Spend smart. Fuel credit cards: Things to know before choosing the right offering

With the price of fuel rising every year, many look for credit cards that could help them save on their fuel expenses and cater specifically to fuel needs. Kotak Mahindra Bank and IndianOil recently launched a co-branded fuel credit card ‘IndianOil Kotak Credit Card’ available on the RuPay network.

Across the market, there are today dozens of fuel credit card options that offer fuel surcharge relief, provide cashbacks, reward points, co-branded benefits, and much more, to credit card customers. In return, customers may have to pay joining fee and renewal fee, apart from any due interest on applicable spends.

What it is

Credit card issuers offer fuel credit cards that help save on all fuel purchases. The fuel savings is in the form of fuel surcharge waiver (you will not be charged the surcharge when you use your fuel credit card to pay for petrol or diesel) and cash/value back or reward points on fuel spends at designated fuel pumps. There are other benefits for non-fuel spending — for instance, online shopping. Apart from this, such credit cards come with standard features, such as revolving credit, interest-free period, EMI facility and zero lost card liability

The joining fee of these credit cards usually ranges from zero to ₹1,500. For cards with high joining fee, the deal is sweetened for customers by offering the carrot of complimentary lounge visits, gift vouchers, etc. The renewal fees are similar, but can be waived in certain cases when total credit card spending is in the range of ₹50,000-₹2 lakh in the previous year. The interest rate on such fuel credit cards ranges from 3.25 per cent to 3.40 per cent per month, but that could also change.

For certain cards, there are welcome gifts such as a defined amount of reward points on payment of joining fee, free vouchers, etc. Some cards market benefits as 50 litres of free fuel every year, but these are calculated as value of rupee savings based on spending and rewards at lower than market price of fuel (₹75 per litre).

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Explaining fuel benefits

Let us take a look at some popular fuel credit cards to understand the benefits. For instance, BPCL SBI Credit Card offers 4.25 per cent ‘valueback’ (13X reward points equivalent to 3.25 per cent + 1 per cent fuel surcharge waiver on every transaction of upto ₹4,000, exclusive of GST and other charges), at any BPCL petrol pump across the country. Note there can be caps on reward points and surcharge waiver per billing cycle. In case of BPCL SBI Card, maximum 1300 reward points per billing cycle and maximum surcharge waiver can be ₹100 in a billing cycle, which is equivalent to an annual savings of ₹1,200. In case of card variant called BPCL SBI Card Octane, the valueback component is 7.25 per cent on BPCL purchases. The maximum reward points per billing cycle is also higher at 2,500.

In case of ICICI HPCL Super Saver credit card, the cardholder is entitled to 4 per cent cashback on fuel purchases, where such cashback is capped at ₹200 per month (₹2,400 a year). Additional 1.5 per cent cashback in the form of 6 Payback points is provided on every ₹100 spent on all fuel purchases at HPCL retail outlets. Also, there is savings of 1 per cent on fuel surcharge, which is over and above 4 per cent cashback benefit.

For IndianOil Axis Bank credit card, one can get 100 per cent cashback (maximum ₹250) on all fuel transactions within 30 days of card issuance. There are accelerated reward points at IOCL fuel outlets on fuel transactions between ₹100 and ₹5,000 per month. You get 4 per cent value back on fuel transactions by earning 20 reward points per ₹100 at any IOCL fuel outlet in India. Also, there is 1 per cent fuel surcharge waiver on fuel transactions between ₹200 and ₹5,000 (maximum waiver of ₹50 per statement cycle).

Take note

Credit card companies know that for greater usage of fuel credit cards, they have to incentivise non-fuel spending too. Depending in the card issuer, some standard non-fuel benefits are reward/fuel points per ₹100 spent on retail purchases, 5 per cent in reward points/cash back on train tickets, mobile recharges, grocery, departmental stores and utility bill spending, capped discount (usually ₹100 or 10 per cent) on movie tickets purchased, discounts at partner restaurants,

Fuel credit cards or co-branded credit cards work best when you are a loyal customer to a specific fuel company. This could be due to service or simply it being the nearest fuel pump stations near your home/office. Before selecting the right fuel credit card, try to analyse your monthly fuel expenses so that you can get the most of that card.

Always check the card member agreement, Most Important Terms & Conditions (MITC) and other brochure material on the credit card issuer website to gauge the full extent of advertised benefits. Many a time there are conditions attached to certain benefits such as minimum transaction value, and knowing them allow you to take full advantage of the card. Depending on the card, the interest-free period can change too. Validity of certain reward points can be for a fixed period, say, two years. Similarly, accrual of points can be capped to a defined number for each month/billing cycle/statement cycle. Not all transactions can be fully paid using reward points in some fuel credit cards.

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