Rewards Credit Cards

THAT PAIN AT the pump you feel is about to get even more agonizing. Gas prices have increased 25 cents over the past month, lifting the average national price to an all-time high of $3.25 per gallon — and economists are predicting that some areas will hit $4 a gallon by late spring.

Blame crude oil prices, which reached an all-time high of $108.21 midday Tuesday, says Tom Kloza, director of editorial content for the Oil Price Information Service, which tracks and analyzes petroleum prices. What's even more worrisome is that the peak was hit before the seasonal spring run-up in prices, when refineries close for maintenance and switch from the winter to the summer-blend gasoline, explains Troy Green, a spokesman for AAA.

That cutback in supply typically leads to the biggest price swings of the year. On March 4 of last year (when the spring run-up began) the national average price of gas was $2.48. By May 24, 2007, it jumped to an all-time record high of $3.23. "Even if we estimate conservatively, we're still reaching all-time highs [on a national level]," says Green.

With the exception of abandoning your car for your walking shoes, using a gas rewards credit card is one of the easiest ways to alleviate some of your pain at the pump. "Because gas rebate cards give you a percentage back, the higher gas prices go the more valuable these cards are in your wallet," says Curtis Arnold, founder of CardRatings.com. A 3% rebate is like knocking 10 cents off the average national price of $3.25 a gallon.

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But as a growing number of savvy customers start taking advantage of the savings that gas rebate cards offer at the pump, credit-card companies are making it tougher for them to reap the cards' benefits. "Credit-card issuers have been trying to get people in the habit of using their cards for these everyday purchases," Arnold explains. "But such rewards are loss leaders. If everybody is using them, there's no way to profit." The end result? A cutback in incentives and plenty of fine print. Two years ago, most gas reward cards offered 5% rebates. Now, the average is 3%.

To keep your rebates from running out of gas, here are four things you need to watch out for before you apply for a gas rewards card:

Rebate caps

Many card issuers put caps on the amount you can spend each month or year, and still receive rewards. This isn't a recent fine print addition, but because drivers hit these caps more quickly as gas prices rise, it's worth comparing how much you typically spend on gas a month against these limits before selecting a card, says Scott Bilker, founder of DebtSmart.com. The Discover Open Road Card, for example, offers a generous 5% rebate on gas purchases — but that's only for the first $100 spent in each billing period. After that, you'll earn 0.25% to 1%, depending on your overall spending. Someone driving a Honda Accord in Los Angeles, where gas is averaging $3.57 a gallon, would hit the cap during their second fill-up in a given month.

Earning tiers

Even with $4 gas expected to arrive within the next few months, you may still not spend enough to get the full reward. Some cards assess rebates based on your total charges on the card, with bigger rewards only taking effect after you've done some big spending. Blue Cash from American Express offers 5% back on "everyday purchases" including gas, but only after you've charged $6,500 on the card in a given year. Prior to reaching that point, such purchases only earn 1%, while all others earn 0.5%.