Should You Avoid Gas Credit Cards? by Elizabeth Kolles* (Guest author)

As young adults, we are often warned about the financial dangers of credit cards.  When it finally comes down to getting your first one, many opt for a gas or department-store credit card, simply because they are easier to qualify for than major credit cards.  If you considering applying for a gas card to build your credit, then you better think again…

Correspondent for the Wall Street Journal.com, Jennifer Waters, cautions individuals that applying for a department-store card, or even a bank/credit union-issued card may be smarter than getting a gas card.  She highlights important things to consider before committing to a gas credit card, such as the lack of discounts on the cost of gas.  While both store and gas cards typically include interest rates around 25 percent, most gas cards do not usually offer the discounts and special deals like department stores. Often many gas stations require non-fuel expenditures of at least $300 to be eligible for fuel discounts.  In addition, these gasoline discounts typically consist of 10-cents-per-gallon, which is not practical compared to what you had to buy to get that discount.

There are better deals out there.  Some major credit card providers offer 5 percent cash back on fuel purchases every three to six months. During that promotional period, you could receive $5 back if you spent $100, as opposed to some major gas cards which require you to buy about $200 worth of gas to earn $5 in rewards. Thus, those individuals seeking their first credit card should turn away from gas stations and head to their nearest bank, credit union, or department-store.   

If you are still not convinced that a fuel card is inefficient, think about this: With obligations like $300 purchases of groceries or other non-fuel items, you are likely to go deep into debt before you even attain your 10-cent-per-gallon discount. 

READERS, what do you think?

What do you think the benefits and downfalls are of having a bank or credit union-issued credit card?

What sort of things do you look for when getting your first card?

*Elizabeth Kolles is an undergraduate student with UK Department of Family Sciences

Reference

Waters, Jennifer. (2012, September 15). Few rewards with gas credit cards. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10000872396390444426404577647723814473852.html?mod=WSJ_PersonalFinance_PF14