The Pros and Cons of Gas Rewards Credit Cards
Gas credit cards have declined in popularity over the past decade as bank-issued cards became more popular and widely used. But for the credit-challenged, gas credit cards have long been touted as a way to quickly build credit and save money, since even those with a less-than-desirable credit history can qualify and use them to build credit.
Be Aware: 5 Unnecessary Bills You Should Stop Paying in 2024
Explore More: 4 Genius Things All Wealthy People Do With Their Money
But are gas credit cards the best option for someone in search of a better credit score? Here are several factors to consider before you fill out that application.
Pros of Gas Credit Cards
Gas Credit Cards Are Accessible
One of the biggest benefits of fuel cards is that they’re accessible to people for whom a traditional credit card may be out of reach.
While standard credit cards often require a good or excellent credit score to open, a gas card provider may issue a credit card to someone with less-than-stellar credit or no credit history. This can be a way for someone with poor credit to rebuild theirs.
Though they may be more likely to issue you a card, you will still have to go through the application process, may not t be automatically approved and some will still have stricter credit score requirements than others.
However, your chances are better with a fuel card than with many other types of credit cards.
You Can Earn Credit Card Rewards and Rebates on Gas
Depending on the gas credit card you choose, you’re eligible for cash-back rebates on every dollar you spend at the pump. This is especially helpful if you regularly fuel at the same gas station on your way to work or if you have a fuel brand you prefer.
Some cards require a minimum monthly gas purchase to qualify for the rebate. So pick a gas card for a company with multiple gas stations in the areas you frequently travel for best results. Also, be sure to double-check the eligibility of gas stations you frequent before using your card.
Trending Now: I’m a Frugal Shopper: 4 Items I Always Buy Secondhand To Save Money
Like rebates, rewards-based fuel cards may provide money back for each dollar spent at a gas station connected with the card–or they may provide a lump sum at the end of the year based on how much you spent during the year. These rewards can often be put toward items like gift cards for food, travel and hotels, along with merchandise or lowering your account balance.
However, the rewards offered change without warning and many gas card owners have complained about limited options. Don’t let rewards or rebates sway your choice too much, since any rewards you earn might be offset by higher interest rates or annual fees.
Pre-Qualification Protects Your Credit Score
When searching for a credit card, applying and being rejected negatively affects your already low credit score.
Fortunately, some credit card companies allow applicants to answer a few questions to determine if they’ll qualify before applying and incurring a hard inquiry on their credit, which can cause it to dip. Checking for such a pre-qualification process and completing it can help guide you to gas cards for which you’ll have the best chance of getting approved.
Gas Cards Offer Convenience
If you have a debit card, you probably already take advantage of the ability to pay at the pump. Now, more gas companies are allowing you to pay with a digital wallet or mobile app, so you don’t even need to have your physical card handy, so long as you have a smartphone.
Cons of Gas Credit Cards
Higher Interest Rates
When choosing a gas card, compare interest rates and perks from one franchise to another.
Many gas cards come with interest rates in the 21% to 28% APR range. With bad credit limiting your options, you may be forced to pay a higher rate than you can afford.
Of course, your best option to build your credit and avoid paying interest is to pay your balance off each month rather than allowing it to accrue.
Annual Fees
Because some gas credit cards come with annual fees of up to $150, it’s important to scrutinize fees before applying.
However, some cards promise no annual fee as long as you meet certain criteria, such as spending a certain amount each month. By being fully informed of the credit card’s terms at the outset, you can avoid unpleasant surprises once you have the card in your wallet.
Limited Use
Some gas credit cards are co-branded by a major issuer like Visa and MasterCard and can be used anywhere those cards are accepted. Others are dedicated gas credit cards issued by a fuel company and are only usable at the gas stations bearing that brand’s name. On top of finding a card with favorable terms, you will also have the card issued by a gas station you’ll actually use.
Instead of a gas card, you may consider a retail card, such as Safeway, Circle K or Kroger’s, which can also be easier to attain and earn cash back or rewards on gas purchases, but can also be used at retailers. Alternatively, this limited use might help cardholders control their spending and avoid the temptation to charge every purchase to the card.
Accumulated Cost
When your fuel cost is built into the rest of your monthly expenditures, you likely don’t even notice that expense. But with a gas credit card, you’ll get a bill at the end of the month for every gallon you’ve purchased. When you’re suddenly tasked with coming up with the funds to pay for your fuel purchases all month, you may find it’s more challenging to pay off the balance in full. This might help you budget better for your gas purchases, however.
Fuel cards are an excellent option for consumers facing difficulty obtaining a general credit card. With careful selection, a customer can land a great gas card with low interest rates and rewards.
More From GOBankingRates
I've Secretly Put Us in Serious Debt: How To Break the News to Your Spouse
This is The Single Most Overlooked Tool for Becoming Debt-Free
This article originally appeared on GOBankingRates.com: The Pros and Cons of Gas Rewards Credit Cards