CONSUMER WATCH: Scrutinize credit card gas rebates - Richmond, Virginia, Business News and Financial Information

CONSUMER WATCH: Scrutinize credit card gas rebates

Sunday, May 25, 2008 - 12:06 AM

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By IRIS TAYLOR

TIMES-DISPATCH COLUMNIST

With gasoline prices approaching $4 per gallon and lots of summer driving days ahead, is this a good time for consumers to get a gas reward credit card?

Let's see, a trip to Disney World could cost about $296 for gasoline for a vehicle traveling 1,478 miles round trip from Richmond to Orlando and averaging 20 miles per gallon, AAA Mid-Atlantic spokeswoman Martha Meade said. That's 74 gallons at the worst-case, $4-a-gallon, scenario.

A leisurely round-trip drive to California: $1,065 for gas.

Would a gas reward credit card help defray the costs? Yes, because cardholders get cash back or a credit for gas every time they charge it.

But don't even think of getting such a card until you know how they work and what sneaky things to look out for:

Rebates can be substantial or pitiful. It depends on which card you choose, its terms and conditions and your spending habits.

If your gas card rebate is 1 percent, and you do a 20-gallon weekly fill up at $4 a gallon, your rebate would only be 4 cents a gallon, 80 cents a week, $41.60 a year.

But, if your card gives back 5 percent, that's $208 a year.

"That's pretty significant just for using a credit card," said online card researcher and marketer Bill Hardekopf, chief executive officer of LowCards.com. Think of the savings if your family drives several vehicles.

Gas cards don't make sense for everyone. "The benefits only accrue to the cardholder if you pay the balance in full every month because the rebate you're getting pales in comparison to the interest charges you could pay," said Greg McBride, senior financial analyst at Bankrate.com.

If, for example, you pick a card that gives back 1 percent to 5 percent for the gas that you charge, of what benefit is it if you then let a credit card balance accrue at 15 percent interest?

"If you're going to revolve your debt, it is almost never worth it," said Travis Plunkett, a spokesman for Consumer Federation of America.

But, if you pay off the balance each month, "what the heck," go for it, he said. If you drive a lot and pay a lot for gas, you may as well get some money back.

You may only need a low-rate credit card. If a gas rebate card does not make sense for you, try to find the lowest rate credit card that you can qualify for, McBride said.

Figure out your spending pattern. Often, the more you charge -- for everything, not just gas -- the better the rebate you can get.

Knowing how much you normally charge and spend on gas will help you choose the right card, McBride said.

Gotchas may be hidden in the small print. "Credit-card issuers are brilliant marketers and can make any card sound very appealing," Hardekopf said.

Read the small print to see what you must do to get the best rebate.

A great-sounding rate may be a teaser. One card advertises a 6 percent rebate on gas purchases for the first 90 days only. Afterwards, the rebate drops to 3 percent.

There may be a cap on how much you get back. One card advertises 5 percent cash back on gas and auto maintenance but limits how much the cardholder can get back to $60 per year.

Another card gives a 3 percent rebate on gas costs but limits the cardholder to $2 per day in savings.

You may have to charge a lot to get a good deal. One card lets you earn up to 5 percent back. But you only get that after making $6,500 worth of total purchases, which may take months.

Until then, you only get back 1 percent. When your year is up, you start from zero.

You may have to gas up at certain service stations. One card applies the 5 to 10 percent savings at only one gas chain.

You may have to request the rebate. You may have to call or write -- or you won't get the rebate, Hardekopf said.

Your rebate can shrink. If you do not call within a certain period of time to request your rebate, your accumulated rebate will progressively shrink, Hardekopf said. Check the small print.

Contact Iris Taylor at (804) 649-6349 or itaylor@timesdispatch.com.