Small Business
Costly Credit: Gas Credit Cards Average Over 23% Interest
The average gas-station-branded credit card charges an interest rate of 23.61% – nearly 7 percentage points higher than the national average for all credit cards – and comes with rewards that can’t match up to a typical general-purpose credit card, ...
Apr. 11, 2018
The average gas-station-branded credit card charges an interest rate of 23.61% – nearly 7 percentage points higher than the national average for all credit cards – and comes with rewards that can’t match up to a typical general-purpose credit card, according to a new CreditCards.com analysis of 28 widely-available gas cards.
24 of the 28 gas cards dangle per-gallon discounts, but the average is just 5 cents per gallon. The national average for a gallon of regular gas is $2.66, according to AAA, so that’s just shy of a 2% return. It’s even worse in expensive states like California, where AAA says the average price is $3.52. A 5-cent discount there nets less than 1.5%.
There are plenty of general-purpose credit cards that offer 2% rebates in the form of cash-back and travel rewards. These typically charge much lower interest rates and provide cardholders with far greater flexibility. General-purpose cards are also much more likely to offer lucrative sign-up bonuses.
For example, the Capital One Venture Rewards card gives new cardholders 50,000 miles (worth $500 in travel) after they spend $3,000 within 3 months of opening the account. Cardholders receive 2 miles for every dollar they spend (essentially a 2% return) and there is no annual fee for the first year.
Citi Double Cash is another popular general-purpose card that offers 2% cash back on all purchases (although it doesn’t have a sign-up bonus). And the American Express Blue Cash Everyday card gives 2% back on gas with a $200 sign-up bonus.
12 of the 28 gas cards that CreditCards.com analyzed come with an introductory offer, most commonly 25 cents per gallon. The catch is that this discount is only available for a very limited time (usually 2-3 months).
“If you’re planning a big road trip, this is one instance when it might make sense to sign up for a gas rewards credit card,” said CreditCards.com senior industry analyst Matt Schulz. “But even then, there are restrictions to be aware of – several of the most generous introductory offers are capped around $100 of fuel credits. You’re probably still better off with a general cash-back card.”
CreditCards.com surveyed 28 credit cards tied to a specific gas brand that are available on a multistate basis. Local cards and generic cards that include a temporary or permanent reward for gas purchases were not included.