Gas credit cards have declined in popularity over the past decade as consumers switched to using bank-issued cards at the pump. But for the credit-challenged, gas credit cards have long been touted as a way to quickly build credit, since even those with a less-than-desirable credit history can qualify and use them to build credit.
But are gas credit cards the best option for someone in search of a better credit score? Here are several factors to consider before you fill out that application.
GAS CREDIT CARDS ARE ACCESSIBLE
One of the biggest benefits to fuel cards is that they’re accessible to a wide consumer market. While standard credit cards may require a good or excellent credit score to open, a gas-card provider will often issue a credit card to someone with less-than-stellar credit or no credit history at all.
YOU CAN EARN CREDIT-CARD REWARDS AND REBATES ON GAS
Depending on the gas credit card you choose, you may be eligible for cash-back rebates on every dollar you spend at the pump. If you find yourself always fueling at the same gas station on your way to work or you have a fuel brand you prefer, this can be a huge bonus. Some of these cards require a minimum monthly purchase on gas each month to qualify for the rebate, however, so for best results, pick a gas card for a company that has a large selection of gas stations in the areas you frequently travel.
PRE-QUALIFICATION PROTECTS YOUR CREDIT SCORE
When searching for a credit card, the process of applying and being rejected can take a toll on your already-low credit score. Fortunately, some credit-card companies allow applicants to answer a few questions to determine if they’ll qualify before applying and incurring a hard inquiry on their credit, which can cause it to dip.
GAS CARDS OFFER CONVENIENCE
If you have a debit card, you probably already take advantage of the ability to pay at the pump. While gas cards extend this convenience, many also offer small cards that fit on a cardholder’s key rings, allowing you to always have your payment method handy.
HIGHER INTEREST RATES
When choosing a gas card, be sure you compare interest rates from one franchise to another. Many gas cards come with interest rates in the 20-25 percent APR range, reports CreditCards.com, and with bad credit limiting your options, you may be forced to pay a higher rate than you can afford. Of course, your best option to build your credit and avoid paying interest is to pay your balance off each month rather than allowing it to accrue.
Because some gas credit cards come with annual fees, it’s important to scrutinize those fees carefully before applying. By being fully informed of the credit card’s terms at the outset, you can avoid unpleasant surprises once you have the card in your wallet.
Some gas credit cards are co-branded by a major issuer like Visa and MasterCard and can be used anywhere those cards are accepted. Others are dedicated gas credit cards issued by a fuel company and are only usable at the gas stations bearing that brand’s name. On top of finding a card with favorable terms, you will have to make sure the card is issued by a company whose gas stations you’ll actually use.
When your fuel cost is built into the rest of your monthly expenditures, you likely don’t even notice that expense. But with a gas credit card, you’ll get a bill at the end of the month for every gallon you’ve purchased. When you’re suddenly tasked with coming up with the funds to pay for your fuel purchases all month, you may find it’s more challenging to pay off the balance in full.
Fuel cards are an excellent option for consumers facing difficulty obtaining a general credit card. With careful selection, a customer can land a great gas card with low interest rates and rewards.