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Gas discounts full of booby traps

While most people see high gas prices as serious problem, marketing gurus see them as an opportunity. It's almost impossible to turn on the TV, get gas or go shopping now without hearing about some great new way to cut down your gas bill. Many of these offers may sound tempting, but beware the fine print booby traps.

Topping the list of gas discount offers is Chrysler's $2.99-per-gallon promotion. But credit card companies, rental car firms and even local tourism boards all are making similar pitches. All of them should be taken with a grain of salt, or maybe taken with one of those little pills you drop in your gas tank to improve your gas mileage (kidding!).

Chrysler's deal is perhaps the most tempting. The car seller promises the security of $2.99-per-gallon gasoline for the next three years. In a world where pump prices have gone mad, heading now towards $5 in some place, $2.99 gas seems like a great deal.

But hold onto your gas hoses. Chrysler's offer has many nuances, but it boils down to this: Most new car buyers are familiar with the choice they often get between a cash rebate or low-rate financing ($3,000 cash back or a 0 percent loan, for example). Well, the discounted gas is simply a third choice. In other words, those who take the gas offer surrender all or part of their rebate and access to the cheap loan.

I like to keep things simple, so the standard advice applies here: for the majority of car buyers, your best bet is to take the rebate. Cold, hard cash is simple.

The truth is, even with $5 a gallon street prices, given the limitation of 12,000 miles worth of gas per year, Chrysler's $2.99 offer is pretty close to a wash when you surrender the rebate. Obviously, the specifics can vary wildly, but for argument's sake, here's a scenario -- at 20 mpg, Chrysler would discount 600 gallons of gas per year, saving a buyer $600 if the street price is $3.99, and $1,800 over three years. Is that worth surrendering a $1,500 rebate, which could add $1,500 and the associated finance charges to your car loan? Probably not. In some cases, Chrysler will let buyers who take the gas offer keep part of the rebate, which complicates the math further, but you get the idea.

Of course, you can imagine a scenario where Chrysler's deal leaves you ahead -- say, if pump prices explode towards $10 a gallon. There are other ways that the $2.99 gas card might pencil out for you -- say if you plan to buy a gas-guzzling diesel truck, for example. The folks at Consumer Reports have performed painstaking math on your behalf. You can see their efforts here and decide for yourself if you want to play gas price roulette with Chrysler.

But even if gas prices rise to $7 or $8 a gallon, and you save a bundle on gas for three years, you still might end up losing in the end, says Jeff Bartlett, auto expert at Consumer Reports.

"After three years, where are you going to end up? With two disappointing scenarios. Either you go back to paying full price for gas, or you say, 'I bought a gas guzzler, how am I going to sell that?' " The resale value of low-mpg cars is sure to plummet as gas prices rise, he said, so it's important for the consumer consider the total cost of ownership -- including resale value -- when considering any sales incentive.

Credit card gas discounts

If you think the Chrysler discounted gas deal is confusing, check out credit cards that discount gasoline prices. Without looking too hard, you can find offers that sound too generous to be true -- 10 percent off a gallon of gas, for example. Again, the higher the price goes, the better these deal sound. I don't mean to burst your bubble, but here goes.

First off, these cards do not lower the price of gas, despite the clever marketing campaigns. They provide rebates. And those rebates are slow in coming. Many cards only provide them once each year, in the form of a credit on the credit card bill. The credit might seem like a generous amount, but if you sign up for one of these cards at a nearby gas station seeking relief from high pump prices, you will wait a long time for that relief.

But that's only the beginning of the booby traps to be found on gas discount cards. Most cards offer a teaser discount rate, which then drops down to a much lower rate after a couple of months. For example: The Citi Dividend Platinum Select Card offers 5 percent off gas for 6 months, and then 2 percent off after that. Some card's teaser rates vanish in as little as two months.

Then there's this: Some cards limit the rebates you can earn each month or each year. With the Citi card, for example, the annual limit is $300. There's also a minimum purchase required -- drivers who don't earn at least $50 in credits get no rebate at all.

Despite all those restrictions (and we've omitted plenty of others), Bill Hardekopf of says consumers can get a worthwhile deal with gas rebate cards if they carefully dissect the terms and conditions before signing up.

"You can make some pretty good money on a rebate card but you have to really know what you are doing," he said. For example, the BP Visa Rewards Card offers sizable rebates of 5 percent -- but only for gas purchased at BP, of course. The card might make sense if you frequent a BP station around the corner, but it certainly wouldn't make sense for consumers to go out of their way to buy BP gas.

"We recommend making yourself a grid. Include the introductory offer, the ongoing offer, if there's a cap, and so on, to make it easy to compare," he said.

Here are two places to compare gas discount credit cards: and

Of course, the most important thing to remember with all rebate cards is this: if you don't pay your balance in full each month, you lose. Few consumers plan to carry a balance, but about half ultimately do, so it's important to be realistic about your ability to avoid finance charges if you sign up for a gas card. If you carry a balance on any other card, you probably don't need any more plastic in your wallet. And remember that applying for multiple credit cards within a few months will likely hurt your credit score, a penalty that could be far more costly than an annual $300 rebate for gasoline purchases.

Other gas deals

The tourism industry is filled with trepidation about the summer travel season, with many families scaling back driving plans. As a result there are genuine incentives that are worth checking out. You can find rental car offers than include a free tank of gas, for example, which could be worth $50-$100. But watch out. Don't let the rental car firm talk you into a gas guzzler (rental car lots are full of underused SUVs right now), which could eat away at your discount. And make sure to price rental cars using other traditional discounts, such as an AAA card. You might get a better deal by forgoing the free gas and taking a better price.

Meanwhile, car renters are also offering discounted gas if you prepay at the time of renting. That deal is only worthwhile if you are clever about returning the rental car with a nearly-empty tank.

Local tourism boards also are nervous and are trying to attract travelers who might be making other plans. Some car-oriented destinations are offering gift cards to tourists who book their trips. Here's a series of offers from the New Hampshire tourism board, for instance.

Some hotels and travel sites like Expedia are also offering gas gift cards as an incentive for booking travel. These deals are pretty straightforward.

Finally, even grocery stores are getting into the act, offering discounted gas to loyalty card holders. Kroger's Co. offers 10 cents off per gallon after shoppers spend $100 at the store. Nothing against FDR, but one thin dime is hardly worth changing your gas buying habits for.

Penny wise and pump foolish

That brings me to my final point. Consumers tend to be very price sensitive, and marketers are keenly aware of this. But while trying to chase down lower gas prices, many drivers are penny-wise and pump foolish.

A survey conducted in 2007 by petroleum retailers found that one in four car owners said they'd drive 10 minutes out of their way to save 3 cents per gallon. That makes no sense. Taking that extra trip saves a driver 36 cents on an average 12-gallon fill up, but it costs about $3. Assuming the driver averages 45 mph, getting to that magical discount gas station will end up requiring a 15-mile detour, round trip. Assuming the car gets 20 miles to a gallon, and the price of gas is $4, the extra trip costs $3, or nearly 10 times the amount saved!

And so it is with gas discounts. Despite the high price of gas, consumers who try to chase a few extra pennies should be aware they might end up being led by the nose into a money-losing deal.

Here's a comprehensive list of other gas-saving deals.

Have you found any gasoline discount deals that really work for you? Share them here.