These days, the cost for a gallon of gas is well above $4 per gallon in many parts of the country, and that’s having a significant negative impact on consumers’ family budgets. However, using certain types of rewards credit cards that are now available will typically give borrowers the ability to slash their fuel budgets.
As gas prices continue to hold at the high levels observed for most of the last few months, more credit card issuers are now beginning to offer accounts that are specifically designed to help borrowers deal with these elevated costs. In many cases, gas rewards credit cards incentivize these types of purchases by granting consumers added cash back for every dollar they spend on fuel.
Most rewards credit cards that consumers have dealt with in the past might grant them 1 percent cash back on all purchases, meaning that for every dollar they spend, they earn one cent. But gas rewards cards typically incentivize purchases by adding anywhere from 2 to 5 percent cash back, meaning that consumers earn more for a type of spending they probably have to do anyway.
And while the added value from these cards is largely indisputable, and can serve as a great way to defray some of the costs that come with fueling up, particularly for those borrowers who tend to drive a lot and therefore have to spend large amounts of money on gas every month, there can be some drawbacks to these accounts as well. For instance, all rewards cards, regardless of whether they incentivize gas, grocery or travel purchases, usually have higher interest rates than cards that come with no such perks. Many also carry annual fees that no-frills cards typically do not. This is to help lenders reduce the costs associated with offering these accounts.
[Credit Cards: Research and compare rewards credit cards at Credit.com.]
As a consequence, consumers will have to carefully consider the various offers for gas rewards cards that are available to them. If they tend to carry a balance over from one month to the next with regularity, the added cost of the higher interest rate might end up being more than they earned in cash back. Similarly, if they tend to buy gas less often than other consumers, the annual fee they face every year may end up costing more than they received back.
Image: The Webhamster, via Flickr