AmEx Blue Cash: Don't Get It for Gas, Get it for Groceries
byFeb 27th 2012 11:30AM
As Americans, we drive an average of 13,476 miles per year, according to Federal Highway Administration data. With gasoline now selling for a national average of $3.65 per gallon -- and the average passenger car netting about 27 miles to the gallon -- that comes to more than $1,800 a year we spend on average to fuel up and go.
No wonder banks and oil companies alike push gas cards. Anything that cuts that bill -- roughly $150 a month -- has to sound good to most consumers. Trouble is, too many of these cards carry high interest rates and other unfavorable terms.
Drive Your Way to a Discount
Every major oil refiner has its own gas card issued through a bank. CreditCards.com has a useful list of what the national station networks offer, which you can find here. Terms vary, but don't assume that all offer some form of cash back based on your fuel spending.
Consider ExxonMobil's (XOM) Personal card, which is issued and backed by Citigroup (C) yet features no rewards whatsoever. Consumers get the benefit of online account management, a point-and-go "Speedpass" wireless key to activate pumps and car washes or to pay with at the counter. You can also use the card for ATM cash advances. The price for all this? An outrageous 24.99% interest rate on purchases.
Of course, good rewards programs are out there. The trick is to know the limitations and -- as with retail cards -- to never, ever use one of these cards to carry a balance. Here's a brief list of considerations:
- What rebates are available? (Do you drive enough for the deal to make sense?)
- Are there limits to what you can earn? (How would you do in an average year?)
- What's the interest rate? (How much will it cost if you slip up?)
The best gas cards combine generous rebates and industry-standard interest rates. Does American Express' (AXP) Blue Cash Preferred card measure up? That's the question before us today in this ongoing series examining the best (and worst) credit card offers out there.
3 Important Details About the Blue Cash Preferred Card
This card is one among dozens American Express offers to potential customers, so don't feel bad if you haven't yet discovered it. Here's a closer look at the benefits and bugaboos:
1. Bonuses. Similar to Amazon.com's (AMZN) Rewards Visa, the Blue Cash Preferred kicks back $150 in bonuses after the first $1,000 of spending. Refer a friend and you'll receive another $75 bonus, and $75 more for every other friend who signs up for the Blue Cash Preferred card.
2. Tiered earnings. Like most other cash back cards, Blue Cash Preferred sports tiered earnings that favor shoppers and gas-guzzlers. Grocery spending outside of warehouse clubs kicks back 6% while gas purchases return 3%. Other spending kicks back 1%. Importantly, AmEx places no limits on what you can earn.
3. Introductory interest rate and annual fee. It's not cheap to carry a Blue Cash Preferred card. Arguably the card's parent -- AmEx -- gets the biggest perk. AmEx charges a $75 fee to hold Blue Cash Preferred, while interest on balances ranges from 17.24% to 22.24% after a 0% introductory rate on purchases for the first 12 months.
American Express promises other benefits on this card, such as extended warranty protection and guaranteed returns for unwanted merchandise. But most of Blue's travel and shopping extras are about in line with what other cards offer.
This Is the Right Card for You If ...
Apply for this card if you have no debt, a family to feed, and an extended commute for work. Cash-back bonuses should add up quickly for those who spend hundreds monthly in these two categories. Over the course of a year, your $1,800 in gas spending could net you $54 in rebates.
Yet what makes this card stand out isn't how much it pays in gas rebates. Plenty of branded gas cards pay more. The difference comes at the supermarket, where the average American family spends $3,624 annually on groceries. Using the Blue Cash Preferred card for all that would kick back $217 in rebates, more than enough to compensate for the annual fee.
Regardless, it's important to remember that Amex wouldn't offer this card if it didn't produce profits. A 6% grocery rebate won't mean much if you end up paying 17.24% or more in interest payments.
What credit cards do you use? What is the best credit deal you've found? Please let us know using the comments box below.
Motley Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and past columns. The Motley Fool owns shares of Citigroup and Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com and ExxonMobil, as well as writing a covered strangle position in American Express.