Here's How Much You Can Really Earn in Gas Rewards Each Year

I think one reason some folks don't understand the value of rewards credit cards is because they're given information in the wrong formats. It's all fine and good to say you could earn 2%, 3%, or even 5% cash back -- but what does that mean?!

For instance, when an issuer tells me I can earn 5% cash back on gas, it sounds great. But, in reality, I don't have any idea of how much actual money that puts into my bank account. So, I thought it was time to fix that.

An average driver can earn around $100 a year

To get a realistic look at how these cards perform, let's crunch some numbers. According to AAA, the average cost of gas right now is $3.68 per gallon. And the EPA says the average vehicle gets 26 miles per gallon. Using those numbers, here's what we get:

Typical drivers tend to cover between 10,000 and 15,000 miles a year, so you're looking at earning $71 to $106 in extra cash each year if you use a top-earning card. And if you're facing even longer commutes than average, that number could top $175 or more every year.

How to choose a gas rewards card

Pretty much every major credit card issuer has at least one rewards card with bonus rewards on gas. While this is great from a competition standpoint, it can make it a little challenging to pick the best card for you.

In general, the choice will be: Do you want the highest possible rate on gas, or do you want a card with competitive rates on gas and other useful categories?

The case for a dedicated gas rewards card

If you drive a ton of miles and fill up regularly, a dedicated gas credit card lets you focus on maximizing those rewards. You can simply find the card with the highest possible rate without worrying about what other perks or rewards the card may offer.

One thing to keep in mind here is whether you want to pay an annual fee. A few great gas cards actually require either a membership fee (Costco and Sam's Club come to mind) or an annual card fee.

If you're considering a card with a fee, be sure you know you'll make back that fee in rewards (or other perks). Fees are only worth paying if they pay off in turn.

A multipurpose card

Folks who aren't necessarily road warriors may prefer to find a credit card that has a good rewards rate on gas -- while also offering a good (or great) return on their other top spending categories. This lets you cover at least two types of purchases with one card, ensuring you're not using up wallet space with a card you rarely pull out.

So, for instance, you can find a card that offers a good return on both gas and groceries. I've even seen triple-threat cards that will provide bonus rewards on dining, travel, and gas.

Whatever you do, avoid gas station cards

When you're out there looking for your perfect gas match, you may see some cobranded cards from popular gas station brands. It may seem counterintuitive, but avoid these!

Most gas station credit cards offer little more than a few cents off per gallon. This rarely competes with the cash back you can earn on a regular gas rewards credit card. Plus, the value actually decreases as gas prices go up, so you'll earn less per gallon as prices rise.

Every once in a while, you'll see a gas station store card with a decent welcome bonus and/or discount. This could be potentially worthwhile if you have a huge road trip or move coming up. But in all other cases, stick with a rewards credit card from a bank or credit union, not a gas station.

Fueling up our cars is a necessary expense in most of the country, so you may as well make the most of it -- by letting it make the most for you, with a good gas rewards card.