High oil prices are inevitable for Americans who drive to work or plan to travel over the July 4th holiday weekend, you may need Credit Cards to get it cheaper.
Although with the national average for regular gas at $4.87 a gallon on Wednesday, there are ways for drivers to save money at the pump.
Indeed, Americans are looking for ways to eat for less money: According to a research note from Bank of America Global Research, Internet searches for fuel and gas cards have increased rapidly in tandem with the rise in gas prices.
There are several types of gas cards, including credit cards issued by gas stations such as Chevron, Shell, Texaco, and others that offer fuel discounts and rewards. When cardholders spend money on gas, some general credit cards from payment companies such as American Express and Visa offer valuable cash back or points.
“Obviously, getting rewards from a gas card is fantastic, as long as you pay in full and avoid interest on your statement,” said Ted Rossman, senior credit card analyst at BankRate.com. “However, the best gas card may not be the first to come to mind.”
While consumers may be drawn to cards from gas stations, such as Shell, they do not typically offer substantial rewards, according to Rossman. Cardholders typically receive 5 to 10 cents per gallon of gas, and the cards have high interest rates.
“You don’t want to rack up continuous debt,” said David Chang, a contributing credit card expert with The Ascent. “If people don’t have much discipline with credit cards, it might be best to use cash, because credit card debt is no good, especially with interest rates being high.”
A branded credit card is also probably only useful if you live near a Shell or Texaco station where you buy a lot of gas.
“If you actually live next to a Shell station but also you drive a lot, have a commute, and always fill up at that Shell,” Chang said.
What type of credit card should I obtain?
With gas prices higher as they are, a percentage discount is more valuable than saving a few cents per gallon.
Choose a card that offers 5% cash back. “A percentage is more meaningful,” said Rossman.
If gas costs $5 per gallon, a 5% cash back card saves you 25 cents per gallon, as opposed to the 5- or 10-cent discount offered by a gas station card.
The Sam’s Club Mastercard, for example, offers 5% cash back on up to $6,000 in gas purchases at any gas station. The Costco Anywhere Visa offers customers 4% cash back on up to $7,000 in gas purchases made anywhere, not just at Costco.
According to the Bureau of Labor Statistics, the average American household spent around $2,000 on gas in 2019. According to Rossman’s calculations, with gas prices now roughly 50% higher than they were that year, a rewards rate of 5% cash back can save the average American family $157 per year on gas. That equates to a few free fill-ups per year.
“You’re not going to get rich off of it,” he says, “but the point of these cash-back cards is that you get something for nothing.” “You would have spent the money anyway, and paying off your balance in full will save you money on interest. It’s similar to getting free money.”
Should I apply for a new credit card?
If you spend a lot of money on gas, getting a new card to save money on gas may be worthwhile.
If you’re not a big spender, one of your existing credit cards may already offer 2% to 3% cash back on gas, which may suffice.
For example, the American Express Blue Cash Preferred card offers 3% cash back at US gas stations, which can be redeemed as a statement credit at the end of each month.
“It’s not the best in the market, but it’s better than nothing,” Rossman said.