With the insanely high prices at the pump, I’ve been asked by more than one person what are the best credit cards for gas only (in other words, not major credit cards that can be used everywhere).

The answer? Most downright suck!

Reason #1: Rewards are pathetic or non-existent

Rewind back a decade ago and gas station cards used to be among the best for fuel rebates. Some would offer 2-10 cents off per gallon… and back when gas was only two bucks a gallon, that was a significant savings, percentage-wise.

Now most don’t even have a rewards program! They’ve either totally eliminated them (so you’re earning no rebate at all) or what they give you is pathetic. Take the Valero gas card as an example. After the first 3 months (the signup promotion) in order to earn gas rewards, you have to pay a $10 annual fee to get the Gold version – and even then – the rebate is miniscule:

Think about it… if you were just using a normal Visa/MasterCard with 1% cash back, on $4 gas you would have earned 4 cents per gallon. Look how that compares to this station’s gas-only card program!

On the other hand, the top-rated gas cards will give up to 5% at all stations. Isn’t the choice a no-brainer?

Reason #2: You’re confined to one brand of gas

The biggest drawback of a gas only credit card is that it will only work with the associated station. You won’t be able to use it elsewhere.

Now if the card actually gave good rewards (like 3% to 5% rebates) then that might be okay, because the benefits would outweigh the drawbacks. But if you’re not getting rewards – or only low rewards – why do you want to be confined to one station? Then you will be at the mercy of their price, regardless of whether or not they are the cheapest station that day.

Reason #3: Limited use for building credit

If you have bad credit, then getting approved for a major credit card can prove to be a difficult task. In that scenario, getting gas cards for gas only does makes sense… since they are easier to get approved for, you can use them as a stepping stone to establish or re-build your credit.

But be careful, because if the only thing on your credit report are store and gas cards, then you’re going to have a hard time convincing grade “A” issuers like Chase, Citi, AmEx and others to approve you for a good card.

So while it’s true that a gas-only account can be useful for building credit, you’re still going to want Visa or MasterCard credit cards to rebuild credit, too.

Reason #4: Outrageous APRs

Take a look at the APR on a gas station card application and don’t be surprised if it’s in the 22-27% range. For example, the Shell “Drive For Five” application listed this:

A pretty outrageous interest rate, especially considering how few benefits you get with the card.

Reason #5: Tricks, not treats

Make no mistake about it… all credit cards (including the more respected ones) will no doubt have people complaining about them. However out of all the card types, those from gas stations are among the most complained about on CreditCardForum.

Why? Well aside from usually having subpar customer service, many people are just fed up with the tricks that are all too common with them.

For example, with the Shell “Drive For 5” gas only card, you do have the ability to earn 5 cents per gallon (note: that’s 5 cents, not percent). But take a look at the fine print:

So if you don’t buy more than 45 gallons per month, you won’t get it. And even if you do meet that threshold, a 5 cent rebate when gas is $4.00 only equals 1.25%. Hardly a reason to jump for joy.

Conclusion?

Generally speaking, the cards that you can only use at gas stations are for suckers. Unless your credit is shot, there’s no reason to apply for these inferior offers.

Written or last updated May 2012

What’s the minimum credit score needed to get the best rates on everything?

There’s a lot of debate as to where that threshold lies. Is a credit score of 800 good enough to get the best mortgage rates, credit card offers, and loan rates? Here are 3 compelling reasons why it might be the magic number.

Reason #1: The best mortgage rates

It used to be a 740 would qualify you for the best mortgage rates. Well that all changed after the Great Recession.

Today, the minimum credit score to get the best mortgage rates is usually 760, at least with most lenders. However a 740 or 750 FICO may still qualify you for the best rates with some.

But when it comes to jumbo mortgages, a 760 probably isn’t going to fetch you the lowest APR. A mortgage broker from Georgia told me that in order to get the best rate on a jumbo loan, you typically need a 780 credit score along with a hefty down payment of up to 25%.

Conclusion? For lower mortgage amounts, a 760 will do just fine. But if you’re talking across the board – all mortgage sizes – then a 780 or higher FICO score will be required.

Reason #2: The best credit card offers

You can have a credit score of 720 to 750 and still get approved for many great cards. However if you want a score that will qualify you for anything, then you’re going need to go higher.

I’ve seen many credit card websites claim a 760 is good enough for anything, but I can tell you – for a fact – that advice is incorrect. I have heard from many long time forum members with scores of around 760 (real FICOs, not FAKOs) and their application still got denied for some cards.

In order to have the best chance at approval –and– getting the best interest rate, a score of 780 and up seems to be the cut-off point.

However let me be clear – you could have even higher than that and still get denied or approved with second-tier rates. This is because factors like debt to credit and credit history are also taken into account. So a certain number will never be a guarantee, but I can tell you that 780 certainly does the trick better than a 760.

Reason #3: The best loan rates

When it comes to car loans, the truth is that you can get approved even with an extremely crappy score… you’ve seen the commercials where the dealer promises to qualify anyone. But if you have bad score, you’re going to pay through the roof with the APR!

The minimum score to get the best auto loan rates tends to be 720 or 740… which obviously is far below the 780 benchmark. But with many other types of loans, the minimum is much higher.

For example if you want to get an unsecured loan through your bank or credit union, a 720 will probably qualify you but not at the lowest rates. The minimum score needed to get the best deal will be comparable to a credit card (which of course, is also unsecured).

With home equity lines of credit (HELOCs) you will also need a stellar credit score in today’s real estate market. Sure, you can probably still get approved with a lower score, but for the best rates it’s comparable to mortgages… count on a 760 to 780 credit score (jumbo HELOCs will usually require the latter).

Conclusion? Once again, a 780 FICO score seems to be that magic number if you want the lowest rates, regardless of the loan type/size.

So if 780 is good enough, why strive for higher?

It’s kind of like your checking account. As long as you have enough money in the account to cover your outstanding checks/debits, your balance is “good enough” whether you have $1 or $10,000 above the owed amount, right? But wouldn’t you rest easier knowing that your cushion was bigger?

Even though a 780 is sufficient, I recommend aiming for a bit of a buffer. I say this for two reasons:

1. If you have exactly a 780 and your score drops a few points, suddenly you are no longer at that threshold. However if you have say, a 795 or 800, you still have a few points to spare without jeopardizing your creditworthiness.
2. Your FICO score will vary between the 3 credit bureaus. Why? Because the information they have can differ, causing your score with one bureau to be different from another. That means just because you have a 780 with say, Experian, don’t take for granted that Equifax and TransUnion are the same.

How to get a 780 credit score?

It’s really not that hard if you have no negative items on your credit report. If you have a bankruptcy or major delinquency on file, then it will take a few years to achieve. Either way, reaching this number isn’t that difficult if you know what you’re doing.

Step One: Understand the different scoring models
Everything I’ve mentioned above is in reference to FICO, however most websites sell non-FICO scores. So first and foremost, you need to understand the difference between a FICO and VantageScore, as well as an Experian PLUS Score and a FICO. There are countless other formulas also, but those are the two most common non-FICO versions and reading about them will help you understand how the game works.

Step Two: Check your credit reports
Before you can address a problem, you need to identify it. By checking you credit reports, you will be able to see your strengths and weaknesses, including any derogatory items that might be on there by mistake or without your knowledge. Check out AnnualCreditReport.com.

Step Three: Know the right steps to take
What should – and shouldn’t – be done to get a credit score of 780? Well like I said, aim higher and read this guide about how to get an 800 FICO score.

Although I personally haven’t used a balance transfer offer in at least a couple years, since I run CreditCardForum obviously I am constantly staying on top of who’s giving what.

As a Discover cardholder, they periodically solicit me with balance transfer promotions (as do most credit card companies). Here is an example of an email they sent me:

Out of curiosity, I clicked on the link to find out what the offer was. It redirected me to the Discover.com website where I had to login to view the promotion. This is what it ended up being (I’m copy/pasting here):

• APR for Qualifying Balance Transfers – 0.0% APR for 12 months after the first Balance Transfer posts to your Account under this offer, then your purchase APR will apply, currently 11.99%. The purchase APR will vary with the market based on the Prime Rate.
• Balance Transfer Fee – 3.0% with a minimum of $10.00 and no maximum for each balance transfer made by the reply by date for this offer.

*Note: 11.99% is the standard APR on my account, yours may differ.

Why is that a bad idea?

Is getting 12 months interest free bad? No, but it’s not spectacular either… I would say it’s just an average offer.

If you apply for a new card instead, you will probably be able to get a Discover balance transfer offer that is up to 50% longer (18 months). You can see their current offers on this page.

Going with 18 vs. 12 months is a big difference, because remember you have to pay that balance transfer fee every time you use one of these offers. So if you took the offer which was in that email, you would not only be paying 3% now, but you would also have to pay a BT fee to do another transfer in 12 months (if your debt isn’t paid off before then).

Apply for a different Discover card?

As is the case with EVERY bank, you cannot transfer balances among their cards. So that means you cannot transfer your balance from one Discover card to another.

However I’m assuming you’re looking to transfer your balance from elsewhere. If that’s the case, you might want to consider applying for another card from Discover (one that you don’t have).

For example if you currently have the More (their most popular card) then alternate options would be applying for the Motiva or Open Road card and taking advantage of whatever 0% promotions they’re currently offering.

The lesson?

Not to beat up on the Discover card balance transfer offers, because this hold true for all issuers: as a rule of thumb, generally you won’t get the longest 0% offers from your existing card. Instead, you almost always need to apply for a new card in order to get the best deal.

The reason banks do it this way is quite obvious – if you already have a card, then you’re a captive audience. But in order to convince you to get a new card, they know they have to go that extra mile and be uber generous with their signup incentive.

Recently a forum member received an application in the mail for the Bryant State Bank Show MasterCard. She wanted to know if it was worth applying for?

Well, it’s definitely not for me! But let’s see if it makes sense for you…

Who’s it for?

It’s an offer that’s marketed to people with no/bad credit. There are reviews/comments from people recently out of bankruptcy (like 18+ months) receiving “pre-approved” offers in the mail for the Show credit card. And once you see the terms and conditions for yourself, you’ll understand why!

What’s the offer?

Bryant State Bank is reportedly offering the Show credit card in a couple different tiers, each with different APRs and fees. Both of them are unsecured.

• Offer #1: For a $50 annual fee, this card comes with a 21.99% interest rate and “at least a $500 credit limit.” After the account is opened – with good credit/payment history over time – you may qualify for credit limit increases up to a maximum of $2,500.
• Offer #2: I’ve seen this one mentioned the most. For a $75 annual fee you get a whopping 35.9% interest rate and “at least a $300 credit limit.” Over time the limit can be raised up to a max of $1,500.

Although not quite as bad, the second version of the Show MasterCard appears to have taken a page out of the First Premier playbook – an issuer who is notorious for their credit card offers which give a measly $300 credit limit in exchange for a $75 annual fee (plus other fees).

As far as rewards, don’t expect any of that jazz. This is a very basic no-frills card. As you can see from the terms and conditions, it’s obviously for people who have bad credit and are unlikely to qualify for something better.

The answer is both yes and no

Depending on which camp you fall under, it may or may not be a bad idea to apply for a Show MasterCard account.

• The first offer with better terms is actually quite good, all things considered, if you’ve recently come out of bankruptcy and have a credit score that’s in the toilet. Paying $50 per year for a $500 minimum credit limit isn’t a bargain, but I don’t think it’s a ripoff.
• The second offer is hard to justify. The annual fee is 50% more and the APR is over 60% higher. To add insult to injury, the minimum credit limit is only $300. If that’s all you’re being promised, then you might as well get a secured credit card for rebuilding credit that comes with a relatively low annual fee of $29-39. Sure, it won’t be unsecured like the Show MasterCard is, but then again, scrounging up $300 for a security deposit isn’t that out of reach for most people.

Review written or last updated May 2012

Q: I was using my Discover card at the grocery store and after swiping, it asked if I wanted cash back. I selected “no” because I don’t know how this works. Will I get ripped off paying cash advance interest rates for using this?

A: The feature you are referring to is Discover Cash Over. Not all stores offer it. Here is a list of Cash Over merchants as of 2012. As you see most of the retailers are strictly supermarkets, but there are others which are not, most notably Walmart and Dollar General.

At these stores, you can get cash back at the register during checkout. The amount you can get depends on the store. But whatever the case may be, Discover has a limit for Cash Over transactions of no more than $120/day per account.

Okay so what’s the catch?

Would you believe me if I told you there wasn’t one?

When you use this feature, it works in a somewhat similar manner to getting cash back using an ATM/debit card.

The extra amount (above the purchase price) will show up on your credit card bill. For example, if you made a $17.24 purchase at Walmart and used the Cash Over benefit to get $40.00, then on your card statement it would show $57.24 ($17.24 + $40.00).

There are no fees for using this. With credit card cash advances, interest begins accruing immediately (no grace period). However the nice thing about the Cash Over feature is that it’s treated the same as a purchase – there’s no interest charged if you pay your credit card bill in full each month.

So should you use it?

Yes! If you need cash, using your Discover for cash back at the register will save you a trip to the ATM. However, my answer is geared towards people who always pay their bill in full. If you don’t, then the Cash Over will accrue interest (the same way any other purchase does) and paying interest on this money wouldn’t be logical.

If you don’t have a Discover or are interested in opening a second account, here are their most popular offers:

• More Card: No annual fee and 5% on rotating categories
• Open Road Card: No annual fee and 2% at gas stations and restaurants
• Escape Card: $60 annual fee and 2 miles per dollar spent.