Americans enjoyed slightly lowered gas prices in May and June, but that trend didn’t seem to last for long as many news outlets are reporting higher prices within the last few days. Additionally, if the Wall Street Journal is correct, prices could climb even higher if an agreement isn’t reached in Norway to prevent a costly shutdown of Western Europe’s largest oil exporter. When gas prices rise, credit cards that give gas rewards (and cash back on gas purchases) can seem all the more enticing. But is a credit card with gas rewards a good idea?
Gas station credit cards, like this Chevron and Texaco Credit Card, often carry annual fees and high interest rates (a $25 annual fee, in this case, and a 26.99% APR) for limited gas rewards. Additionally, with a gas station-specific credit card, you are often limited to using that gas station only. A gas station credit card may be a good option for people with poor (or no) credit history and are seeking to build up good credit, even if it costs them to do so.
A smarter option for people with good credit is the Chevron and Texaco Visa Card, which can be used just like a regular Visa card, anywhere Visa is accepted. The card boasts no annual fee and gives 20 cents per gallon in fuel credits for every $1,000 spent per month on the Visa, or 10 cents per gallon in fuel credits if you have $300 - $999 of monthly spend on the card. While this card has no annual fee, it still has a hefty APR (26.99% - just like the regular gas credit card). Additionally, you would still be limited to redeeming your fuel rewards only at Chevron or Texaco stations, which may not have the best gas price in your neighborhood. You might be able to get a 10 cent per gallon reduction just by shopping around.
There are better options out there for those seeking gas rewards, like this BankAmericard Cash Rewards Visa Signature Card. This card offers 1% cash back on every-day purchases, 2% back on groceries, and 3% back on gas. If you already have a Bank of America checking or savings account (or if you open one), you can earn an additional 10% bonus on your cash back rewards if your rewards are deposited into your BofA account. They also have nice introductory incentive as well: you can get a $100 cash back bonus if you make at least $500 in purchases within the first 90 days of the account opening, and you get a 0% intro APR on purchases for the first 12 months. After your introductory rate period, you will have a variable APR that’s between 12.99% and 20.99%, but even the highest rate—20.99%—still beats the credit cards offered by gas stations. This also has card has no annual fee, which is extra gas money in your pocket.
If you break down the rewards just on gas purchases, you’d earn $4 on a $40 fill-up with the Chevron and Texaco Visa Card and you’d earn $1.20 with the BankAmericard. The BankAmericard gives you freedom to shop around, and if you need to gas up in a pinch (where there are no Chevron or Texaco stations around), you’d still earn cash back rewards.
As with any banking product, there is no one-size fits all solution. If you already have good credit, a card like the BankAmericard Cash Rewards Visa Signature seems like a no-brainer. However, if you pay off your card balance in full every month and routinely fill up only at Chevron or Texaco stations, you may get more bang for your buck with the gas station Visa card. For those seeking to build their credit history, you may have to go with a regular gas station-specific credit card and pay the annual fee until your credit score qualifies you for better cards. No matter which option you choose, you should always consider your current spending (and payment habits) to find the best deal.