Gas Cards Attempt to Fight Through Strong Headwinds

Navigator Edition: May 2016
By: John Grund and Ryan Douglas

While the credit card industry is enjoying a sustained period of highly favorable performance, gas cards face a perfect storm of challenges. For years, banks have been chipping away at legacy gas cards by focusing on everyday spend as a core element of their proprietary rewards cards. Many oil companies battled back by enhancing their own value propositions, relaunching card products, and adding new features such as instant rollback functionality at the pump. As if competition was not enough of a challenge, the steep drop in oil prices has been the latest setback for gas cards, for oil companies, and their bank partners alike. Obviously, the headline value of a discount on gas loses some of its appeal when the price per gallon drops by 35%1 in the last 9 months. For issuers of private label gas cards, it is nearly impossible to grow receivables when the price/gallon is in a deflationary free-fall.

In the table below, we take stock of the value propositions on gas cards and highlight the positioning of gas rewards on certain proprietary bank cards. We also note other initiatives being pursued by oil companies that are related to enhancing loyalty in the current environment.

Figure 1: Comparison of Gasoline Value Propositions

Fig-1_-Comparison-of-Gasoline-Value-Propositions¹Per $100 in spend. ²Tiers based on monthly spend.
Source: Company websites as of May 3, 2016.

BP and Chevron both recently announced changes to their branded credit card value propositions, while ExxonMobil announced its participation in the Plenti loyalty coalition and enhanced its proprietary mobile app, Speedpass+. Other oil companies such as Chevron, Sunoco and Sinclair are developing mobile payment capabilities at the pump. SuperAmerica and Wawa have also launched new branded credit card programs with competitive value propositions. QuikTrip recently announced that it will soon launch a private label credit card program with First Bankcard (First Data will manage rewards). General bankcard and other non-gas proprietary cards continue to offer attractive earn rates on gas spend; in a recent development, the new Costco card by Citi is offering 4% off gas spend.

While the pressure of competitive card offers and low gas prices continue to burden gas card programs, we expect petroleum companies to continue to enhance gas card value propositions, and make investments in mobile and other form factors as a means to drive loyalty. Of course, EMV readiness is also another challenge facing the oil companies, but we will leave that for another story.

1 June of 2015 ($2.75) compared to the national average price of gas in Feb. 2016 ($1.75) according to the AAA Fuel Gauge Report.

For more information, please contact John Grund, Partner,; or Ryan Douglas, Manager, Both specialize in Credit Card Issuing.

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