When I was in college, I learned “the credit card lesson.” It’s a familiar story. I started with an “emergency card” that I didn’t use for a year. Then I had some car problems that landed my only car in the shop with a $400 bill.
I decided my broken car qualified as a real emergency, so I charged the repairs. When I realized how easy it was to magically have extra money, I started charging stupid things. Pizza, DVDs, bar tabs. I ended up with $4000 in debt over a two-year period.
Luckily, that was enough for me. Obviously $4000 is a lot of debt for a 22-year-old, but it was manageable. I paid the minimum payment every month to keep my credit score high. After I graduated I transferred the balance to a 0% interest card and started doubling and tripling my payments. As of November I’ll be completely free of credit card debt forever. I don’t plan to carry a balance ever again. To me, the interest I’ve payed is a small price for such a valuable life lesson.
Despite my decision to stay away from credit, my husband and I just acquired a new card in May that we use regularly. Why? At the time we were planning a road trip back to our home state of Indiana to get married. We’d carefully constructed a budget months in advance, but we didn’t planned on gas prices skyrocketing to $4 a gallon in May.
To save a little money, we decided to get a BP credit card to charge our gas expenses. The card carried a 10% rebate for the first 60 days, which meant that we got $30 back on the $300 we spent round trip to drive from North Carolina to Indiana to Washington D.C. and back to North Carolina. Basically a free tank of gas.
We continue to use the card for gas even now that the rebate rate has lowered to 5%. We never ever carry a balance, so we never pay interest. The 5% rebate would obviously be pretty silly if we paid a high interest rate. However, because we pay it off every month, we pay 5% less for gas than the price at the pump.
It may not sound like much, but at $4 a gallon, it equals 20 cents per gallon. It lowers our gas budget by about $5 a month, or $60 a year. Since we never pay interest, I say why not save 5%? Every little bit helps.
I also like having our gas bill come once a month in a lump sum. It makes it easier for us to track our expenses and budget.
We choose to travel by car instead of air when we can to save money, so when we make the long trip back to Indiana at Christmas, we’ll automatically save 5% on fuel expenses for the trip.
In most cases, opening a credit card for the “rewards” is a terrible idea. No matter how much you promise to be responsible (“I’ll only use it for groceries and pay it off every month just to get the frequent flier miles”), it almost never works out that way. You spend more than you should or end up charging more than you can afford to pay in a month and the interest starts accruing. But with a gas card, it’s easy to avoid charging unnecessary items or overspending. We don’t consume more gas just because we’re charging it. In my opinion, this is the one case where a credit card rewards program makes sense.
An added bonus: BP offers the option to donate your rebates to the Conservation Fund to help reduce your carbon footprint. We’ve only received one rebate so far (you can only get them in $25 increments), and we requested that rebate in a check to offset the overage in our budget that resulted from $4/gallon gas on the trip. But I like having the option to donate my rebates in the future.