6 Tips for Using Gas Rewards Cards Wisely
Gas rewards cards
With gas prices topping $4 a gallon in some parts of the country, consumers are feeling the pinch at the pump. One way to save money on gas is by using gas rewards cards. Since roughly two-thirds of consumers pay for gas with plastic, according to the National Association of Convenience Stores, it makes sense for many consumers to earn rewards in the process.
Gas credit cards are available as private label cards for specific gas brands or as co-branded cards, which are issued by banks and carry the logo of a payment network such as MasterCard or Visa. Last year alone, Americans received 15.9 million offers for private label gas credit cards and 25.4 million offers for co-branded gas credit cards, according to Mintel Comperemedia, a marketing research firm based in Chicago.
Rebate amounts for gas purchases vary, but many cards fall in the 1 percent to 3 percent range, according to the experts paneled for this article. A few co-branded cards offer 5 percent off or more.
Besides the rebate offer, there are a few other factors to consider in choosing a gas rewards card.
Do you carry a balance?
"As long as you're paying off your balance in full every month, a good rewards gas card is found money," says Joe Ridout, spokesman for consumer advocacy group Consumer Action in San Francisco. However, he cautions that gas rewards cards are not appropriate for consumers who carry a balance because these cards tend to have higher annual percentage rates than regular credit cards.
Compare rates on gas rewards cards to those on low-interest cards.
Paying interest can offset any discount from a gas card. "When you're paying 26 percent on a $50 balance to get 15 cents off a gallon of gas, those rewards do not pay out," says Ondine Irving, founder of CreditCardConnection.org, a directory of credit unions that offer consumer-friendly credit cards.
Analyze your gas use and needs
Before signing up for a gas rewards card, look at your gas-buying habits. Where and how often do you fill up your gas tank? Do you need a gas rewards card or could you simply switch to a gas station with lower prices?
In addition, consider the differences between private label cards, also called retail cards, and co-branded cards. The former is accessible to more consumers but also less flexible than co-branded cards, says Dennis Moroney, research director of bank cards at TowerGroup in Needham, Mass.
Consumers with good credit will likely qualify for co-branded cards as well as private label ones, so they have a wider range of options, he says.
"With a card that's issued by Shell or Exxon, those cards are typically just good at the gas station," says Moroney.
Bankrate.com is the Web's leading aggregator of information on financial products including mortgages, credit cards, new and used automobile loans, money market accounts, certificates of deposit, checking and ATM fees, home equity loans and online banking fees. Visit Bankrate.com to get the tools and information that can help you make the best financial decisions.