In a NutshellThinking about getting a gas credit card, but unsure how they work? Find out how you can get one, the pros and cons, and if it's right for you.
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It looks like gas prices may be on the rise again. Whether you drive around town occasionally or frequently drive for your job, you may be feeling the pinch of gas prices.
According to the U.S. Energy Information Administration, Americans consumed more than 140 billion gallons of gas in 2016. While gas prices may continue to rise, gas cards could offer some relief. Here’s how they work and what you need to know.
What’s a gas credit card?
A gas credit card is a type of credit card – which is different from a prepaid card – issued by a gas station. Using a gas credit card, you can pay for gas at the pump while taking advantage of discounts and perks offered by the card issuer.
For example, with the ExxonMobil Smart Card, you can get 6 cents off each gallon of Synergy™ gasoline at Exxon and Mobil stations and earn two Plenti points per gallon of Synergy gasoline you purchase with the card.
“Using a card like this can also help you track your fuel expenses separately, making it easier to budget,” says David Bakke, credit expert at Money Crashers.
You can usually apply for a gas credit card at the gas station or online. With some cards, you may be able to choose a billing date that works for you.
How gas credit cards work
Though a gas credit card can help you track your gas expenses and save money at the pump, there are pros and cons to consider.
According to Alex Gerard, founder of CardsMix.com, “gas station credit cards are very similar to store credit cards — they’re often accepted at one particular gas station chain and are useless in any other store or for online shopping.”
Despite the limited use, gas credit cards can be helpful for those who are having trouble getting approved for a traditional credit card. This is because gas credit cards may be easier to get approved for than rewards credit cards.
A gas credit card may be a good option for those with fair credit who are looking to rebuild or establish their credit. As an added bonus, “it’s not as easy to overspend on a gas card because it’s not accepted outside the gas station,” Gerard says.
Although gas credit cards may have easier approval, they often come with high interest rates. For example, the ExxonMobil Smart Card has an annual percentage rate (APR) of 25.74 percent on purchases. That’s nearly 10 percent higher than the national average credit card interest rate (as of May 10, 2017).
What you should consider before applying for a gas credit card
Gas credit cards can reward loyal customers by offering discounts and fuel credits. A fuel credit may be applied to your bill as a statement credit, effectively saving you money. The problem is, you may have very limited use with these cards. In other words, make sure the gas station you get the gas credit card from is easily accessible and fits your lifestyle.
It’s also important to keep in mind that gas stations sometimes offer discounts for paying with cash. For example, on May 12, 2017, gas station RC Gasoline on Castro Street in San Francisco was charging $2.73 per gallon if you paid in cash, and $3.49 if you paid with a credit card. Before applying for a gas credit card, check the terms to see if there’s an additional fee to pay at the pump. If there is, it could negate some of the rewards.
While gas credit cards can save consumers money at the pump, a gas rewards credit card could offer even higher returns. Unlike gas credit cards, which are distributed by gas stations, gas rewards credit cards are traditional credit cards that offer points or cash back on gas purchases.
“If you don’t have any problems getting approved for traditional credit cards, you may find that general purpose credit cards with gas rewards offer a better value,” Gerard says. “Earning 3 to 5 percent rewards on gas is a possibility today.”
If your credit needs work, a gas card might be a better fit to get started. It may be easier to get approved for a gas-branded credit card, and you’ll have fewer opportunities to rack up debt. If your credit is in good shape and you make your payments in full, a gas rewards credit card could be a better option for you.
Gas cards may look like regular credit cards on the surface, but there are differences to take note of. One of the main differences is where you can use them.
While gas credit cards might be good for consumers looking to build credit, they may not be as reward-friendly as traditional cards. Before you apply, weigh the costs as well as the pros and cons to determine what type of card is best for your situation.
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