Editorial Policy

Be Realistic When Seeking Gas Rewards Card

Erica Sandberg

June 21, 2013

QDear Erica,

I was wondering, what credit card is best to use to purchase gas? Are there any with low interest rates or zero percent APR? — Mary

AHi Mary,

Wouldn't it be wonderful to get a credit card that you could use to charge things like fuel for your car, but not have to pay extra for the short-term loan? Well, it is wonderful and it can happen — assuming you use the card responsibly.

Most large gasoline stations partner with banks and credit issuers to offer affiliated credit cards. Each time you use the card to pay for their product, you can earn cash back or points redeemable for future fill-ups. If the card is branded with the Visa or MasterCard logo, you may charge with it anywhere those cards are accepted. In other words, you can pay for movie tickets, restaurant meals and clothes with the gas card, too.Ask Erica

However, depending on the card, cash back and rewards points may only be racked up when you hit the pump at that particular chain of stations. Also keep in mind that the rebate rate for cards affiliated with gas stations can be quite low, especially as fuel prices creep up. A 5-cent rebate per gallon comes out to a 1.25 percent cash-back rate, assuming a price of $4 a gallon.

So, it may be more logical to get a cash-back rewards card that rewards you for all purchases and then put the money you earn toward your fuel budget.  Plus, many issuers embed extra gas perks into their rewards programs, offering a higher cash-back rate for fuel purchases. The American Express Blue Cash Everyday card is one example, offering 2 percent back for fuel purchases and 1 percent for everything else. By going with a more flexible cash-back card, you're also not limiting yourself to just one chain of gas stations.

As for the interest rates, all credit card issuers apply interest to balances that aren't paid in full. The only exception to this rule is when an issuer offers a promotional introductory rate. That rate may be zero percent (or close to it) in the beginning, but the issuer will hike it up to a normal rate after the promotional period has expired.

It sounds like you're interested in a gas card with a fixed yet abnormally low annual percentage rate (APR), which is understandable, but not realistic.

To give you an idea of what's out there, here are some current offers. Clearly, rates vary tremendously. For example, the APR for the Discover Open Road card starts at 10.99 percent, while the Blue Cash Everyday card starts at 12.99 percent. When it comes to the co-branded cards offered by gas stations, those rates can get even higher. The BP Visa (offered by Chase) has an APR of 19.4 percent, while the Chevron and Texaco Credit Card has an APR of 26.99 percent.

Some of those rates sound high (and they are) but that's OK. You can easily drive around those expensive roadblocks by filling up and then paying for what you charged in full before the due date. That way you'll never pay a penny in interest, no matter how high the rate may be. In fact, by charging both a lot and frequently, you can come out financially ahead due to the rewards program that's attached to these types of accounts. By transforming those points into cash you'll use at the pump, you will reduce your gas bill and use the savings to pay for other things you may want or need.

When searching for a fuel rewards card, travel all over the credit map. Consider not only those tied to your favorite gas station, but those that give you the flexibility of earning rewards everywhere.

Got a question for Erica? Send her an email.