Should You Use a Credit Card or a Pre-Paid Petro Card While Tanking Up?

There are principally three ways by which you can pay for petrol at a gas station: Cash, Credit Card (plain or co-branded), or Pre-Paid Petro Card. There are advantages and disadvantages in each option, mainly depending on your spending or budgeting beliefs.

I always prefer paying in cash for all my expenses, except for airline tickets and web-hosting for which I have no option but to use a credit card. If it’s an expensive purchase, which in my books is above Rs 2000, I use my debit card – the plastic equivalent of cash – rather than having to carry bundles of currency in my pocket. I avoid using my credit card. Because when it comes to credit card debt, I have been there and done that. Veni. Vidi. Credit. I came (to the shop), I saw (the products), and I debted (using the credit cards). Although the 50-odd days of credit looks attractive – and many advise you to invest the saved cash elsewhere for 50 days – I believe it’s not worth the management headache.

The pre-paid petro card seems to be a good backup for an emergency. I think it’s a good idea to have such a card in your wallet, or even better in your vehicle, with a 1000 bucks worth of petrol loaded. It really could be a life-saver. The more I think about it, the more determined I am to get such a card once I am back in Bangalore. And forget the reward points. If you maintain cards for the reward points alone, you need to think hard.

The The Economic Times recently carried a well researched article on this topic. Excerpts below.

The use of credit cards is becoming as common as cash when it comes to tanking up the car. While plain vanilla credit cards can be used, one also has the option of using pre-paid petro cards and co-branded petro credit cards. Here’s a lowdown of the features, advantages, and disadvantages of such instruments.

Pre-paid cards

There are two pre-paid petro cards in the market: HP Smart 1 and BPCL Petro card. A pre-paid card has an electronic chip, which stores information about the amount (in rupees) of fuel that you have loaded in your card. Every time you transact on this card you earn some reward points. To apply for any of these petro cards one needs to fill an application form and pay a one-time joining fee of Rs 250. The card is received later by courier through a payment receipt which is issued by the retail outlet immediately. In case of the HP card, you can load the card with a minimum amount of Rs 250 and in multiples of Rs 50 thereafter. For a BPCL card, the minimum load amount is Rs 500 and subsequently you can load the amount in multiples of Rs 100. The cards get automatically debited according to the spends made.

How rewarding are pre-paid cards?

Club HP Smart 1 card provides 5% of the amount spent as rewards. The spend can be on anything, right from petrol/diesel fills to lubricants to car servicing to batteries, etc. All one needs to do is use the HP smart card to pay bills. The BPCL Petro card, on the other hand, provides you with reward points (called petro miles) for all purchases from any of Bharat Petroleum’s retail outlets in India. The reward points in BPCL’s case differ based on what products are purchased.

In case of HP Smart 1, you can encash the rewards accumulated for free fuel. In case of the BPCL Petro card, you can only redeem the petro miles for gifts. The petro miles can either be redeemed at BPCL outlets or through its website.

Co-branded credit cards

Apart from the pre-paid petro cards, you have the option to use a co-branded credit to pay for fuel. These cards do away with the surcharge you pay at fuel filling stations while using a vanilla debit/credit card. The surcharge works out to 2.75 % or Rs 10, whichever is more.

Co-branded credit cards like IOC-Citibank and HPCL-ICICI Bank are the only co-branded petro cards in the market. The IOC-Citibank card fetches one reward (turbo) point for every Rs 125 spent. If you purchase any other IndianOil product outside an IndianOil retail outlet you can earn two points. These accumulated points can be redeemed for free petrol or petro coupons. These coupons can be exchanged for free fuel/Servo lubricants at select IndianOil retail outlets.

In case of ICICI Bank-HPCL credit card, the reward points — Speed ‘o’ miles — can be redeemed for free fuel at HPCL petrol pumps or against gifts available in the ICICI rewards redemption catalogue. Other add on features include a 15% discount on P-UC. (pollution under control) check, labour charges on servicing and minor repairs at HPCL petrol pumps. You can also enjoy a 5% discount on MRF tyres, Exide batteries and MICO accessories.

Cash too can be rewarding

IOC has launched IOC Xtra reward programme, which benefits customers making cash purchases. This card is issued almost instantly and you need not pre-load any money. Every time you make cash purchases using this card at IndianOil petrol/diesel outlets, reward points are added to your card. These points can be redeemed for fuel/lubes and other items. It also offers accident insurance cover worth Rs 1 lakh for the first year.

Pre-paid vs credit card: Take your pick

A credit/debit card may charge an annual fee. The pre-paid petro cards, on the other hand, charge a one-time membership fee, which is non-refundable. Another catch is the waiver of the surcharge. You should know that for HPCL-ICICI Bank credit card, there is an extra charge of Rs 2 for all fuel purchase transactions that is less than Rs 400 made at HPCL outlets. Moreover, in case of a pre-paid card there are no late payment penalties or interest charges unlike credit cards. But, in the case of a pre-paid card you pay the oil company in advance for future petrol spends while in the case of a credit card you can get up to 45 days to settle your petrol bills.

How do you weigh your options?

The cue is if you are loyal to a particular petrol brand, then you would benefit from possessing a pre-paid petro card or a credit card. You can use rewards points for free fuel or gifts. If you do not patronise a single petrol pump/brand or don’t feel like carrying too many cards, you always have the option of paying cash.

Let me know if you use a pre-paid petro card. I would love to hear your thoughts.

Further reading:

1. Tip Tuesdays: Why You Should Not Own a Credit Card From a Bank Where You Also Have Other Deposits
2. The Order in Which Your Credit Card Payments are Applied for Settling Dues

Tagged as: credit cards