Can a gas credit card help build good credit?

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That’s a “Yes!” If you are looking for a way to boost your credit that has more lenient instant approvals and is geared toward something you would spend money on anyway (and earn cash-back rewards and discounts in the process), getting a gas credit card may be a good idea for you.

But, using a gas card for credit-building is only a good idea if you never carry a balance on your gas card. That’s because gas cards charge an average APR of 24%, way over the current average 15% general purpose cards charge, according to CreditCards.com’s 2015 Gas Card Survey Data.

Gas credit cards can be good credit builders for several reasons

  1. Easier to get. Specific fuel brand gas cards usually come with smaller credit limits and more lenient approval, according to the CreditCards.com survey, so if you are looking to build your credit you might have an easier time getting approved over a bank card or a co-branded gas card with a MasterCard or Visa logo. Also, single brand gas station credit cards come with no annual fee.
  2. Limited purchases. Your purchases are limited to gas (and sometimes convenience store items) only at that gas station brand so you are limited to spend only what you would normally spend in cash for gas which can be helpful for those with credit card will-power problems.
  3. Establish responsible payment history and credit utilization. Small charges for just gas makes it more likely you will have the cash to pay the balance before the due date and never carry a balance on a gas card, while keeping it actively used every month. This helps establish a good payment history and keep your credit utilization low, two important factors for a good credit score.
  4. On your credit report. Whether a gas credit cards does or does not sport the Visa or MasterCard logo, they all still report your account and payment history to the credit bureaus so they can help you build and boost your credit when you use them purposely and responsibly.
  5. Discounts and rewards. You may be able to use gas cards to get discounts at the pump and cash-back rewards.

But watch out for these three big gas credit card credit pitfalls…

  1. Carrying a balance. If you carry a balance, you will be smacked with that high interest rate which will increase your payment and the likelihood that you may continue to carry a balance or make a late payment, which will affect your credit negatively. Also, if you make late payments, you will not receive rewards.
  2. Confusing rewards programs. The rewards programs can be confusing and sometimes cause you to pay more for your gas than if you had just paid cash, especially in states or at pumps where the credit card price is different from the cash price. There are also minimum and maximum spending thresholds and limits, specific types of gas that don’t qualify (such as diesel) and rewards tiers you must understand to use them correctly. Read the fine print so you don’t pay more for your gas than you need to.
  3. Spending more. If you choose a co-branded card that includes a MasterCard and Visa logo where the card can be used for more than just gas purchase, you might be tempted to charge more, so if that’s you, choose a traditional fuel-only branded gas card.

If you’re looking to build or boost your credit, an easy first step is to be approved for a single branded gas card (regardless of its rewards or discount program) for your regular neighborhood gas station and use it responsibly.

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