A Quick Look at Recent Changes in Gas Cards

Navigator Edition: July 2015
By: John Grund and Ryan Douglas

Over the span of only a few months, both BP and Chevron recently announced enhancements to the value propositions on their gas cards. Synchrony Financial manages both programs, and the timing of the card enhancements coincided with a contractual renewal in the case of Chevron, and a new partnership with BP following the transition of the program from Chase. Both announcements come in the wake of a significant drop in the price of gas at the beginning of the year, which directly impacts the relative value of the rewards program for gas cards. For context, the average price of gas (dollars per gallon) was $2.55 for the period between January and June of 2015 ($2.88 in June) compared to an average of $3.61 for the same period in 2014.1 At the same time, almost all general purpose card issuers have continued to feature gas-based incentives (e.g., earn increased rewards for gas, grocery, etc.) to attract new cardholders with point or cash back based rewards on everyday spend. Select retailers who have their own branded petroleum stations, such as Sam’s Club, are also incorporating gas rewards in their proprietary credit card programs (e.g., Sam’s Club MasterCard offers 5% cash back on gas purchases). At the end of July, Gulf Oil also made a change to its card program, entering into a new partnership with First Bankcard to issue its co-brand credit card (now Visa), formerly issued by Barclaycard (MasterCard); however, the value proposition remained largely the same (note: Gulf also has a PLCC product which it issues in-house).

Figure 1 level sets the card offerings of BP and Chevron and the nature of the changes, but our summary observations are as follows:

  • Substantial increase to ongoing earn rates – both BP and Chevron made significant increases to the value of the ongoing rewards/discounts offered on both the PLCC and co-brand cards; the BP offer of 10 cents off on PLCC and up to 25 cents off on co-brand are among the highest discounts offered in the market today on oil cards (max redemption of 20 gallons);
  • Cents off discounts are table stakes – the new credit cards offer cents off fuel discounts as the reward currency (for both the acquisition bonus and ongoing reward), as do most oil cards in the market today; in years past, there were various rewards types on oil cards , e.g., percent cash back, points programs, gift cards;
  • Reinstatement of rich acquisition bonuses – Chevron not only increased its acquisition bonus from 10 cents off to 30 cents off for 60 days, but it is also extending this bonus to co-brand cards (whereas previously the bonus only applied to PLCC);
  • Encouragement of non-gas purchases – the Chevron co-brand card is unique in that it offers fuel discounts up to 20 cents off per gallon, but only if non-fuel (outside) spend on the card is over $1,000 per month (non-fuel spend over $300 earns 10 cents off); and
  • Differing redemption forms – BP gives cardholders the choice to redeem discounts either as an instant POS fuel price reduction (i.e., “roll back”), or as a statement credit; at this time, Chevron only offers a statement credit, which occurs automatically at the end of each billing cycle.

Figure 1: Summary of Gas Program Reward Changes

Fig-1_-Summary-of-Gas-Program-Reward-Changes1 For every $100 spent. 2 Reward applicable gallons per coupon/reward redemption. 3 Rebate applied to current billing cycle. 4 POS discount is not redeemable at BP branded locations in Alabama.
Source: Current company websites, historical versions of company websites, old take-one applications from 2011 and 2012.

In addition to credit card programs, oil companies have launched or participated in numerous tender-neutral reward programs (both standalone and coalition programs) that reward customers with gas savings opportunities (e.g., BP Driver Rewards, grocery reward partnerships, Shell’s Fuel Rewards Network, Plenti) in an effort increase loyalty and spend at their stations. For oil card programs, competitive substitutes are abundant, putting pressure on gas companies and their partners to offer rich rewards and develop creative ways to increase market share.

1 U.S. Energy Information Administration.

For more information, please contact John Grund, Partner, john.grund@firstannapolis.com; or Ryan Douglas, Senior Consultant, ryan.douglas@firstannapolis.com. Both specialize in Credit Card Issuing.

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