card debt from previous purchases and you've already made a bad situation much worse.

James Chessen of the American Bankers Association explains it this way, "Delinquencies are telling us that some people are suffering from financial distress and with gas costing now $500 more per year than it did last year, it could be enough to push some people, you know, beyond that line."

What can you do when you're stuck between a rock and a hard place? Dig your nails in, make some tough choices and start clawing your way up and out.

Not to sound Pollyanna here, but you might want to consider at least one of these three alternatives to paying with plastic at the pump.

Love your car enough to leave it at home for a while - It's understandable that you have a routine that you don't want to break as you drive to work each day, but with the cost of gas more than doubling within the last year you should at least consider forming a car pool a couple of days each week. Think of it this way, if your car is already parked all day while you're at work why not let it stay parked in your driveway.

Public transportation isn't as bad as it used to be - Mass transit has it's challenges; sure it can be crowded and a bit noisy but it's still the best bang for your buck. When you cost out the price of a subway card or bus ticket to get to work for a week compared to the cost of a gallon of gas on average it's 35 to 45 percent less.

Peddle right past the pump Depending on which part of the country you live connecting with your "inner child" could be more difficult in the winter months but assuming the weather cooperates; pulling out your bicycle, rollerblades or scooter could be just the thing you need to shed a few pounds and save some serious cash. With gas prices reaching $4 and even $5 per gallon in other parts of the world, it's no wonder bicycles are so popular in Holland, and do you know over 250,000 people ride electric bikes daily in Japan? It's at least worth considering.

Einstein said it best, "You cannot solve a problem with the same level of thinking it was created with." The reality is there have been predictions that gas prices would rise for years; sadly not enough was done in advance to shield our wallets from the hit.

Now we must change our level of thinking and our attitude about financial planning, saving and money management so that in this ever changing and totally unpredictible world we're better prepared to handle whatever financial emergencies that come our way.

Sanyika Calloway Boyce is an author, speaker and financial literacy coach who offers tips, tools and techniques for becoming saving savvy, money minded and financially fit. To learn more visit www.financialfitnesscoach.com

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