Credit card offers at gas stations are becoming increasingly popular and more difficult to ignore. These cards offer discounts and rewards for using them on gas purchases and, in some cases, additional incentives for using a specific brand of distributor (co-branded offers).
So with the rising cost of gas and the convenience of swiping a card at the pump, why not take advantage of these incentives?
The truth is, they’re not for everybody and most of the offers come with serious limits and restrictions anyways. So before you sign up for an offer that’s “too good to refuse” you should do some research first and determine if that’s going to actually be the case…here’s how:
Gas consumption & travel habits
For gas rewards to be worth taking advantage of, you don’t always need to spend a decent amount on gas, unless you need to offset any fees you might incur for using or having the card (annual fees). For those who already travel extensively (and drive) or just simply consume a lot of gas, having additional rewards points for gas purchases is obviously going to be more advantageous than for those who don’t.
For those of you who don’t drive too much, it’s likely that there’s rewards offers that would fit your personal lifestyle and spending habits better. And unless you want to have multiple cards to use for different types of purchases, you might be better off just researching a typical generic rewards card.
Instead of changing your lifestyle to fit credit card rewards offers, find credit cards rewards offers that fit your lifestyle.
Comparing credit card rewards offers isn’t cut and dry. There are a number of factors that must be taken into account in order to maximize benefits based on your personal lifestyle. Not just percentage rates and annual fees, either. How rewards are distributed, limits, and blackouts can also determine whether or not a rewards program is right for you.
With gas rewards cards, don’t just look at the benefits of gas purchases (unless the card will exclusively be used for gas only). Most offers also include rewards for other purchases too (like groceries, retail, and ALL OTHER PURCHASES). Many gas rewards cards include other additional travel type purchases, like hotels and restaurants. Once again, find the rewards that fit your personal lifestyle. If you’re on the road a lot this kind of card might indeed be ideal.
Many of the best offers, especially gas rewards offers, usually carry an annual fee. So in order to take full advantage of the additional benefit, it must offset the cost of the annual fee. For example: if the annual fee for Card A is $20, and you get 5% on gas purchases and Card B has no annual fee and 3% on gas purchases, you need to purchase at least $1000 in gas per year just to break even…
Card A: $1000 @ 5% = $50 – $20 (annual fee) = $30
Card B: $1000 @ 3% = $30
One major factor in judging whether or not a rewards card is right for you is how the rewards are given. Some of the more seemingly fruitful offers (“up to 15% on gas purchases”) can only be redeemed when you make purchases through a very limited vendors (retail partners, etc.). In other words, to take full advantage of the “15%” you need to buy specific items or through specific retailers or stores (you probably wouldn’t otherwise shop from).
“Cash back” rewards – where you earn cash for making purchases tend to be much less generous and even limited in their own way: like only gas purchases from a select brand of refueling station.
For most credit cards that offer “gas rewards” there are limits to the benefit. Typically it can be either a cap on the amount of rewards one can earn on gas purchases (per year, etc.) or limits to what times of the year the higher gas rewards take place.
One of the more common limits for these offers, however, is the expiring (“initial” or “teaser”) offer. A good majority of the best offers for “gas rewards” expire after the first year or other set period of time. These initial offers are meant to entice people to sign up for the credit card with front loaded benefits.
“3% cash back on gas purchases for the first year and 1% thereafter”
Not only is it very common for gas rewards to expire, but it’s actually rare to find offers that don’t include other major limits and/or annual fees.
Interest rates for many gas rewards cards tend to be quite high. It’s not atypicial for these cards to carry an interest rate of 20%-25%. And even if you’re the type of person who pays their balance in full each month it’s worth considering the interest rate you would pay if you are to carry a balance (even once) when you’re researching offers.
Take this example: if you are getting 3% on gas purchases but paying 25% interest. If you fail to pay your bill JUST ONCE, you will be charge interest that’s more than eight times the benefit. In other words, you will need to earn 8 months of rewards just to pay for the interest you were charged that month.
Per month benefit: $100 x 3% = $3
One month of interest: $100 x 25% = $25
Credit score requirements
Before you sign up for a gas rewards card, or any rewards card for that matter, you need to be aware of a simple fact: these cards are usually reserved for those with very good credit. It’s not uncommon for those with poor credit to be outright rejected by these offers, which can temporarily hurt your credit score. Otherwise, the credit card company will offer cards with offers that simply don’t stack up to other offers negating the benefits of opening the new account.
If you don’t have great credit history, buyer beware.
How good are you about paying bills?
In order to take full advantage of any type of rewards credit card offers, you must be disciplined enough to pay your balance in full every month. Otherwise you’re more likely to be paying more interest than you receive in benefits. Don’t get sucked into using credit cards just for the potential of 5% cash back if you aren’t ready for the responsibility.
Can gas credit cards be worth it? I don’t doubt that for some people, they can be. Depending on your lifestyle, the rewards, limits and terms of the offer, as well as your own relationship with credit and finances they may just be exactly what you need.
Before you sign up for one, whatever you do: don’t accept the first offer you see…do the research, read the fine print, and know yourself.