3 Little-Known Drawbacks of Using Gas Credit Cards

Gas credit cards are cards that earn higher rewards or cash back for gas purchases. Generally, these cards come in two types. The first is a general-use credit card that gives you a fixed percentage back on your gas purchases, like 2%. The second is a branded gas credit card that earns more rewards with whichever gas company has issued the card, like Shell or BP.

I'm not a huge fan of branded gas credit cards. Although they might benefit drivers who are loyal to one brand, they also have several weaknesses. If you're considering opening a credit card offered by your favorite gas station, here are some drawbacks to consider.

1. The savings aren't always worth it

Gas branded credit cards often give you instant savings at the pump, instead of cash back or rewards. Typically, the card will reduce the price of the gas you're buying by a fixed amount, like $0.10 per gallon. These cards may also earn rewards on non-fuel purchases, such as food purchased within the gas station's convenience store.

When you do the math, the per-gallon reduction isn't always competitive, especially if you live where gas prices are above the national average ($3.675 as of April 22, 2024). For example, let's say you live in California, where regular gas prices currently average $5.436 per gallon. If you save $0.10 per gallon on your gas credit card, then you effectively earn about 1.8% back. Considering that many of the best cash back credit cards earn at least 2% back on gas, this gas credit card may not save you the most money.

On the other hand, say you live in Texas, where regular gas prices currently average $3.267 per gallon. For you, saving $0.10 per gallon is like getting 3% back. That's on par with many rewards credit cards, even those designed to earn more on gas purchases.

2. Welcome bonuses can be weak

Some gas credit cards come with welcome bonuses. The bonus is usually a boost to your per gallon savings. For instance, while the card may normally save you $0.10 per gallon, a bonus might boost this to $0.30 for your card's first 60 days.

While getting $0.30 off per gallon may sound appealing, in practice it may not save you all that much. For instance, let's say you fill up twice a month, and you buy 12 gallons of gas per refueling stop. You would save $3.60 per fuel purchase with the discount. If the bonus lasts 60 days, that gives you about $14 in savings. Since many no fee credit cards have welcome bonuses worth $200 or more, this bonus doesn't stack up well.

But do the math for yourself, because it might make sense if your car has a larger gas tank or you plan to fill up more often within the bonus period.

3. Branded cards can teether you to gas stations

Finally, many gas credit cards are closed-loop, meaning you can only use them at a specific company or brand. Even if the card is open-loop, meaning you can use it wherever the card is accepted, the fuel discount typically only applies at the brand's chain of gas stations.

Why is this a problem? Well, it might force you to buy gas at a station whose prices aren't the lowest. For instance, if you have a Shell credit card, you might be inclined to only buy gas at Shell stations, even if its prices aren't lower than, say, Race Track, Valero, or Costco. Even a price difference of a few cents could start to eat into whatever savings your Shell credit card gives you.

Now, to be fair, gas credit cards might make financial sense for some drivers. For instance, if you live where the price of gas is below the national average and you're loyal to one gas station, you might earn more on a branded gas credit card than other options. Otherwise check out the best cards for gas and see if one offers rewards that might be more conducive to your spending.