Fewer gas rebates for cash back credit cards

By Jeremy Simon

For many drivers, sky-high gas prices at least had one positive -- sizable rebates for gasoline purchases made with certain cash back credit cards.  But it looks as if those rebates could decrease significantly if other credit card issuers imitate the recent changes made by Citibank and American Express.

Citibank announced that it will cut the rewards earned by Citi Dividend MasterCard holders to 2 percent from 5 percent for purchases made at gas stations, pharmacies and supermarkets.  Meanwhile, American Express said that beginning in October it plans to end double cash back points earned for "everyday" transactions by cardholders in its Membership Rewards program. 

According to analysts, the reduction in cash back earnings will likely follow across the credit card industry.  Although credit card issuers are not losing money on rewards programs, they have not been as profitable as other areas, causing the companies to scale back. 

Still, gasoline sellers have yet to report any plans to cut reward programs on their credit cards. 

However, industry watchers note that credit card issuers have basically accomplished their goal of getting consumers to pay for both large and small purchases with their credit cards.  They add that with merchants paying the card companies a 2 percent or 3 percent fee for each transaction, issuers like Citi can't afford to give a rebate of 5 percent unless it gets the money another way, such as from fees or from a revolving card balance.

But cardholders shouldn't worry that rewards are vanishing altogether.  Instead, credit card issuers are unveiling new versions of their reward programs.  Citi will still pay 1 percent cash back on most purchases made with the Dividend MasterCard, up to $300 a year, with the 2 percent cash back offer extended to new categories, including purchases made at convenience stores and for utility bills paid with the card.  Additionally, purchases made at a group of 300 selected merchants in Citi's Dividend Merchant Network (such as Linens 'n Things and Sears) will earn cardholders 5 percent to 7 percent cash back, with no annual cap.

While AmEx is concluding its four-year old payout of double points in its Membership Rewards program for purchases made at groceries, gas stations and drugstores, cardholders can still earn single points. Also, consumers who use the Delta Sky Miles and Blue Cash cards can still accrue double points for gas purchases, with certain limits.  

Should you be a reward cardholder, keep an eye on your mail for notices of any changes to your card program.  If your rewards are reduced, consider once of the many other rewards cards available, such as from CreditCards.com.

Published: November 2, 2006

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