Do High Gas Prices Justify a Gas Rewards Credit Card?

by Kevin on May 6, 2011

Gas prices continue to climb headed into the summer months. I’m thankful to personally be in a situation where I can afford a 25% increase in gas costs, but I know many around the country are hurting. The last time I wrote about gas, my local prices sat at $3.68 per gallon for regular grade gasoline. Now, a short week later, they’re up to $3.78. One ponders where the ceiling is… how high can it go before people start drastically changing their habits?

In light of this I’m also pretty thankful I get cash back rewards when I buy gas. I’ve long been an advocate of wisely using a rewards credit card for purchases you would normally make. I think gas purchases are a great example. I don’t buy more gas because I’m using a credit card. I don’t drive more because I know I get cash back when I fill up the tank. If I used cash or a debit card at the pump, I’d still buy the same amount of gas.

So why not get some rewards or cash back for the expenditure?

Higher Prices, More Rewards

Whenever I use my AMEX Blue Cash Rewards card, I earn 5% on my gas, grocery, and drug store purchases. Of course that’s the upper tier of my rewards program (the first tier pays 1.25% until you hit $6,500 in total spending). However, when we’re using our credit card to pay for daily expenses it usually doesn’t take long to bypass that rewards cap.

That means that every time I fill up and it costs me $45, I’m earning $2.25 in cash back. It’s not much, but definitely better than paying 100% of the gas cost.

Caveats of Rewards Credit Card Use

As great as getting cash back on my gas purchases is, there are some risks associated with using credit to earn rewards.

  • Paying interest and fees will negate any rewards you earn. You can’t go into debt to earn cash back.
  • Paying an annual fee will normally wipe out a significant chunk of the rewards you get.

I can safely use a rewards credit card because I know how to avoid getting into debt. I know to pay off my balance every month. If you can’t handle doing that, then trying to get rewards is too risky for you.

Minimal Impact

As you are considering the risk of credit card debt, remember that while it is nice to get what is essentially a discount on your gasoline spending, it isn’t a massive discount. My credit card has one of the highest cash back rates on gas charges because of the two tiers. You’ve got to get to that tier first. Even then, on my average fill up I’m only saving $2.25 per fill up.

You can also factor the savings off the price of a gallon of gas. At $3.78, assuming I’m in the highest cash back tier, I earn $0.189 per gallon in rewards. That’s a nice discount, but it really is a drop in the bucket compared to the overall cost. There are other ways to have a larger impact on your gas spending such as buying a more fuel efficient car or carpooling.

{ 1 comment }

Sun May 10, 2011 at 12:50 pm

You can double dip if Amex or other cc classifies gas gift card purchases at grocery stores as groceries.

Ralphs gives 2% in store rewards on gc every quarter. Chase gives me the 5% rewards as well.

Last year, we front loaded several thousands on gas cards because albertsons was giving $20 in store grocery coupon for every $100 of gc purchase.

$100 of gas ended costing us about $75 overall.

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