Long-time blog readers will recall that I think Pentagon Federal Credit Union has the best credit card out there for gasoline.  It pays you 5% of everything you spend on gasoline and automatically credits it as cash on your statement each month.  All you have to do is join Pentagon Federal with a $5 deposit.  If you didn’t qualify to join, you could just pay a $15 one time fee to join Voices of America and qualify that way.  Unfortunately, PenFed is realizing that they’re pretty unique, and that lots of people are joining the credit union just to get this card.  They’re making changes starting with the November statement that make this card less attractive.

Annual Fee and Lower Rate

The card is currently no-fee, but starting in November it will have a $25 annual fee.  To make matters worse, it will reduce the gas credit to 3%, instead of 5%.  Everything else put on the card goes to 0% from an already paltry 0.25% (I think it was 1.5% when I first got the card.) It’s still applied to your statement automatically each month.

There’s Still Hope

There is still some hope for those of us who like this card.  I got $380 back last year (I shudder to think how much gas I’m buying that 5% is $380) on this card and would like to keep it.  Pen Fed will keep the deal terms the same (5% on gas, 0.25% on everything else, no annual fee) IF you’re willing to use some other Pen Fed product, such as a checking account with direct deposit, a mortgage or home equity loan, or most easily, a CD.  Their minimum CD size is $1000.  The 2-year CD is paying 1%, or slightly better than my Ally Bank savings account where I keep my emergency fund.  That’s not such a big deal to keep such a great card.  I do dislike having to constantly be on the prowl for the best deals on credit cards and savings accounts (I’d rather set it and forget) but $380 a year is worth a little hassle for and I think even with the additional restrictions that it is still the best gas card out there.

Other Options

The Chase Freedom card offers 5% on gas, but only for one quarter a year, and it’s more of a pain to redeem rewards.  Amex Blue offers 3% on gas (but 6% on groceries) making it also a decent choice.  There are lots of other cards paying 1.5-3% on gas as well. I don’t know what other hoops Pentagon Federal is going to come up with in the next few years, but this one is low enough that I’m going to go ahead and jump through it. I’ll just put $1000 of my emergency fund into a 2 year CD. Even if I need the money (unlikely), I’ll only forfeit 180 days of interest, or $5. I’d rather have the $380.

Update Prior to Publication

Pen Fed has added some new options to the list that allows you to keep the card at 5% without an annual fee.  The easiest to use is their Money Market Savings Account, which has a minimum of $25.  It only pays 0.05%, but hey, it’s only $25.