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If you’re attempting to build credit from scratch, a gas credit card can help. That’s because, similar to other types of credit cards, gas credit cards report your payments to the three major credit reporting bureaus. Further, gas cards are good for building credit because they tend to be easier to get approved for than other types of cards.

On top of that, a gas credit card can allow you to save on gas by earning discounts and fuel credits when you fill up your tank and use your card to pay for transactions. Here’s all you need to know about gas credit cards, including how to get a gas card to build credit.

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Understanding Gas Credit Cards and How They Work

A gas credit card works similarly as other types of credit cards in that it offers access to a revolving line of credit. In other words, you have a credit limit that’s set ahead of time. You can borrow up to that limit, and then repay the debt over time through monthly payments. If you carry a balance from month to month, you’ll pay interest.

There are two main types of gas credit cards:

•   Gas station co-branded credit cards: Also known as a single-purpose or closed-loop card, a gas station co-branded credit card is a card that you can only use to make purchases from a single company. In this case, you could only use the card when you pump gas from a particular gas or oil company, which the card will usually bear the logo of.

•   General-purpose gas credit cards: A traditional gas credit card can be used when you fill up at any gas station, rather than only with one particular brand — marking the difference between gas cards vs. gas station credit cards.

As mentioned, gas credit cards can be a good way to build credit when you’re starting from scratch. Keep in mind that the best rates, terms, and rewards offerings generally are reserved for consumers with strong credit. That being said, some gas cards are easier to get approved for, especially those from a particular oil company or brand.

Another benefit of gas credit cards is that they can offer discounts per gallon or an introductory promotional period where you can receive additional discounts at the pump. For instance, a co-branded gas credit card might offer 30 cents back on each gallon for the first two months after you open an account, and then 10 cents back per gallon after that.

Some general-purpose gas credit cards might also feature rewards, like cash back on everyday purchases up to a certain amount per year.

Tips for Building Credit with a Gas Credit Card

Are you wondering, does a gas card build credit? The answer is yes. Because gas credit cards report your activity and payment history to the three major consumer credit bureaus — Equifax, Experian, and TransUnion — using one can be a good way to help you establish credit when you’re starting out on your credit journey.

For a gas card to build credit, however, you’ll need to stick to the following credit best practices.

Choose a Card Carefully

If you decide to open a gas credit card, carefully review the terms, rates, and fees. Gas credit cards typically have high interest rates compared to other types of cards, so if you anticipate carrying a balance, you could end up paying a pretty penny on interest charges.

While many gas credit cards don’t carry an annual fee, you might get hit with late fees, balance transfer fees, and returned payment fees. Make sure you’re aware of what fees a gas credit card may charge so you can avoid them.

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Pay the Full Balance Each Month

Your payment history makes up the bulk of your FICO credit score — 35%, to be exact. As such, it’s important to make your payments on time, each and every month.

And if possible, you might also aim to pay off your balance in full each month, which will allow you to avoid paying interest on your gas credit card. To do this, set a limit for how much you want to spend on your gas credit card each month and stick to it.

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Don’t Spend Up to the Credit Limit

Another factor that influences your credit score is your credit utilization, which is how much of your overall credit limit you’re currently using. It’s generally suggested to keep this ratio at no more than 30% to avoid adverse effects to your credit score. If you were to spend up to your credit limit, that would likely drive up your credit utilization well about that recommended threshold.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Keep Track of Your Credit Score

Monitoring your credit score can help you pinpoint behaviors that can move your credit score up or down, as well as notice any red flags. By keeping an eye on your credit, you can better make adjustments to your habits and spending to ensure you’re making progress on building your credit score.

You can keep track of your credit score in a handful of ways, including by signing up for a free credit monitoring service or possibly through your credit card issuer. For instance, the cash-back rewards credit card that SoFi offers provides free credit score monitoring to cardholders.

Advantages of Building Credit With Gas Cards

Gas cards absolutely can be good for building credit, and here are the benefits of using one to do so:

•   Savings on gas: A major perk — and the one that is most apparent — is that you can receive discounts at the pump by using a gas credit card.

•   Potentially easier approval: A gas credit card can have easier approval requirements than other types of cards, such as rewards credit cards. This can make it easier to get credit, and therefore start building your credit.

•   Rewards and sign-up bonuses: Gas credit cards might offer rewards, perhaps just on your spending at the pump or more generally across purchases, depending on the type of gas credit card. Some gas credit cards offer a sign-up bonus if you meet a minimum spending requirement within the first few months.

Drawbacks of Building Credit With Gas Cards

There are downsides to using gas cards to build credit as well, including:

•   Potentially restricted use: If you get approved for a credit card that you can only use when you fill up at a gas station from a single gas or oil company, it might take you a bit more work and planning to use your card. That being said, there are some more general use gas cards available.

•   Higher interest rates: If you’re building your credit from scratch and are approved for a card with less stringent financial or credit criteria, this can mean higher interest rates and less generous or attractive card perks.

•   Limits on earnings and rewards programs: While some gas cards do offer rewards, they’re usually not as robust as they would be with other types of credit cards. Plus, many gas cards have a cap on how much you can earn in rewards in a given year.

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The Takeaway

A gas credit card could be a strong option if you are looking for a credit card with easier approval requirements to take a step toward building credit. Before deciding, consider the advantages and drawbacks of getting a gas card to build credit.

Another option might be a general rewards card, like the SoFi credit card. This way, you won’t be restricted on where you can use your credit card. Plus, the SoFi credit card offers unlimited cash-back rewards on all eligible purchases, among other perks.

FAQ

Are gas cards worth it?

Gas cards can be worth it if you are looking for a credit card with less stringent approval criteria and are trying to establish credit. Many don’t have annual fees, so if you’re able to pay the balance in full each month, it could be worth opening. Plus, you might be able to save at the pump.

Are gas cards good for building credit?

Gas cards can be good for building credit as they do report your activity and payment history to the credit bureaus. However, in order for them to help with your credit, you must maintain responsible credit habits, like making on-time payments and maintaining a reasonable credit utilization ratio.

Recommended: Tips for Using a Credit Card Responsibly

Is it better to use a fuel card or a credit card?

It depends on what you typically use your credit card for, as well as what cards you’re able to get approved for. If you would like a card that you can use only for gas and would like to rack up gas savings, then a fuel could be a good fit. Another type of credit card, such as a cash-back or travel rewards credit card, could offer you different perks. However, they might be harder to get approved for.

Do gas cards save you money?

Gas credit cards can shave a few dollars at the gas pump in the way of discounts and promotions. Some cards offer cash-back rewards, usually up to a certain amount per year.

Photo credit: iStock/Talaj

¹See Rewards Details at SoFi.com/card/rewards.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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We increasingly live in an electronic financial society, and if you are unbanked or underbanked, you may be missing out on some opportunities. While cash is still accepted at many retailers, there are some places where you’ll need a card to make a purchase. And sometimes, using a card is simply more convenient.

If you don’t have, don’t want, or can’t qualify for a credit card, you may consider a prepaid credit card as an alternative. Unlike traditional credit cards, prepaid credit cards do not report transaction or payment information to the major credit bureaus. That means that prepaid credit cards will not help build credit directly.

Recommended: What is a Charge Card?

Do Prepaid Cards Build Credit?

Having or using a prepaid credit card will not have any impact on your credit score. That’s because one of the major differences between a prepaid credit card and a traditional credit card is that prepaid credit cards do not report transactional or payment information to the major credit bureaus. As such, that activity cannot have an affect on your credit score.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Understanding Prepaid Credit Cards and How They Work

When you use a traditional credit card, you are borrowing money from the credit card issuer. Then, each month when the statement comes due, you make a payment toward the loan the credit card company has issued you. This payment history is reported to the major credit bureaus. Other potential lenders will review how much credit you have open and how reliably you make payments on your debt obligations to help them decide if they want to issue you additional credit.

On the other hand, a prepaid credit card does not offer access to revolving credit. With a prepaid credit card, you will first purchase the card, and the purchase amount will be loaded onto the card. Then, you can use the card at participating retailers. Each purchase that you make will get subtracted from the total value that is stored on the card. Once the total value reaches $0, the card will no longer be accepted.

Recommended: When Are Credit Card Payments Due?

Who Might a Prepaid Credit Card Be Suitable For?

There are certain groups of people for whom a prepaid credit card might be an ideal solution. This includes those with poor credit and those who desire the flexibility that a credit card can offer.

People With a Poor Credit Score

One group of people who might get value from a prepaid credit card are those that have a poor credit score or limited credit history. If you’re not able to qualify for a traditional credit card, or are concerned with how much a credit card costs, you might want to use a prepaid credit card for transactions where using a card is required or preferable.

People Who Want the Flexibility of a Credit Card

If you don’t have a credit card or prefer to use cash for most of your transactions, there still may be some circumstances where you might appreciate the flexibility of using a credit card. If that description fits you, you should explore the benefits and risks of prepaid credit cards, and decide if one might be right for you.

If, on the other hand, you are already in a solid financial state and want to apply for a card that offers excellent rewards, consider the SoFi credit card. When you apply for a credit card with SoFi, you can earn unlimited cash-back rewards with every eligible purchase.

How Can a Prepaid Card Improve Your Credit Rating?

Since prepaid credit cards do not report payment or transactional usage to the major credit bureaus, they won’t improve your credit score directly. However, getting in the habit of using a credit card responsibly can help prepare you for when you do have a traditional credit card. Starting those habits can keep you from making some of the common credit mistakes that can harm your credit score.

When Should You Use a Prepaid Credit Card?

A prepaid credit card can be a good option for people that need or want to use a credit card but don’t have a traditional credit card. This could include when making purchases online or when making a purchase where you want to make sure there is an electronic record of the transaction.

If you are trying to get a credit card cash advance, however, you may want to consider another option. Most prepaid credit cards will not allow you to get cashback.

Secured Cards vs Prepaid Cards

There are several different types of credit cards, one of which is a secured credit card. A secured credit card is similar to a prepaid credit card in that you have to make a deposit or purchase upfront to load value onto your card.

However, a secured credit card allows you to regularly reload value onto your card. A secured credit card also reports usage information to the major credit bureaus, which can make it one way to help with establishing credit.

Alternative Ways to Help You Build Credit

Besides secured credit cards, there are a few other ways to help you build your credit. Some options include:

•   Becoming an authorized user: One is being an authorized user on the credit card account of a trusted friend or family member.

•   Making on-time payments on other debt obligations: Another possible way to help build your credit is reliably making payments on other types of debts, like student loans, car loans, or personal loans.

•   Getting a cosigner: If you’re hoping to get a loan or unsecured credit card to begin building your credit, one way to increase your odds of approval is by getting a cosigner. Just know that this means that person will also be on the hook for your debt if you fail to repay it, so make sure to abide by credit card rules to avoid that situation.

The Takeaway

Prepaid credit cards can be a great way to make a purchase when using cash is not an option or is less advantageous. However, it’s important to understand that prepaid credit cards do not send information about your transaction or payment history to the major credit bureaus. That means that having or using a prepaid credit card will not have any impact on your credit score.

If you want a credit card that reports transactions to the major credit bureau, you’ll need to have a more traditional type of credit card. One option to consider is the SoFi credit card. With the SoFi credit card, you can earn cash-back rewards, which you can then use to invest, save, or pay down eligible SoFi debt.

FAQ

What challenges are involved in having prepaid credit cards?

One challenge is that any transactions or payment history associated with a prepaid credit card are not reported to the major credit bureaus. That means that using a prepaid credit card will not help you build your credit. There also may be some types of credit transactions where the merchant will not accept a prepaid credit card.

Can prepaid cards be run as credit?

In some ways, prepaid cards work just like traditional credit cards. This means that typically, a prepaid card can be run as credit when making a purchase. Additionally, depending on the merchant and the type of prepaid card you have, you may be able to set up a PIN and use your prepaid credit card as a debit card.

Do prepaid cards damage credit?

Prepaid credit cards do not report any type of purchase or payment history to the major credit bureaus. So while this means prepaid credit cards can’t help build credit, the good news is they also will not damage it.

Do prepaid cards report to credit bureaus?

No, prepaid cards do not report to the major credit bureaus. Any purchases that you make on a prepaid credit card will not have any impact on your credit score, either positive or negative. So if you are working on establishing credit, you will need to use a traditional credit card or another type of financial instrument that reports usage to the major credit bureaus.

Photo credit: iStock/Visiondreams

¹See Rewards Details at SoFi.com/card/rewards.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.




Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .


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