This research was created in August 4, 2008 and was last updated in August 22, 2008
With gas prices at an
all time high and new reports predicting Americans could be paying $5
a gallon gas by the end of the summer, saving money at the pump seems
impossible. Credit card companies, as well as oil companies, try to
lure consumers with promises of rewards on gas purchases in shape of
cash rebates, points, miles and more. Consumers who are looking for
"smart ways" to save money at the pump find that many of the
rewards programs are complex and hard to compare.
CreditCardClients.com
conducted the industry's most comprehensive research analysis comparing
the value of credit card rewards on gasoline purchases. A total of 31
credit cards were evaluated by our team of financial analysts.
Each of the 31 credit cards rewards programs were analyzed and compared.
25 credit cards offer cash back rewards, and six credit cards offer
points. All of the rewards programs were valued in dollars, in order
to allow a common basis of comparison.
Twenty of the 31 cards
analyzed are issued by oil companies. Seven are issued by large oil
companies and 13 by small oil companies, as measured by the number of
stations that accept the card in the United States. These cards were
compared with 11 leading general rewards credit card programs that give
special rebates or rewards for gas purchases. Eleven additional gas
cards were also analyzed; however, they were excluded from the final
comparison because those cards did not offer rebates or rewards on gas
purchases.
Full
list of Gas Credit cards and Rewards Credit cards in this research.
The first step in the
CreditCardClients.com analysis was defining three common user profiles:
Profile 1:
A household that charges
an average of $400 each month on gas with a single credit card, but
does not use the card for any other purchases.
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Profile 2:
A household that charges
$1,500 of purchases per month on a single credit card, of which $200
is spent on gas purchases.
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Profile 3:
A household that charges
$3,000 of monthly purchases on a single credit card, of which $400 is
spent on gas purchases.
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For each profile, our
team of researchers calculated the value of the rewards that each household
profile could receive by using each one of the 31 fully-evaluated gasoline
credit cards.
Reward calculations are
complex and require the consumer to carefully review and understand
all the provided information, which is usually written in hard to understand
technical jargon and is provided in multiple documents and in fine print.
The “reward programs” often include special conditions for when
the rewards are given, different kinds of limits, special one-time bonuses,
and requirements for redeeming the rewards. Credit cards that
award points require an extra step in the calculation to determine the
monetary value of these points. CreditCardClients.com determined
this value by analyzing each card’s program and identifying the most
profitable method for redeeming points accrued.
For example, the Citi®
Dividend Platinum Select® Card gives 5% cash back on supermarket, drugstore
and gas station purchases for the first six months, and 2% afterwards.
In addition this card gives 1% on all other purchases and has a limit
of $300 per year. Cards that give points require an additional step
to assign a monetary value to these points. In another Citi card, 10,000
ThankYou® points can be redeemed for a $100 gift card for leading merchants,
representing a value of 1 cent per point. For a detailed example of
the rewards value calculation see Appendix A - Rewards Breakdown.
Some assumptions have
been used in order to model all of the rewards programs:
- Oil cards give higher rewards
on gas purchases made in their own branded stations. For purchases made
in competing gas stations, some oil cards do not give any rewards and
others give lowered rewards. When using a gas card of a certain oil
company, it is assumed that the card holder is spending 80 percent of
his/her gas expenditures in participating stations of that company,
and 20 percent of their gas expenditures in stations of other companies.
This 'loyalty' assumption is important for the final value of the rewards
from an oil card.
- When given the choice to redeem
rewards points, the card holder would choose the option that pays the
highest value for their reward points. For example, the card holder
would redeem his/her points for $120 gift cards of one of several large
merchants instead of redeeming it for $100 cash.
- Some cards allow redemption
of rewards only in increments, such as $50 or $100. CreditCardClients.com
ignored this restriction and presented the value as if it was redeemed
without any limitation because on average, in the long term, the customer
will receive the annual value of the full reward each year.
- Some benefits that cards are
providing do not enter the calculation. For example, several credit
cards provide minimal auto insurance for rental cars, travel insurance,
and membership in shopping clubs that allow discounts. These extra benefits,
which are often presented also in credit cards that are not 'rewards'
cards, were not modeled into the value of the rewards in this research.
Full list of Gas Credit cards
and Rewards Credit cards in this research.
Interesting
Facts
None of the credit cards
that CreditCardClients.com researched charge consumers an annual fee.
This is an important factor in searching for an advantageous credit
card program because when an annual fee is present, even if the rewards
seem high, the bottom line is oftentimes not competitive with other
cards that do not have fees. The only exception is the Costco card by
American Express®, which requires the card holder to be a Costco member
and membership in the retail club is an annual added charge.
Many of the oil companies'
gas cards give 3%-4% rebate on gas purchases made in their stations.
This rebate is often doubled in the first two or three months after
the card was issued. These cards usually give a rebate of 1% on
other purchases year round, and some offer a higher percentage rebate
for the first months of using the card. General consumer credit
cards usually have more complex rewards schemes, and different first
period bonuses.
Although they give rewards
on general purchases, 11 of the 20 oil cards surveyed would give the
card holder no rewards on gas purchases from competing gas stations.
The rewards that these companies offer are designed to create long-term
brand loyalty with their customers. As a result, they try to discourage
the card holder from making purchases with their competition by giving
no rewards on such purchases.
Research Results and
Consumer Credit Card Guidelines
Based on their exhaustive
analysis, CreditCardClients.com’s team of experts developed the following
list of consumer guidelines for choosing a gas credit card:
- Search for your right card!
The most striking result of this research is the significant difference
in the value of rewards between the different cards. The tables show
that the difference between the best cards and the worst cards is higher
than 100% for profile
2, higher than 250% for profile
3, and higher than 400%,
for profile
1. Giving some attention
to choosing the right card can really pay off.
- There is no
‘best card for all’! A comparison of the different profiles
show that cards that score high for one profile often score low for
another profile. A consumer should realize his or her spending profile
and choose the right card for that profile. For example: Citi® Diamond
Preferred® Rewards Card is ranked at the bottom of the list for profile
1 according to annual rewards, but if you only look at the value for
the first year and include the first year's bonus, it becomes the second
best card in the study.
The value of loyalty!
The highest value per dollar is usually achieved with being loyal to
one gas company and making gas purchases using that company’s credit
card. A careful examination of the value of loyalty shows that consumers
that commit to purchase gas, at a single company, for more than 70%
of the times, and use that company's card, will likely benefit from
the higher rewards than with general credit cards. When loyalty is between
70% and 30% some general cards outperform the specialty gas cards. Below
30% cards issued by gas companies clearly underperform general cards.
The following graph was calculated for annual expenditures of $4,800
on gas alone without considering other purchases (Profile 1)
Loyalty Pays (each
line represents more than one card)
- Separating
your gas purchases can earn you more! For a given profile, we tried
to compare the value of rewards from using one card for all of the purchases
vs. separating purchases for two cards: a designated oil company’s
card and a good general rewards card. The results (not presented) vary
according to the gas company you are considering and on how loyal you
can be to it, but in many cases, such separation can increase the total
value of your rewards. For example, charge your regular purchases on
American Express Blue, and your gas purchases on Speedway SuperAmerica
card, and you can increase your rewards by 18%. If you only have access
to stations of companies that don’t give a high value then you are
better off using a general card for all of the purchases including the
gas purchases and saving yourself the trouble. Use the results for profile 1 and check if the gas company you can be loyal
to is giving a high rewards value, before you separate your gas purchases.
- Are you a big or small
spender? Some credit cards, such as the American Express®
Blue Card, encourage high spending, and give higher rewards once your
spending on the card reaches a certain threshold. However, a third of
the cards in this study, such as the Chase PerfectCard, give a high
value of rewards at first, but limit the amount of rewards allowed.
Spending a lot with these cards would not increase the rewards value.
Think ahead how much you going to spend and choose the card accordingly.
- Bonuses make a big difference
if you think short term! Many cards offer sign-up bonuses such as
double the rewards for the first three months, or a lump sum of bonus
points. These rewards range from tens of dollars to hundreds of dollars,
and can be significant if you think short term. If you consider getting
a card and using it for many years (which is what CreditCardClients.com
advises!), then ignore the sign up bonus and only look at the regular
rewards you get for your purchases.
The following tables show the differences between short and long term:
The first table is sorted by annual value while the second is sorted
by the value for the first year including the bonus. Notice how the
Citi® Diamond Preferred® Rewards Card will rank second in the first
table without appearing in the top 5 table at all when it is ranked
based on annual value.
Top 5 cards for Profile 3 when sorted based on Annual Rewards
- Carrying debt wipes out your
rewards value! This research shows that you can get between 0.92 to
5 cents per dollar spent on gas, but less than 2.5 cents per dollar
if you spread your purchases on many types of products. This number
might sound attractive, but notice that if you are carrying a balance
on your card can easily pay more than the value of rewards as finance
charges. For example, a household described in Profile 2 is carrying
a balance of $5000 dollars with an APR of 18%, will be paying about
$900 per year in finance charges on that debt. This household’s rewards
and rebates would be significantly lower than the finance charges.
It is advised to separate debt credit cards from purchases cards. CreditCardClients.com
has developed the Savings
Agent™, a free tool designed
to help you find the best credit card for your debt.
Other ways to save
on gas purchases:
Other than rewards on
your gas purchases, CreditCardClients.com’s analysis shows there are
other ways to decrease your gas spending:
1.
Consider Cash Discounts! Credit card fees that credit card
companies charge from gas stations are usually around 2% (10 cents per
gallon!). Some gas stations offer a cash discount on gas. Consider taking
this offer when the value of the discount is more than what you are
getting on your card.
2. Find cheap gas!
Sometimes the price difference between gas companies is large enough
that it pays to give up the rewards for a plain lower price. New Yorkers,
for example, can sometimes save up to 10 percent by filling up in New
Jersey. Be careful not to force yourself to be loyal to a gas company
that has stations that are out of your way… don’t waste the value
that you are getting on gas to the station!!!
3. Drive less!
Maybe the best way to save big buck is to drive your car less.
Take the most efficient route home when you drive, carpool when possible,
or take mass transit or bicycles when you don't have to take a car.
Relative to a savings of 5 cents per every dollar you get with the right
card – the bicycle give you 100 cents savings per dollar!