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CONSUMER FINANCE

Some cards pump cash back into wallets

Credit issuers are dangling higher rebates in front of drivers. But watch out for caveats.

September 16, 2007|Elizabeth Douglass | Times Staff Writer

Forget the quest for airline miles. Today's hot credit card perk is at the gas pump.

Drivers can get 3% or more of their fuel bills returned to them from card giants MasterCard Inc., Visa International and Discover Financial Services as well as large gasoline retailers including Shell Oil Co. and Exxon Mobil Corp.

"A number of cards are increasing the rebates, specifically rebates on gasoline, because they see how consumers are concerned about gas prices and how much it's costing them," said Matt Mills, founder of Seattle-based E-Wisdom.com, an Internet site that tracks credit card offerings.

Such offers come with plenty of caveats and fine print. But in California, land of high gasoline prices and long commutes, the deals are worth considering.

"A lot of consumers aren't aware that these kinds of cards exist," said Curtis Arnold, chief executive of Cardratings.com, a card reviewer based in Little Rock, Ark. "But if you go out on the street and ask someone, 'Instead of you paying $3 a gallon, you can pay $2.85, are you interested?,' then people perk up."

Motorists already are big on using plastic at the pump. As U.S. fuel prices pushed steadily higher, the percentage of gasoline purchases made with a credit or debit cards jumped to 65% in 2006 from 53% in 2003, according to the National Assn. of Convenience Stores.

David Wagner, a 36-year-old San Diegan, earns points on his Citibank reward card every time he fills up. The bonuses aren't as generous as some of the newer gasoline-focused cards, but he likes racking up points while making everyday purchases.

"The gasoline can add up because everybody needs gas if you have a car," Wagner said.

For consumers, there are three types of specialty cards for gas: Traditional branded gas-only cards issued by oil companies; newer general-purpose cards cosponsored by Shell and gas sellers; and general-purpose credit cards offered by banks, MasterCard, American Express and others. Consumer credit experts give the highest marks to gas reward cards that aren't issued or cosponsored by oil companies.

Most of the general-purpose gas-rebate cards carry a MasterCard, Visa or Discover logo and, like regular credit cards, can be used at any store that takes those kinds of cards. The difference is that gasoline purchases come with pumped-up rewards based on the amount of fuel you buy or how much you spend on gas.

The cards typically offer a rebate or cash-back reward equal to 3% of your gasoline purchases, but the figure can go as high as 10% or as low as 1%. The average savings amounts to $3 a fill-up and more than $150 a year for people who use a tank of gas a week, according to FuelBudget.com.

To qualify for the best cards, you need a good or above-average credit rating, which equates to a credit score of 700 or higher, Arnold at Cardratings.com estimates.

Most cards don't charge an annual fee, but they come with above-average annual interest rates. Some rates top 20%, so if you don't pay off the balance each month, you will quickly negate your gas rebate.

And then there are the small-print details that often determine the true usefulness of the card.

"The bottom line is, understand how the reward structure works and then, just as important, understand how the redemption structure works," Arnold said. Check for limitations such as reward caps and rewards that expire before you can use them.

"And watch those introductory offers," he said. "These gas rebate cards are notorious for giving a rebate that blows you away on paper, but then you look at the fine print, and it's only for 60 to 90 days."

Some credit card issuers and gas stations put a block on fuel purchases above a set limit, such as $50 or $100, or a hold that counts against your credit limit until it is cleared.

"People hate the blocks, and rightly so," said Emily Davidson, who edits a blog for Credit.com. Between high gas prices and huge gas tanks on sport utility vehicles, she said, "it's easy to have a $75 purchase of gas."Many general-purpose cards grant the best rewards only for purchases made at stand-alone gas stations. That means you probably won't get the big rebates if you buy gas at a warehouse club, grocery store or any other place where the primary business isn't fuel sales.

Michael Shames, executive director of the Utility Consumers' Action Network, said such limitation underscores a potential drawback to the rebate cards.

"Those gas stations that take credit cards usually have higher prices, so it can be a wash," he said. "It's still a better deal to use cash and buy at independent" gas stations.

One exception is American Express' TrueEarnings card available to members of Costco. It comes with 2% to 3% rewards for travel and restaurants but also offers 1% rewards for any Costco purchase, including gasoline. After an interest-free introductory rate for three months, it carries a variable 17.24% annual rate, with the rewards paid out only once a year in the form of a Costco coupon redeemable for cash or merchandise.

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