Iman Paul, Assistant Professor of Marketing, David Reh School of Business, Clarkson University
See the article here: https://wallethub.com/credit-cards/gas/#expert=Iman_Paul
What types of people should consider applying for a gas rewards credit card?
People who have a higher-than-average driving requirement subsequently have higher gas bills. Especially professionals who get reimbursed by their companies for gas bills based on mileage. Not only does using one gas credit card keeps all the spending on one card making it convenient for tracking and filing receipts, but it also enables the cardholders to use the accrued rewards points for personal use on non-gas items (at the convenience stores associated with the pumps). Mental accounting research (Thaler 1980, 1985) shows that many among us make mental accounts for the allocation and budgeting of recurring expenses (e.g., rent, food expenses, gas bills). Having a separate gas reward card is particularly helpful for such people as it facilitates an easy allocation and budgeting mechanism. Lastly, for people who are particular in monitoring their monthly gas bills, having one card with all the gas expenses loaded on it makes it very convenient again from the tracking and accounting point of view.
How much higher of a gas rewards earning rate do you think is needed to warrant committing to a particular gas station chain?
In my opinion, the reward earning rate would depend on various factors. Obviously, bigger, and better-known gas chains (e.g., the national chains and the regional favorites) can do with a lower rewards rate. Factors that would also impact the rewards rate would be locations, availability of other amenities (e.g., car wash, presence, and quality of the convenience stores in the gas station, etc.), and rates offered by other gas stations among others. Behavioral economics tells us that a $.05 reward per gallon is significant when prices are hovering upwards of $4/gallon. The same $0.05 may not feel as rewarding when the price comes back to normal. So, the reward rate should probably have to be dynamic in some sense. For consumers, cards that give rewards in terms of a percentage off (e.g., 3% discount) make more sense than absolute cash amounts (for example 0.05 cents) especially if the price of gas is on an upward trajectory.
Does it make sense to get a gas rewards credit card when gas prices are low?
Yes, irrespective of gas prices, it always makes sense for people for whom gas expenses are a major component of their monthly household expenses. As mentioned, many among us (Paul, Parker, and Dommer 2018) like to mentally allocate expenses to different budget types (e.g., work-life budgets). Having a separate gas reward credit card certainly appeals to those people. I have seen people using one particular card for “big” expenses only or “recreation” expenses, so it aligns with the general principle of expense/budget allocation.
Thaler, Richard. "Mental accounting and consumer choice." Marketing science 4, no. 3 (1985): 199-214.
Thaler, Richard H. (1980), “Towards a Positive Theory of Consumer Choice,” Journal of Economic Behavior and Organization, 1 (1), 39-60.
Paul, Iman, Jeffrey Parker, and Sara Loughran Dommer. "Don’t Forget the Accountant: Role-Integration Increases the Fungibility of Mentally Accounted Resources." ACR North American Advances (2018).