Trim Fuel Bills With Gas Cards

Prices at the pump have been falling in recent weeks, but gasoline still costs almost a dollar more per gallon today than it did just a year ago. In an effort to save, some drivers are using credit cards that offer rebates on gasoline purchases.

Vera Gibbons from Kiplinger's Personal Finance magazine visits The Early Show to explain how these cards work and highlight the pros and cons.

Last year, the number of mail solicitations for oil and gas cards jumped to 13.6 million, from 6.6 million the year before. Clearly, consumers' interest in these cards is rising as gas prices skyrocket.

Card Offered by Gas Station
There are two different types of gas-rebate credit cards. The first type is offered by a specific gas station/company. The cards will carry a MasterCard, Visa, etc., logo and can be used anywhere but you will only receive a rebate on gas purchased from that particular station. If you have a nearby gas station that you always visit, it might make sense to go ahead and get a credit card that's connected to that station. However, these cards may prove limiting. That station won't always have the lowest prices; you want to feel free to go wherever the gas is cheapest and then get a rebate on top of that. You don't want to feel obligated to visit only the gas station that's connected to your card.

Card Offered by Credit Card Company
Gibbons recommends the second type of gas-rebate card, which is much more flexible. These cards are offered by major credit card companies and offer a rebate on gas at any gas station as well as on other purchases at grocery stores, etc.

How do these cards work? You shop, and then you receive a 3 to 5 percent discount on your purchases. The best cards offer you 3 to 5 percent on gas, groceries and drug store purchases and 1 percent on all other purchases. The rebate will either appear as a credit on your statement or a check in the mail.

Some of the gas station-specific cards will offer higher rates during an initial introductory period, such as 10 percent off of gas for the first 60 days.

So how much money can you really save with these rebate credit cards?

You are saving only pennies on the gallon, but those pennies do add up over a year. Gibbons says you save between $2 and $3 every time you fill up your tank. Even if you only fill up once a week, that weekly $3 savings would result in an extra $156 in your pocket at year's end.

Here's what you need to know about gas rebate cards:

Good Credit Required : Most of these cards do require you to have a good credit history, meaning you pay bills on time, don't miss payments, etc. Otherwise, you may not qualify to receive a rebate card.

Interest Rates At 14 – 15 percent : This is the average interest rate on rebate cards; gas station-specific cards may be a tad bit higher. While these rates aren't terrible, they are a bit higher than "plain Jane" credit cards. And, if you do indeed have good credit, you can get a lower rate. If you pay your balance in full each month, go ahead and get the rebate card. If, however, you regularly carry a balance, these cards aren't for you.

Rebate Caps of $300-$600 : Most of the cards do carry some sort of cap on how much money back you can receive.

No Annual Fees : If the card you're offered does have a fee, look for a different card.

At this point you may be wondering, "Where is the catch?" Gibbons says there's not one IF you pay your debt wisely. The strings are no different for those on a regular credit card. If you don't carry a balance you really will be saving yourself some money. So why are credit card companies offering these cards in the first place? The companies are betting that you will mess up and they can hit you with interest fees, late fees, etc.

If you want to look into these cards further, or even apply for one, Gibbons suggests checking out www.bankrate.com or www.creditcardguide.com. She also has three specific cards that Kiplinger's recommends.

• Citi Dividend Platinum Select
• Chase Cash Plus Rewards Visa - Both the Citi and Chase cards offer 5 percent back on gas, groceries and drug store purchases; and 1 percent back on all else.
• Amex Blue Cash Card - This offers 5 percent back on gas, groceries and drug store purchases; 1.5 percent back on all else, assuming you spend over $6,500 a year.