Tuesday, January 15, 2008

Why I chose to sign up for a gas credit card

I run the risk of appearing to be an advertisement for gas credit cards. But this is a risk I am prepared to take if only to share some valuable thoughts with you.

I just signed up for a gas credit card. Today I run you through the process, of how and why I chose to sign up for one. This, in my opinion, is a more important question as compared to which gas credit card to sign up for. The reason I say this is because, with the number of credit cards people tend to have nowadays, it really does take some serious thought to decide whether you need another one or not. This article is basically intended to be a sanity check before you go and sign up for one.

What got me thinking: I absolutely love my car and do a LOT of driving. I just graduated. While in school I did not have the luxury of owning a car and hence, when I finally did get my little beauty, I felt free as a bird. To cut a long story short, I was returning home last weekend from a road trip and happened to stop over at a Shell gas station to fuel up. While I was waiting there, my eyes fell on the advertisement for a Shell Gas Card which announced a 5% rebate on all fuel purchases from Shell. With the amount of money the average car owner in America spends on gas, 5% seemed to me like a significant amount. It was then that I started entertaining thoughts of having a gas card.

The initial hesitation: All of us have heard horror stories of people having tons of credit cards and buried neck deep in credit card debt. Thus, when one thinks of getting another credit card, however attractive the accompanying offer may be, one is always wary of the possible consequences. This is a very realistic possibility. When we see the attractive offers that usually come along with credit cards, we might think that the credit card companies lose money. But with the ridiculously high interest rates, they more than make up for it if you happen to have even a small balance on your card at the end of the month. That's the reason I make it a point to see that I do not carry any balance on my credit card.

Does it make financial sense? This is a question that poses a conundrum of sorts. In my experience, the answer is never a clear yes or no but is more of an exercise in weighing out the pros and cons. In my case, I evaluated the following to be my pros and cons for this argument.

  • It will put 5% (or the advertised percentage) of all my gas expenses back in my pocket.
  • It will help me keep a track of how much gas I am consuming.
  • Since most of these cards have an upper limit, it might help control my gas consumption.
  • Since I am pretty efficient with my personal finances and I have just one credit card to date, I stand a very good chance of benefiting from the deal.
  • It shouldn't hurt my credit history.
  • It is, after all, another credit card on which my balances need to be tracked and paid off.
  • There might be hidden costs/fees once the introductory period expires.
  • I forget to make one payment and the result is an avalanche effect potentially snowballing into huge debt.
In conclusion, to me, it does make financial sense. I do consider myself conscious enough to be aware of the fact that another credit card needs to be paid off regularly. And hence, I went ahead and signed up for it.

But to many, it might not. Having multiple credit cards is not only a hassle as far as self management is concerned, but also a bonus for the credit card companies which thrive on you not repaying your debt in time. If that is the case, does it really make sense to get a measly 5c back on the dollar with such a high price waiting to be paid? I do not think so.

Actually choosing a card: Now comes the process for which there is ample guidance available on the internet in the form of websites, blogs, news articles and what not. The internet is indeed an excellent resource for credit card selection as there are tons of reviews on the available credit cards which help you decide whether a particular card is tailored to cater to your specific spending habits or not. Some amount of research and talking to co-workers and friends helped me zero in on a Discover Open Road Card for my needs.

I hope this article, though verbose, was slightly helpful. If you invest the right amount of time and effort into your search, I am sure, as with other areas of your life, you will find your perfect match.

1 comment:

Vrushali said...

Good Article. Its very informative. I hope to see more of these! :-)