Credit cards make so much of our financial lives easier and more convenient. We use them to pay for groceries, retail merchandise and online purchases, and payment isn’t due until the bill arrives in our mailboxes (or email inboxes).
Gas credit cards come with the added benefit of helping us earn rewards and discounts on our gasoline purchases. However, it’s important to note that there are two different types of cards that fall into this category: general rewards credit cards that offer bonus rewards points on gas station purchases and branded store cards you can only use at specific gas stations. Let’s look at the advantages and disadvantages of both.
Benefits of Gas Credit Cards
The main benefit of gas credit cards is that they offer rewards or discounts for gas purchases. Some gas credit cards are also traditional credit cards offered by card networks like Visa, Mastercard, or American Express — meaning you can use them to earn rewards on other purchases you make.
While rewards programs vary, gas station credit cards tend to offer up to 3% back on gas station purchases you make with your card. If you commute long distances to work, it’s easy to see how this could benefit you. After all, spending, say, $500 per month on gas — or $6,000 per year — would net you $180 in cash rewards annually at the 3% rate.
Other benefits of gas credit cards could include:
- Sign-up bonuses: Several credit cards that offer rewards on gas purchases also give a big sign-up bonus when you meet a minimum spending requirement within a few months. These sign-up bonuses can dramatically boost your rewards’ haul the first year.
- Gas discounts: Some gas credit cards offer discounts on gas purchases made within their brand of gas stations. These discounts can help you save big on fueling up, which is probably why you’re considering a gas credit card in the first place.
- Other spending rewards: While some gas stations credit cards are “store credit cards” that can only be used at a specific brand of gas stations nationwide, others are traditional credit cards that let you pay for purchases anywhere they’re accepted. This means you can earn rewards on gas purchases and other purchases you make elsewhere with your credit card.
While a branded gas credit card may not be as flexible as a true rewards credit card, application requirements are often easier to meet, which makes such cards a decent option for those building (or rebuilding) their credit histories.
Drawbacks of Gas Credit Cards
Gas station cards can be tempting if you want to save money on transportation, but there are plenty of downsides to consider. The biggest one is the fact that not all gas station credit cards can be used for other purchases.
For example, you can apply for a Sunoco credit card if you fuel up at Sunoco stations most often. But if you do, keep in mind that you can only use the Sunoco Rewards Credit Card for Sunoco purchases made at their gas stations — not for anything else.
Some other downsides of gas credit cards to consider:
- High interest rates: Gas credit cards tend to have high ongoing APRs—even as high as 29.99% with some cards. To avoid costly interest charges, you’ll need to pay your balance in full every month. If you need to carry a balance from time to time, you should consider a card with a much lower APR.
- Earnings caps: Some credit cards that offer rewards for gas purchases come with caps that limit how much you can earn in rewards over the course of a year. You’ll typically earn a higher rate up to this cap, and then only 1% back for gas purchases thereafter.
- Limited rewards programs: An important factor to consider is how you can actually use your rewards. Some gas credit cards only offer rewards in the form of a discount on gas purchases, so you don’t get to “redeem” your rewards for anything else. Others may let you cash in points for statement credits, gift cards, or travel, so make sure to check.
Is a Gas Credit Card Right For You?
A gas credit card can be a valuable tool if you want to earn rewards each time you fuel up. However, the interest you’ll pay can add up fast if you don’t pay your balance in full each month. Before you sign up for a gas station credit card, make sure you have a plan to avoid debt.
Also make sure you know which type of card you want — a regular rewards card or a store credit card from a gas station. If you only want a discount on gas purchases, a store card may work just fine. If you want to earn rewards on everything you buy, on the other hand, consider a general rewards credit card you can use for regular purchases and bills.