How Gas Credit Cards Affect Your Credit Score

gas credit card

Gas credit cards have declined in popularity over the past decade as consumers switched to using bank-issued cards at the pump. But for the credit-challenged, gas credit cards have long been touted as a way to quickly build credit, since even those with a less-than-desirable credit history can qualify and use them to build credit.

But are gas credit cards the best option for someone in search of a better credit score? Here are several factors to consider before you fill out that application.

See the 7 best cash-back and rewards gas credit cards >>>

Pros of Gas Credit Cards

Gas Credit Cards Are Accessible

One of the biggest benefits to fuel cards is that they’re accessible to a wide consumer market. While standard credit cards may require a good or excellent credit score to open, a gas card provider will often issue a credit card to someone with less-than-stellar credit or no credit history at all. It’s important to note that you won’t be automatically approved for a gas credit card, and some will still have stricter credit score requirements than others. Your chances are simply better with a fuel card than with many other types of credit card.

You Can Earn Credit Card Rewards and Rebates on Gas

Depending on the gas credit card you choose, you may be eligible for cash-back rebates on every dollar you spend at the pump. If you find yourself always fueling at the same gas station on your way to work or you have a fuel brand you prefer, this can be a huge bonus. Some of these cards require a minimum monthly purchase on gas each month to qualify for the rebate, however, so pick a gas card for a company that has a large selection of gas stations in the areas you frequently travel for best results.

Like rebates, rewards-based fuel cards provide money back for each dollar spent at a gas station connected with the card. These rewards can be put toward items like restaurant gift cards and merchandise, or to lower your account balance. However, the rewards being offered can change without warning and many gas card owners have complained about limited options. As you’re searching for a gas card, don’t let rewards or rebates sway your choice too much, since any rewards you earn might be offset by higher interest rates or annual fees.

Read: How to Get the Most Out of Your Gas Rewards Credit Card

Pre-Qualification Protects Your Credit Score

When searching for a credit card, the process of applying and being rejected can take a toll on your already-low credit score. Fortunately, some credit card companies allow applicants to answer a few questions to determine if they’ll qualify before applying and incurring a hard inquiry on their credit, which can cause it to dip. Checking for such a pre-qualification process and completing it can help guide you to gas cards for which you’ll have the best chance of getting approved.

Gas Cards Offer Convenience

If you have a debit card, you probably already take advantage of the ability to pay at the pump. While gas cards extend this same convenience, many also offer small cards that fit on a cardholder’s key rings, allowing you to always have your payment method handy.

See 5 ways to avoid credit card fraud when paying at the pump >>>

Cons of Gas Credit Cards

Higher Interest Rates

When choosing a gas card, be sure you compare interest rates from one franchise to another. Many gas cards come with interest rates in the 20% to 25% APR range, reports CreditCards.com, and with bad credit limiting your options, you may be forced to pay a higher rate than you can afford. Of course, your best option to build your credit and avoid paying interest is to pay your balance off each month rather than allowing it to accrue.

Annual Fees

Because some gas credit cards come with annual fees, it’s important to scrutinize those fees carefully before applying. And it can be more complicated than which gas cards carry fees and which don’t, as some cards promise no annual fee as long as you meet certain criteria, such as spending a certain amount each month. By being fully informed of the credit card’s terms at the outset, you can avoid unpleasant surprises once you have the card in your wallet.

Limited Use

Some gas credit cards are co-branded by a major issuer like Visa and MasterCard and can be used anywhere those cards are accepted. Others are dedicated gas credit cards are issued by a fuel company and are only usable at the gas stations bearing that brand’s name. On top of finding a card with favorable terms, you will have also have the card is issued by a gas station you’ll actually use.

Instead of a gas card, you may consider a retail card, which can also be easier to attain and earn cash back or rewards on gas purchases, but can be used at all stores or retailers. Alternately, this limited use might help cardholders control their spending and avoid the temptation to charge every purchase to the card.

Related: 10 Purchases You Should Never Put on a Credit Card

Accumulated Cost

When your fuel cost is built into the rest of your monthly expenditures, you likely don’t even notice that expense. But with a gas credit card, you’ll get a bill at the end of the month for every gallon you’ve purchased. When you’re suddenly tasked with coming up with the funds to pay for your fuel purchases all month, you may find it’s more challenging to pay off the balance in full.

Fuel cards are an excellent option for consumers facing difficulty obtaining a general credit card. With careful selection, a customer can land a great gas card with low interest rates and rewards.