For years, credit card issuers have tried to lure consumers into using their card by offering frequent flier miles. The recent dramatic rise in gas prices, however, has led some of these companies to promote gas rewards and rebates instead. The question is, how does anyone decide which card, including rewards, is best for them?
Credit cards offering gas rebates should not be confused with the gas credit cards issued by the gas companies and that can be used only to purchase gas at their stations. Cards offering gas rebates are regular credit cards from MasterCard, Visa, Discover, American Express or whomever, that offer rebates and rewards for the purchases made on the card each month.
“Gas, like other rewards, can just be a gimmick to get you to sign up for the card,” Scott Bilker, founder of Debtsmart.com, told SmartMoney. The News Journal (Wilmington, Del.) reports that some cards offer initial “teaser” rates as high as 10 percent to attract new customers, however most rebates range from 3 to 5 percent once the “honeymoon” is over.
It’s not just the rates that vary, either. Gas rebates come in two types, those that are tied to specific stations, like Mobil, Chevron, etc. and those that can be earned by purchasing gas at any station. When it comes to reducing the amount spent each month on fuel, the non-station specific card is probably the wiser choice, as it allows the buyer to shop around and purchase gas at the lowest available price. Paying the full amount off every month will also help reduce the overall amount spent on gas because the refund won’t be eaten up in interest.
“Make the credit card companies pay you,” Curtis Arnold, founder of CardRatings.com, told the News Journal. “If you use these cards in a savvy manner, they can be a great way to get a break on gas prices.”
CNNMoney.com goes even further, stating that gas rebates are a good value only if the credit score of the cardholder is 720 or higher and the gas tank needs filling at least twice a month. Even if you fall into this category, there are a few things to know about gas rewards cards before rushing out and signing up. Besides knowing whether a card is tied to a specific station, consumers will want to find out:
- The interest rate and annual fee. Even those individuals who pay off their credit cards every month can get hit by annual fees, and if something happens one month and a balance is carried forward, the card holder can get a very nasty surprise, as high as 23 percent, if they aren’t careful which card they apply for.
- Is there a limit on the rebate? Most cards, according to CNNMoney, limit how much a cardholder can get back to between $300 and $600.
- Other limits. Are rebates given only on purchases made at the pump? What about purchases made at stations associated with warehouses and big box stores like Costco or Sam’s Club, are rebates earned on those? Will the rebate be automatically deposited in the cardholder’s account or is some additional action necessary and, if so, what? Are rebates calculated only on fuel purchases or purchase made at gas stations or are they calculated on all purchases?
- Are all gas purchases eligible for the full rebate or just those made at standalone stations? This one is particularly important since the number of standalone stations has been steadily decreasing in recent years.
“Typically, to get the full rebate, which is generally 5 percent, you have to go to a standalone stations,” Arnold explained to Kiplingers, further describing a standalone station as “a place whose primary function is selling gas.”
Consumers can gather information to help them make a wise decision about which, if any, gas reward card they should apply for. Several sites compare credit card details including:
- CardRatings.com (select the Cash Back option)
- Credit Card Assist.com
- LowCards.com (select Rewards – Gas)
If the cardholder carries a balance on their card, it is unlikely they will see significant savings from rebates on a credit card. Most debt advisors agree such consumers are better off choosing a credit card with the lowest possible rate and working to pay down the debt owed as swiftly as possible. However, it doesn’t make sense to acquire more debt in an effort to save a few dollars at the pump. Using a credit card or gas station card can help consumers track purchases for tax purposes.
“The big question behind any reward is what’s the cost?” Howard Dvorkin, founder of Consolidated Credit Services Inc. and author of Credit Hell: How to Dig Out of Debt, told Florida’s Sun-Sentinel. “Everything has a limitation. Understand what you are getting into and don’t take it by face value.”