Choose a fuel co-branded card that offers wide coverage, great rewards

Since these cards have high interest charges, avoid using them when you wish to revolve credit

Amid rising petrol and diesel prices, credit card issuers are trying to attract customers with co-branded fuel credit cards, which offer discounts, cash backs and reward points. Several card issuers have launched these cards in association with oil marketing companies (OMCs) in recent times.

BPCL and SBI Card launched a co-branded RuPay contactless credit card recently. Rama Mohan Rao Amara, managing director and chief executive officer (CEO), SBI Card says, “BPCL SBI Card RuPay targets mass affluent consumers who spend a significant amount on fuel.”

It promises 13x reward points on every Rs 100 spent on fuel purchases at BPCL petrol pumps and 1 per cent fuel surcharge waiver on every transaction up to Rs 4,000. These translate into a net saving of 4.25 per cent.

In July, ICICI Bank and HPCL had launched ICICI Bank HPCL Super Saver Co-branded Credit Card. Indian Oil, too, offers co-branded cards with several banks, including Axis.

Sanjeev Moghe, executive vice president and head-cards and payments, Axis Bank says, “Axis Bank IOCL co-branded credit card brings value to customers’ fuel and online purchases and also provides discounts on spends at movies and restaurants.”

Fuel cards are usually co-branded, but many generic cards also offer rewards on fuel purchase.  

Attractive rewards  

Fuel cards offer attractive discounts and cashbacks. Gaurav Chopra, founder and CEO, IndiaLends says, “You can get a waiver of 1 per cent on fuel surcharge. When fuel prices are high, this can be a substantial amount and can lead to considerable savings for those who drive a lot.”

These cards also offer reward points. Once you have accumulated them, you can use them to purchase the goods you need.

They also enhance convenience. Chopra adds, “These cards drastically reduce the time spent on administrative tasks like collecting receipts, sorting expense forms, or chasing employees for business mileage.”

High finance charge

Most fuel credit cards, however, come with high interest cost on revolving credit (also referred to as finance charge, annual percentage rate, or APR). Chopra adds, “Their average interest charge is about 24 per cent.” This is about 9 percentage points higher than the average APR on general category credit cards, whose average is around 15 per cent. Chopra adds, “Pay off your balance in full every month. If you need to carry over a balance, use another card that has a lower APR.”

Check coverage

When selecting a fuel card, check its coverage. Adhil Shetty, CEO, Bankbazaar, says, “Check if the benefits are offered only at the petrol pumps owned by the issuer oil company or at all petrol pumps.”

Usually, these cards can only be used at the pumps belonging to the issuer oil company. If you select a card from a company that has very few outlets in your area or state, it will not be of much use to you.

Next, compare the finance charge, joining fee, and annual fee.  

Prefer a card that offers reward points that don't expire. Sachin Vasudeva, associate director & business head-credit cards, Paisabazaar.com says, “Reward points generally expire within two-three years from the date of issuance. Some card issuers also offer reward points that don’t have an expiry date. Opt for them.”

Some cards waive the annual fee if you spend above a certain limit. So, factor in your average consumption and the card’s limit while choosing.

Some credit card issuers allow you to redeem cashback or reward points at select online partners or as gift vouchers.

Those online stores or brands should be ones that you like for the reward points and vouchers to be useful to you.

Weigh benefits against charges  

• Analyse your average monthly spend on fuel

• Going for a fuel credit card won’t serve much of a purpose unless you spend a reasonably high amount

• Look for a card that offers a combination of attractive fuel benefits and reasonable annual charge and interest rate

• The benefits and discounts derived from using such a card should not get negated by the high fees and charges associated with it

• Go for a card that allows instant redemption of reward points

Source: Bankbazaar.com