American households already spend between $2,000 and $3,000 yearly on gas. Come this summer, however, those numbers are expected to increase by another 14%. While you and your family might be counting on gas credit cards to offer some savings, a new survey has found that these credit cards offer much less than promised when compared to general use credit cards.
The new CreditCards.com analysis of 28 widely available gas station cards such as Chevron, Texaco and BP, found that the average gas-station-branded credit card charges an interest rate of 23.61%, which is nearly seven percentage points higher than the national average for all credit cards. These credit cards often offer rewards that can’t match up to a typical general-purpose credit card, Matt Schulz, CreditCards.com senior industry analyst, told Black Enterprise.
Of the 28 gas cards analyzed, 24 of them offer per-gallon discounts at an average of just 5 cents per gallon. According to the American Automobile Association, the national average for a gallon of regular gas is currently $2.66, making the return on the deal just shy of 2%. In states like California, where the average price is slightly higher at $3.52, a 5-cent discount gets you less than 1.5%.
Twelve of the 28 gas cards analyzed come with a 25-cents-per-gallon introductory offer. The catch is that the discount is only available for a very limited time, usually two to three months.
“If you’re planning a big road trip, this is one instance when it might make sense to sign up for a gas rewards credit card,” said Schulz. “But even then, there are restrictions to be aware of–several of the most generous introductory offers are capped around $100 of fuel credits. You’re probably still better off with a general cash-back card.”
For example, the Capital One Venture Rewards card, the survey found, gives new cardholders 50,000 miles ($500 in travel) after they spend $3,000 within three months of opening the account. Cardholders receive 2 miles for every dollar they spend (essentially a 2% return) and there is no annual fee for the first year. Citi Double Cash is another popular general-purpose card that offers 2% cash back on all purchases, although it doesn’t offer a sign-up bonus, the survey found. The American Express Blue Cash Everyday card gives 2% back on gas with a $200 sign-up bonus.
General-purpose cards are also much more likely to offer lucrative sign-up bonuses, Schulz said they found. He said there are many different general-purpose credit cards that offer 2% rebates in the form of cash-back and travel rewards. These typically charge much lower interest rates and provide cardholders with far greater flexibility, he said.
“Most folks would benefit from a general purpose card more so than the typical gas station card and the rewards over the long run will end up being lucrative,” Schulz said.
Here’s what else the survey found about gas cards:
- You don’t want to carry a balance. The average APR for the cards that were surveyed is 23.61%, well above the national average for general purpose cards (16.62%, per the CreditCards.com Weekly Credit Card Rate Report). Nine of the cards in our survey had APRs of 28.24%.
- Most are only good at one kind of gas station. Only 11 cards were co-branded with payment networks such as Visa and Mastercard, meaning they can be used almost anywhere. Gas cards that are not co-branded can only be used at their respective stations.
- Some cash back cards don’t measure up to them. General purpose cards that offer 1.5% cash back on all spending save you slightly less than 5-cents-per-gallon gas cards at the current average gas price. But drivers who live in expensive-gas states such as California ($3.52 per gallon) can save more with 1.5% cash back cards.
- Many of them have introductory offers. Twelve of the cards in the survey advertised introductory offers, typically featuring increased per-gallon discounts and rebates.