Editorial Policy

Save Money with Gas Rebate Credit Cards

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By Eva Norlyk Smith, Ph.D.
August 30, 2011

If you’re struggling with long commutes and high gas prices, credit cards that offer rebates on gas purchases can be a great way to ease the pinch at the pump, say experts.

“There are obvious benefits to taking advantage of these kinds of rebates and discounts on everyday purchases, as long as it doesn’t change your spending pattern,” says Michael Rubin, author of “Beyond Paycheck to Paycheck: A Conversation About Income, Wealth, and the Steps in Between.” “Gas in particular is a great rebate category to take advantage of because you spend what you spend. The temptation to spend more just because you get a discount is not there.”

There are two basic types of gas credit cards: The first category includes generic rewards credit cards that offer higher rebates on gas, grocery and drug store purchases. These are available online or through mailed credit card offers. The second type of gas credit card includes cards issued in affiliation with a specific oil company, such as BP, Chevron, Exxon or Texaco. These are available through gas stations, online or via mailed offers.

Both types of credit cards offer unique benefits — as well as significant pitfalls that can undermine your budget. Here are some tips on how to compare both types of cards and choose one that will help you save on gas year-round:

Rewards credit cards with gas rebates
Many cash-back credit cards offer higher rebates on certain purchases, such as gas, grocery and drug store purchases. The type of reward and the percentage earnings vary considerably from card to card, so it pays to look carefully at the terms and conditions.

Some cards, such as the Chase Freedom card and the Discover More card let you earn 5 percent cash-back up to a certain limit on travel-related purchases, such as gas, hotel and airline tickets.

However, that 5 percent cash-back rotates every three months. So, for most of the year, the card only offers 1 percent cash-back on gas purchases (and, in some cases, even less than that).

Other cards come with attractive introductory offers, such as cash awards or bonus points for signing up. Or they come with double cash-back earnings during the first month you hold the card.

The bottom line: Don’t get lured in by the introductory offers with all the bells and whistles. Instead, look for the card that offers the best long-term value. A card that lets you earn 2 to 3 percent cash-back on gas purchases year-round will save you more money in the long run than a card with 5 percent cash-back for three months. In addition, look for cards that offer more cash-back on everyday purchases, such as groceries and drug store purchases.

Gas station cash-back credit cards
If you tend to pull in at the same gas station chain each week, a co-branded gas rebate card is another option to consider. Most gas station credit cards offer rebates in the form of 10 to 15 cents cash-back per gallon bought.

Of course, gas prices change over time, so the percentage value of that cash rebate varies. However, assuming a gas price of $3.30 per gallon, 10 cents per gallon translates into a 3 percent rebate, and 15 cents per gallon translates into about a 4.5 percent rebate. That’s significantly higher than the cash amounts offered by generic cash-back credit cards.

That said, there are other factors to consider when comparing these types of cards, so be sure to read the terms and conditions carefully. Some notable terms to check before applying for a gas station credit card include:

  • Commercial exclusions. Some cards exclude rewards for commercial purposes, so if you drive frequently for your business, avoid cards with these kinds of exclusions.
  • Tiered rewards. Many gas station credit cards offer rebates on other purchases, but the rewards tend to be tiered. For example, the issuers start users out with cash-back earnings of 0.5 percent and only allow the cardholder to get the full rebate advertised (typically 1 percent) after the cardholder has charged a certain amount to the card each year.
  • High interest rates. APRs on gas station credit cards can run as high as 23.99 to 26.99 percent so look carefully at the APR range offered on the card. Also watch out for minimum interest charges, which typically run from $1 to $2.99. Minimum interest charges mean that if you carry a low $50 balance, you will still be charged a minimum of $2.99 in interest — which translates into an APR of 72 percent! As always, the devil is in the details.
  • Confusing rebate requirements. Before you apply, also check to see how your earnings will be redeemed. In some cases, you have to request your rebate in order to receive it, or you have to cash in your miles or points, so make sure you know upfront how to do that. Your points or miles may also expire, sometimes in as little as six months, if you don’t convert them to rewards within a given period of time. So be sure to familiarize yourself with the rules before you apply.

The bottom line: No matter which gas rebate card you choose, the benefits that you get from it will depend on how well you manage it. As with all rewards or cash-back credit cards, your savings can quickly be undermined by high interest charges if you carry a balance.

“Like any rewards credit card, gas rebate cards can be useful, if you pay off the balance in full each month before interest sets in,” says Bruce McClary, Media Director with ClearPoint Credit Counseling Solutions and a certified financial educator. “If you don’t, those earnings are going to be offset by interest charges, and you won’t reap the benefit of those rewards earnings.”

(Article updated 8-30-2011. Originally published 5-22-2009.)