How a Gas Card Can Help Boost Your Credit
Whether your drive to work takes minutes or hours, filling up the gas tank can be a major expense. Getting a gas card can ease the pain, but as with any credit card, it’s important to first understand what effect it can have on your credit.
Gas cards are credit cards that reward you when you fill up your tank. Gas-only branded cards can only be used at stations associated with the card issuer’s brand, like BP, Shell or Chevron. This is different than a gas rewards credit card, which is a traditional credit card that also provides rewards for gas station purchases.
Getting a gas card not only rewards you for filling up at a particular gas station chain, it can also help you build your credit. But is it worth it? Make sure you know the good and bad before signing up for one.
The pros of a gas card
1. They’re pretty easy to get
With traditional credit cards, you usually need a decent credit score to qualify. With gas cards, requirements vary from card to card, and from gas station to gas station. So, even if you don’t have the best credit, you can still probably get a gas credit card.
2. Limited use is a good thing
Since most gas cards can only be used on gas, it’s hard to run up large balances on them. Unless you’re regularly buying groceries and convenience items at the gas station, your gas card will allow you to separate your gas bill from all your other expenses. This could make it easier to pay off every month.
3. They can help build credit
Payment history is one of the biggest factors in your credit score. Proving to lenders that you’re responsible by making on-time payments every month is a big step toward building your credit. With the low monthly bills that usually come with a gas card, you get the benefit of consistently paying off a balance in full, which should help fortify your credit score.
4. Stock up on rewards
Different gas station chains offer different rewards. Some offer pennies off per gallon every time you fill up. Others give you in-store discounts on snacks, drinks and auto accessories. If you frequent a certain chain, you might earn freebies after hitting certain milestones. Each gas card is different, so be sure you familiarize yourself with the specifics before applying.
The cons of a gas card
1. High interest rates
One of the major downsides of retail store credit cards are high interest rates, and gas cards are in the same category.
High interest rates mean that if you keep a balance on your gas card, you’ll get charged a significant amount of interest each month. This increases your balance and can ultimately be harmful to your budget and your credit score. A high credit utilization ratio can bring down your score.
2. Confusing rewards programs
Many gas cards will lure you in with generous-sounding rewards programs. But if you aren’t careful, you might not get all the goodies you expect.
For example, you might not get discounts per gallon until you hit a certain spending threshold, say $500 a month. If you don’t normally spend the minimum amount on gas on a monthly basis, you may not earn rewards at all.
3. The discounts are limited
While a gas card might sound enticing, you may get better rewards through other payment options.
Some gas stations charge a lower per-gallon rate for cash than they do for credit cards. For example, if the station’s cash rate is $0.10 cheaper than its card rate, you can save $1.85 every time you fill a typical 18.5-gallon tank. For heavy commuters, those numbers can add up quickly.
A traditional credit card might offer a bigger discount than a gas card. If you have a rewards credit card, you could save anywhere from 3% to 5% every time you fill up. If you spend $20 every time you get gas, that’s $0.60 saved per trip at 3% cash back. If you fill up twice per week, you could save $62.40 a year.
4. Few benefits for infrequent fillers
If you don’t drive too much — or don’t drive too far — gas cards don’t offer much benefit. Gas cards are made for the mega-fillers, or those who fill up often. If this isn’t you, double-check those rewards before applying.
Is a gas card right for you?
Getting a gas card may sound like a good idea, especially if you frequent one station quite a bit. But weigh your options before applying. How often do you fill up? What are the rewards, and are they reachable given how often you get gas? Are there better payment options given your financial circumstances, like paying in cash or using a credit card you already have?
While a gas card is a great way to build credit, it isn’t the only way. If a gas card isn’t the right fit for you, look for alternative ways to build your credit. Think about how much you drive (or don’t drive) before applying for a gas card.