Fuel Rewards Programs - Their Advantages and Disadvantages   by Russell Strider

in Finance / PersonalFinance    (submitted 2011-08-31)

If you reside in a place where grocery stores offer you discounts for fill-ups at their gas station based off your purchases at the store, you quite possibly feel like you are deluged with advertising about it.

They promote it as the ideal way for you to save cash from your fuel purchases and try and entice you to spend just as much as you possibly can in their store since, after all, you will be saving money at the pump.

However the question is - is it really worth it?

Well, it depends. It certainly can be if you're already making purchases at that store and you are comfortable with the amount you are spending. The problem is if you discover that you need to spend $15 more to get an extra ten cents off your gas purchase, so you spend $15 on whatever you see simply to receive the fuel discount. That's really unnecessary in the event you might have paid less for your purchase at another store. Remember, an added ten cents off for each gallon is only a $1.50 to $2.00 discount - unquestionably not worth throwing away money you did not need to spend!

Yet another huge promotion these types of stores quite often run is related to gift cards. In some cases if you purchase these cards at their store (commonly offered for a variety of stores), they will offer you twice the fuel discount.

You should think that through. Say you'll earn 20 cents off for each gallon for every $50 gift card purchase you make. If your gas tank holds 16 gallons, that is a $3.20 discount. If you already need one of these cards (perhaps for a gift), that would seem like a great deal - you earn $3.20 for actually doing nothing at all.

When you don't possess a cash back charge card (like Discover More), you can optimize this special promotion by purchasing these cards for all of the stores you shop at. You'll get fuel rewards essentially for buying at the stores you currently shop at.

Nonetheless, if you do possess a cash back charge card, it can get a bit more complicated. If you utilize a gift card you will not be getting cash back rewards, so you need to take that into consideration. If the cash back credit card offers 5% cash back at grocery stores, buying a grocery store card is pointless. If you purchase a $50 card, you are going to get a $3.20 gas reward and a $2.50 cash back reward on your gift card purchase (if you use your cash back credit card to purchase the gift card), however you are going to lose out on the $2.50 reward you'd get for using your cash back card on the subsequent $50 purchase.

However, when the gift card is from a category you only receive, say, 1% money back on, then your gift card purchase will be worthwhile. You will get the fuel reward along with a $2.50 money back reward because you're getting the gift card at your grocery store. If you used your cash back credit card in the store only generating 1% cash back, you would only get a reward of 50 cents. In this particular case, you essentially earn $2. The question is whether the entire process is worth the $2 you obtain.

As you can see, there are actually winning and losing scenarios with fuel rewards programs. You just have to make the decision of when it is worth it and when it isn't.

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