Reward Cards can Save on Gas When you Pay the Balance in Full
Some of the best reward cards offer rebates on gasoline and grocery purchases to attract new customers. Their offer seems to be working. With higher gasoline prices, many consumers have realized that some reward cards can help them save a substantial amount of money at the pump.
Here's how they work
When you use a credit card that offers a cash rebate, you can reduce your gasoline expense by 3 to 10 percent. Marathon and Hess have a 10% rebate card, if you have these fuel stations in your local area.
The Citibank Platinum Rewards card seems to be a good option. It has a permanent 5% cash rebate on all gasoline and grocery purchases, and a 1% rebate on all other purchases. If the cost of fuel is $3, then you get an effective cash rebate of fifteen cents per gallon. The same holds true at the grocery store. It's almost like getting $5 back for every $100 you spend. Citibank's card has a $300 annual limit on rebates. This translates to a limit of $500 in eligible gasoline and grocery purchases per month.
As with any reward, you only benefit if you avoid finance charges by paying the balance in full each month. Also, there is a chance that you may become overextended if you get in the habit of charging basic living expenses. Credit card companies know this, which explains why they are willing to offer such great terms on these accounts. Still, if you can manage the accounts properly, you stand to save a considerable amount of money.
Most participating card issuers will allow you to request a check once your rewards balance exceeds $50. Most limit rebates to $300 to $500 a year.
Rewards not limited to cash rebates
Other reward cards are also on the market. Some offer gift certificates as a reward for use. These tend to be less attractive since there are limits on where you can use these. Also, they typically encourage you to spend more at those stores.
Some reward cards offer points that can be redeemed for reward items. Points tend to be the least attractive reward, since they are worth very little. Similarly, airline miles tend to be one of the least valuable type of reward, often with $35,000 or more in purchases required to get a single round trip ticket. A better option is the Southwest Airlines Visa, which allows you to combine credits for purchases with your flight credits. If you fly at least 3 times a year and spend at least $500 a month on purchases, this could be a better option for many people.
Rewards are not worth finance charges
Whatever option you choose, make sure that you pay off the balance in full each month. If you are concerned about charging more than you can pay off, try one of two strategies. You can send in extra money each month when you know that you have made charges since the statement closing date. Also, consider limiting your charges in the beginning so that you are comfortable with the amount that you are charging. Paying off the balance in full every month will build your credit, allow you to benefit from rewards and help you avoid falling victim to heavy credit card debt.