A customer inserts a credit card to buy gas in Haverhill, Mass. It’s always good to pay off your credit card debt, but now may be a better time than ever to do so. Americans’ debt levels have been creeping back up recently and interest rates are expected to rise soon. That’s a combination that could put consumers in a bind if they’re carrying a balance on their cards.
Elise Amendola, AP
If you’re paying full price at the gas pump these days, you might be missing a way to fuel your household savings. That’s because many rewards credit cards offer bonus points when you use them at the gas station.
Used right, those rewards are like a discount on every gallon you buy.
It’s not unusual now to get triple points — 3 points per dollar spent — for using a rewards card for service station fill-ups. And some of the best gas cards don’t feature the names of big oil companies or their service station brands. Instead, look for fat gas rewards on cards from retailers, warehouse clubs and credit unions.
Lucrative gas rewards are part of a larger trend in which intense competition among credit card issuers is driving better rewards for everyday spending, like gas, dining out and groceries, said Eric Marks, senior director with the banking practice of consultant West Monroe Partners.
“Payment providers and retailers now recognize they need these everyday spending rewards to attract and acquire customers,” he said.
Here’s what to know about gas rewards cards when examining your current credit cards or marketing pitches for new ones.
Use 3 percent back as a benchmark. The most lucrative cards offer the equivalent of 3 percent or more in rewards.
Example: With the Wells Fargo Propel American Express Card, gasoline is one of its 3 points-per-dollar bonus categories, along with dining, travel and eligible streaming services. Non-bonus-category spending earns 1 point per dollar. Its annual fee is $0.
Look beyond gas rewards. Look for credit cards that offer bonus rewards on not only gas but other areas of spending, too. Why? You might not spend as much on gas as you think. U.S. households spend an average of $1,977 per year on gasoline. Even with a 3 percent gas rewards card, that’s less than $60 per year or $5 per month.
Example: The Blue Cash Preferred Card from American Express not only offers 3 percent back at U.S. gas stations and select U.S. department stores, it offers a huge 6 percent back on purchases at U.S. supermarkets (on up to $6,000 per year in purchases, then 1 percent). Terms apply. It has an annual fee of $95.
You might already have a suitable card. As more cards add gas spending as a bonus rewards category, you might find you already have a decent card for pump purchases.
Examples: The Citi / AAdvantage Platinum Select World Elite Mastercard earns 2 miles per dollar spent on gas, with an annual fee of $0 for the first year, then $99. The Hilton Honors American Express Ascend Card earns 6 points per dollar at U.S. gas stations, with an annual fee of $95.
Mind the caps. Some cards place limits on how much gas spending will earn accelerated points or cash back.
Example: The $0-annual-fee Bank of America Cash Rewards credit card, at its basic earning rates, gets 3 percent back on gas, 2 percent at grocery stores and wholesale clubs, and 1 percent cash back on other purchases for the first $2,500 in combined grocery/wholesale club/gas purchases each quarter.
Beware of ‘cents off’ rewards. Instead of a percentage of cash back or points per dollar spent, some cards — especially gas station-branded cards — give you a specific discount, such as 6 cents off per gallon. But when gas costs $3 per gallon, that 6 cents off is a mundane 2 percent discount. Plus, with gas station cards, you typically can earn rewards and spend them only at a single brand.
Rewards at the gas station vs. pump. Most cards that offer outsized rewards on gas spending include all purchases at the service station, including snacks or wiper fluid bought in the associated convenience store. But some cards limit rewards to gas spending paid at the pump.
Example: The PenFed Platinum Rewards Visa Signature Card, with no annual fee, offers a generous 5 points per dollar spent, among its rewards. But it’s on gas at the pump only.
Warehouse cards have pros and cons. The Sam’s Club Mastercard offers 5 percent back on eligible gas purchases up to $6,000 per year, and the Costco Anywhere Visa Card by Citi offers 4 percent back on eligible gas up to $7,000 per year. But you must be a member of those warehouse clubs, which means paying an annual membership fee. And redemption can be cumbersome.
All points are not created equal. Just because you’re earning 3 points per dollar spent doesn’t mean you’re getting the equivalent of 3 percent in rewards value. For example, the PenFed Platinum Rewards Visa Signature Card gives 5 points per dollar spent on gas, but many redemption options are for a value of 0.85 cents per point instead of the more typical 1 cent.
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Gregory Karp is a writer at NerdWallet. Email: firstname.lastname@example.org. Twitter: @spendingsmart.
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