Budget Basics

April 30, 2006

By MC Nelly Torres
South Florida Sun-Sentinel

With gas prices hovering near $3 per gallon at South Florida stations, consumer advocates say gas-rebate credit cards -- typically offering cash back on fuel expenses or credit toward future purchases -- could offer relief for some motorists.

But the advocates warn that consumers need to be careful about choosing such cards, and make sure to pay off monthly balances so they don't fall into debt.

"If you are a savvy consumer you can save as much as 5 percent and that's pretty remarkable," said Curtis Arnold, founder of CardRatings.com, a consumer advocacy Web site. "But you need to be aware that interest rates are higher on these cards."

Rebate cards, offered by financial institutions and oil companies, typically provide 5 to 10 cents back on every gallon purchased, or credit "points" to be used to buy other products.

But credit card issuers can change the rules, fees and interest rates without much advance notice, said Howard Dvorkin, founder of Consolidated Credit Counseling Services Inc. in Fort Lauderdale and author of the book Credit Hell: How to Dig Out of Debt. Issuers can also pull your credit report to see if you have been delinquent paying other credit cards and raise your interest rate based on that. And if you are late on your payments, they can freeze or forfeit your rewards.

"The big question behind any reward is what's the cost?" Dvorkin said. "Everything has a limitation. Understand what you are getting into and don't take it by face value."

Marketing pitches for gas-rebate cards are on the rise as gas prices have continued to inch upward. Last year, credit card and petroleum companies sent out about 14 million pieces of direct mail for gas cards, according to Synovate, a market research firm.

At the same time, credit debt has risen to unprecedented levels. Overdue credit card bills hit a record high nationwide last fall, in part because of rising gas prices, according to the American Bankers Association.

In 2005, households with at least one credit card carried an average of $9,498 in card debt, nearly twice the level of a decade ago, according to CardWeb.com, which tracks credit trends.

Consumers need to take special care with gas-rebate cards, which often carry higher interest rates than conventional credit cards, advocates say. If you don't pay the balance in full every month, that can hurt your wallet and your credit rating.