Since 1984, when I was a college student, I have had a credit card. I still have my first card, which originally had a limit of $300 and was issued by my hometown bank.
Well, that bank was bought, and then it was bought again. My little hometown card today is a BankAmericard Cash Rewards card, and the limit has increased into five digits.
That card has been my good friend. As my family has grown, this card has been there with me. I bought our first car seat with it. I used it to pay for art supplies so my then-toddlers could paint on the kitchen floor (newspaper was taped to the floor). As the kids grew, we used the card to buy them computers that they could use for their school work. Meanwhile, I have built exemplary credit by having a card for three decades.
My loyalty to my card has paid off. Now, without even making an effort, I am clearing about $800 a year just for using the card.
That’s right. I make $800 a year, and nothing is cutting into that sum. That’s the power of rewards cards.
Here’s how I’m doing it:
I don’t pay an annual fee. Annual fees cut into how much you profit from rewards plans, and you need to account for them when deciding on the best card for you. Because I have no annual fee, my cash back is pure profit.
I don’t carry over a balance. This means I’m not paying interest, which would further dig into my rewards. That’s something CreditCardForum.com chief Ben Woolsey advises that you do if you are going to use a rewards card.
“If you carry balances on a regular basis, it’s best to avoid a reward card altogether,” says Ben. So, because I pay my card bill in full and on time each month, I’m further benefiting from this card’s rewards.
But how do I use my card? Actually, I don’t use the favorite tricks of rewards card experts. I don’t put my utilities on it, for example. And I don’t shop at specific stores to max out my points. However, if we have a big purchase, for example, holiday shopping or a new computer, the Bank of America card is my card of choice.
As a result, I accumulate about $200 in cash back every three months. I credit my card account with the cash, and put it toward the next month’s bill.
There are other things I can do to maximize my rewards.
For example, by shopping online on my card’s WorldPoints Mall, I found one retailer that gives you 17 points back for every dollar you spend. Four points for every dollar spent is typical on this site, and the 400 retailers include major merchants such as Macy’s, the Apple Store, Staples and The Home Depot.
The card is very versatile, with the option to get gift cards or travel rewards instead of cash.
But I don’t plan to change my shopping habits — nor should you. You shouldn’t have to adjust your life to benefit from a rewards card. Instead, shop for the one that fits your needs.
When you are shopping for a rewards card, go through this checklist:
Does the card have an annual fee? And if so, will you spend enough to recoup the annual fee? (See the chart below to use for cashback plans.)
Will you be able to pay the card in full and on time each month? Otherwise, you are just wasting your money.
Does the card fit your current lifestyle? For example, will you primarily use the card for groceries and gas? Then, you want a card that pays $2 or more for every dollar you spend on those items.
Part 2 of fitting your lifestyle: Make sure your favorite stores fall under the merchant category codes that the card rewards. For example, see Visa’s code list.
Travel a lot? Look at travel cards that reward you for using your favorite hotels and airlines. (My husband and I made the mistake of upgrading his American Express Delta card. We pay $195 a year, get lots of travel benefits and have 59,000 Delta points, but we don’t use them because we no longer travel on Delta. So we are wasting money on a rewards card that we aren’t taking full advantage of. Why? Because it doesn’t fit our lifestyle.)
I’ve found that by having a card that fits my lifestyle, that doesn’t have an annual fee, and by paying in full and on time, I not only maintain a high credit score, I actually make money by using the Bank of America card. Not bad for a little hometown card that started with a $300 limit.
When it comes to rewards cards, I’m not as observant as I could be.
I have a Bank of America Rewards Signature Visa and typically cash in my points for credit on my bill when it’s enough to make a difference. But other than that occasional small balance reduction, I haven’t taken much advantage of this card’s benefits. I know I can do better than I’ve been doing.
That’s why Ben Woolsey got my attention. He’s an expert on reward programs and president and general manager of CreditCardForum.com, the web’s largest interactive forum dedicated to credit card rewards programs.
Ben says that with a hefty sign-up bonus and by keeping on the lookout for cards that will maximize your expenditures, you can enjoy great benefits such as trips overseas and free hotel stays. The trick is to read the fine print and spend some time analyzing how you use your credit card. Do you use your card for groceries? Are you open to paying your phone and cable bills by credit card? How you answer will help you choose the right card for you.
I’ve asked Ben to bring his expertise to our Oct. 16, 2014, Google+ Hangout, hosted by CreditCardGuide editor-at-large Erica Sandberg. At 11 a.m. Central Time, Ben and Erica will explore how you can maximize rewards cards in time for the holidays.
Ben comes with an impressive background in the credit card world. Prior to his role with CreditCardForum, Ben served as an industry analyst for CreditCards.com. He has also worked in the credit card industry for several of the nation’s largest issuers, where he has managed co-brand partnerships and designed reward programs.
Erica is a personal finance expert, advice columnist and show host. She is author of “Expecting Money: The Essential Financial Plan for New and Growing Families” and is KRON-TV’s consumer finance expert.
At our Google+ Hangout, the chief of CreditCardForum will talk about:
How to get the most out of your travel points.
What you need to know about annual fees.
What can happen when you don’t use your card enough.
When a rewards card is not right for you.
The dangers of overspending in your quest of points.
Maximizing cash rewards.
Choosing the right cards for your priorities.
Why you should also be thinking in the long term about your rewards.
Join Ben and Erica at 11 a.m. CT on Oct. 16 on CreditCardGuide’s Google+ page for our G+ Hangout about maximizing rewards cards during the holidays. Questions for Ben? Hashtag #RewardsCardsCCG on Twitter, Facebook or Google+.
I got an email from Southwest Airlines warning me that my miles would be expiring in January. Rapid Rewards points expire after two years. Because I now live in American Airlines territory, it’s been a while since I’ve earned points.
I’ve already let my points with AirTran and Frontier expire this year because I had so few points with them that keeping them alive wasn’t worth the hassle. Yet Southwest is different. Although I recently cashed in most of my points, my remaining balance puts me more than half way to a free one-way ticket. I don’t fly Southwest that often, but I’ve decided I’d like to keep those points around. If I happen to make a couple trips with them in the next couple years, I’d like to get a free ticket out of the deal.
The easiest way to keep rewards points active is to earn more points. The problem is, I don’t have a credit card with Southwest. If my Aadvantage miles with American were in danger of expiring, I could re-up my entire balance by buying groceries with my Aadvantage card. I can’t do that with Southwest.
Southwest’s email had a variety of suggestions for keeping my miles valid without a credit card, but most required buying stuff via its rewards portal — mostly stuff I don’t need or want.
My first plan of action was to buy something small, like a song on iTunes. This is the go-to advice for keeping points active among rewards bloggers, and I was happy to see that I could earn points via the Apple Store through Southwest’s shopping portal. But then I read the fine print:
“… not eligible on Apple iTunes purchases through the Apple Store.”
I then considered buying a gift card on the rewards portal and then using it for something I needed. Yet the selection on Southwest’s shopping portal was pretty limited. Although there were gift cards for many stores I’d love to shop in, none of those stores offered anything I was planning to buy. Nor did they match the interests of anyone on my holiday gift list. So I decided that getting a gift card would just become an excuse to stray from my budget.
There is one thing I buy every week, though, that will also keep my points alive: A meal out. My boyfriend and I dine out once a week as a special treat and as motivation to cook most meals at home.
Southwest, like many other airlines, offers a dining program: You register a card (it can be any debit or credit card in your wallet) with the airline. If you eat at one of the airline’s partner restaurants and pay with that card, you earn points.
I’d never considered joining an airline’s dining program before (I hate keeping track of rewards). But in this case, signing up provides a convenient solution for my expiring-points problem. I scrolled through the list of Southwest’s dining partners and found a place where I just so happen to have an unused gift card for. I’ll pay for part of the meal with the gift card, pay for the rest on the card I just registered, earn a few Rapid Rewards points and relax for another two years, knowing my points are safe and sound.
Oh, and because I registered my rewards card for the dining program, I’ll earn 1 Aadvantage mile per dollar spent. I also registered the card with American’s dining program. Although I don’t plan to seek out restaurants in its network, a few extra miles here and there couldn’t hurt.
Although keeping miles active is relatively easy, point expiration is frustrating. You earned those points by doing time in the air. And, unlike food, it’s not as if they’ll spoil if you let them sit around too long. Forcing you to keep points active is just the airlines’ way of getting you to spend more money (either with them or with their partners) — so don’t spend more than you have to. These tips from travel experts will help:
BoardingAreahas a list of 36 odd and random ways to keep your points active, from getting an insurance quote to taking surveys.
The Points Guyrecommends linking every piece of plastic in your wallet to the dining programs of every airline you fly. Once you’ve got it all set up, it’s an effortless way to earn points — and keep yours active.
If you do let your miles expire, you can buy them back. MileValue explains how.
WorldWanderlusting has the expiration polices for all major U.S. Airlines, so you won’t be surprised.
The Well Traveled Mile suggests donating miles to charity or transferring points from other programs into your mileage account to prolong the life of miles that are gathering dust.
I’ve been in the market for a new credit card for a while. My credit history suggests I can probably get a pretty good card, so I’ve been scoping out rewards cards for the past few months.
I’m an extreme comparison shopper at heart, and found myself oscillating between cash-back cards and travel rewards cards. On one hand, I like the idea of getting money back on each purchase. On the other, I’d love to snag a free flight.
Ultimately, I decided on an AAdvantage rewards card from Citi. To make my choice, I performed the following steps:
Step 1: Looking at the pros and cons The first step of my research involved taking a look at the overall advantages and drawbacks of the two major types of rewards cards.
The case for cash-back cards: On CreditCardGuide, we’ve dubbed cash-back cards the most low-maintenance rewards cards out there. Swipe your card and get a small kick-back automatically. Then redeem that cash for a statement credit, a gift card or a deposit into your checking account.
The case against cash-back cards: Rotating rewards categories can make these cards tricky. One month, you’re earning up to 5 percent back at hardware stores. The next month, you’re … wait … you better check your card’s website to find that out.
Travel rewards cards
The case for travel rewards cards: Your everyday spending turns into miles, which you can redeem for a free flight. You can declare your loyalty to a particular airline with a co-branded card that gets you extra perks (such as free checked bags and priority boarding) in exchange for your fidelity. Or, you can get a general purpose travel rewards card that gives you miles that can be cashed in with any airline.
The case against travel rewards cards: Travel rewards are often accused of giving cardholders “funny money” — murky miles that greatly fluctuate in value, based on when you fly. As personal finance blog Seeking Alpha points out, cash-back cards generally give you a pretty consistent 1 percent (a cent for every dollar spent) back. Rewards miles, on the other hand, can be worth less on popular routes during busy travel times.
Rewards site FrequentFlier.com, meanwhile, points out that the glamorous extras touted by airline cards are generally only accessible to elite fliers — not steerage passengers (like me). The BudgetTravel blog, meanwhile, warns that airline cards promise free flights but often nickel-and-dime cardholders for upgrades.
Perhaps the most scathing review of airline cards, however, comes from travel blogger and consumer advocate Christopher Elliott. In USA Today, he criticizes airline cards for trapping loyal fliers with bait-and-switch tactics. The airlines constantly reduce the perks and rewards frequent fliers have grown accustomed to, forcing them to either abandon their hard-earned miles to fly with another airline, or keep crawling back to the airline that takes them for granted.
Step 2: Analyzing my circumstances
So, given the arguments against airline cards, why did I decide to apply for one anyway?? Well, it’s not the cushy perk that attract me, but the free flight, plain and simple. So I chose the AAdvantage card for two reasons:
1. My flight patterns My airline loyalty over the past several years is split between Southwest, Delta and American. I cashed in a bunch of my Southwest miles recently, so my balance is almost at zero. I have just 5,000 rewards miles with Delta, which isn’t much. Meanwhile, I have 20,000 miles sitting in my AAdvantage account. That’s not enough to get even the cheapest round-trip ticket anywhere. Yet, with the 30,000-mile sign-up bonus the Citi Platinum Select AAdvantage card is currently offering, I’d be looking at a free ticket nearly anywhere in the U.S.
Admittedly, getting a rewards ticket just because I can doesn’t count as saving money. However, I fly to my hometown for Thanksgiving and Christmas. It’s a regular expense I build into my budget. The Midwestern airport I fly into is tiny, and American is one of the few airlines that flies there. Plus, the city I fly out of is an American hub. So If I want to get home, I’m pretty much stuck with American. If I can get just one of those flights for free in 2014, that’s several hundred dollars saved.
2. The numbers added up Wouldn’t I be better off getting a cash-back card and using the cash toward a flight? That only works out if a cash-back card earns me more money than the airline card. In my case, for the first year of card ownership, it wouldn’t.
Here’s how I ran the numbers:
Cash back: I had my eye on the Capital One Quicksilver card. It offers a constant 1.5 percent cash back on all purchases. Because I don’t spend much on groceries (I don’t have a family) and gas (I live 10 minutes from work), cards offering extra for grocery and gas purchases in exchange for a lower regular rate wouldn’t do much for me. The card also offers a $100 bonus for spending $500 in the first three months and has no annual fee.
Thanks to the spending data I’ve been collecting and the personal finance apps I use, pulling up the average amount I spend each month was relatively easy. Paying rent with a credit card isn’t possible (unless you get creative), so I subtracted that out of my monthly spending. That left me with about $1,000 in spending per month on average.
Assuming I use my credit card for all of that (and get the sign-up bonus), in the first year of card ownership, I would earn:
$180 in cash back + $100 bonus =
$280 in cash back
Not too shabby.
Airline card:Again, because of my flying patterns, I had my eye on the Citi Platinum Select AAdvantage card. It offers 1 mile per dollar spent on regular purchase and 2 miles for American Airlines purchases. It also offers a 30,000-mile bonus if I spend $1,000 in the first three months (I plan to make that spending requirement by charging my tickets home for Thanksgiving and Christmas 2013 by November). The card has a $95 annual fee, waived the first year.
During my first year, I would earn:
$12,000 in earned miles + 30,000 bonus miles =
But that’s not all. Some of that spending will earn me double miles, assuming I buy at least one American ticket in the next year (which I almost definitely will). Plus, I’ll be earning the AAdvantage miles I’d otherwise earn on any American Airlines flights I take. Finally, I’ll finally be able to use those 20,000 miles rotting away in my account.
With all those extras, at the end of next year, I’ll be looking at a balance of about
My tickets home for Thanksgiving are generally pricey: around 50,000 miles, for a ticket worth anywhere between $350 and $500 dollars.
I’d be getting that ticket with my miles, so that’s at least:
$350 saved, if not more.
…That beats my projected cash-back earnings.
Looking ahead The AAdvantage card has a $95 annual fee, waived the first year. So, I’ll either have to cancel the card within a year, or negotiate to have the fee waived another year. My co-worker successfully managed to have her annual fee reimbursed by threatening to cancel, so I’m willing to give that a try myself.
Even if I do keep the card, it’s the sign-up bonus and my current miles balance that really make the AAdvantage card worthwhile. A year from now, I’ll consider getting a no-annual-fee cash-back card and keeping it for the long term.
If there are any rewards aficionados reading, I’d love to hear from you. Is there anything I’m not taking into account? Experiences (good and bad) with your rewards cards you’d like to share? Tell me about it in the comments.
Soon, my husband and I will start a big house remodeling project. We are going to turn the cramped kitchenette in our little Victorian house/former bed and breakfast into a real kitchen. So, I’ve been doing some research on how to leverage our spending to earn maximum airline miles.
Listening to hammering and sawing (and dealing with freaked-out dogs) for a month will wear on our nerves, so I’m hoping to rack up enough miles to allow us to fly off on a relaxing weekend trip after the dust settles.
We recently made a decision to stop using our rewards card for all of our regular expenses because we found that we were spending more than when we used cash or debit — but we made an exception for big purchases such as this remodel. For one thing, we want the consumer protections that come with using a credit card. Also, we already have a set budget and money in the bank, so we’re less worried about overspending. And it is appealing to get a prize back for shelling out that much money.
A remodel is a great opportunity to earn rewards, but it can present some challenges. If you’re also planning a home renovation or project, here are five tips to help you maximize the miles or points you earn:
1. Ask if your contractor takes credit cards. If your contractor takes credit cards and doesn’t charge you extra to pay with plastic, you’re in luck. In our case, our contractor doesn’t take cards but the plumber and electrician — whom we’ll pay directly — do. We can use credit cards to pay them without incurring a “convenience fee” that would cancel out our rewards. Although we were out of luck with our contractor, more of them are accepting credit cards than in the past, according to consumer review service Angie’s List.
2.If your contractor doesn’t take plastic, look for a workaround. As a workaround, we’re considering getting an American Express Bluebird card to pay our primary contractor. The card is reloadable and can function like a checking account, recommended by ThePointsGuy.com. That way, we would be able to use our rewards card to buy Vanilla Reloads (to load money onto the card) and then write a check from the account to the contractor. As travel rewards site TravelSort.com points out, using AmEx Bluebird checks works well not just for paying your rent or utilities, but also to pay your contractor for a house remodel. Just keep in mind that some retailers no longer accept credit cards (or limit the amount you can reload with a credit card) for Vanilla reloads.
3. Buy your own supplies. Don’t let your contractor buy pricey supplies and invoice you. Instead, arrange to purchase your kitchen cabinets, countertops, drywall and other items with a rewards card. That way, you can hunt for the best deal and choose purchases that will get you the most points or miles. The blogger Frugal Babe saved $200 by opening a Home Depot store card and getting 10 percent off of the first $2,000 of her initial purchase. We plan to look into that option, as well as the possibility of getting a Home Depot coupon that can be used toward our purchase of cabinets and other materials.
4. Consider gift cards. Blogger Jenny Lang of FrugalGuruGuide.com used discount gift cards to make her remodel pay off. She has a Discover card that pays 1 percent cash back on every purchase, and she can redeem it as cash or as a Lowe’s gift card. A $50 card cost her only $45 through the Discover redemption program.
5. Pay attention to categories. It might make sense to consider the timing of your remodel if you have a card that gives higher rewards percentages in ever-changing categories. In fact, FrugalGuruGuide.com points out that Discover and other cards sometimes offer 5 percent cash back for home improvement spending. Just beware of spending caps: Discover offers this percentage only on the first $1,500 spent.
6. Save wherever you can. Remember, look for discounts and deals wherever you can find them to cut the overall cost of your remodel, and be just as frugal as if you were spending cash. Spending more just to get points is always a bad idea because you earn only a tiny fraction of that money back. If you save that money and bank it instead, you’ll have more spending money for your free trip.
If you’re juggling multiple credit cards (and using some of them for different purposes), it can be tricky to keep track of your spending, bill due dates and rewards.
When my husband and I were putting all of our expenses on just one rewards card, the ease of spending with plastic lulled us into being a little less diligent with our finances. As I’ve also learned in the past, using multiple cards can increase your odds of getting mixed up with your finances.
Use these six tips to help you stick to your budget, make payments on time and get the most of your perks while using more than one card:
1.Budget before you spend. It’s easy to pull out the plastic now and worry about crunching numbers later. But when you use credit cards, it’s crucial to plan before you spend a cent. As the blog You Need a Budget points out, it doesn’t matter how you paid your $100 grocery bill. That amount should be recorded in the food category on your budget and considered spent, even if you haven’t yet paid your credit card bill. Using multiple cards can make things even more confusing, but adhering to a budget can help keep you organized.
2. Keep your cards straight. It’s hard enough to keep track of a slew of cards, but what about when some of your cards — the Discover It card, for example — have regularly changing rewards categories? That can make it hard to know which card to use when. Self-improvement website Always Improve Me has a simple solution: Put a piece of scotch tape on the front of each card and jot the categories on the tape with a marker. That way, you can be sure you’re pulling out the right card at the right time to maximize your rewards.
3. Record your purchases. The more credit cards you’re using, the more complicated it will be to keep track of them. So, it’s a good idea to come up with the tracking method that works for you and to use it to record your spending regularly — if not every day, then every few days or at least every week. Some personal finance experts recommend saving your receipts and recording those purchases in one place when you get home. Others recommend jotting down all purchases in a notebook. Whatever you do, don’t count on the credit card company to keep track of your purchases for you.
4. Keep running tallies. Once you have your individual purchases recorded, you need to regularly transfer them to your spreadsheet, online program, app or wherever you keep track of your budget. You’ll need to keep a running tally of the total amount you’ve spent across all of your cards that month and the total for each budget category. For example, if you charged a $30 oil change on one of your cards, you’ll record that amount in the car maintenance category of your budget and also add it to your running total credit card balance. You might have to make adjustments, just like you would if you were spending cash. For example, if you go over the amount you budgeted for dining out, could you cut back in the lawn care or gifts category to make up for it?
5.Set up payment alerts. If you’re juggling multiple cards, you might be juggling several payment due dates, too. The Frugal Travel Guy recommends setting up text or email alerts or other reminders for your bill due dates, using whatever system works for you. If you use online banking through your credit card company, you can also set up alerts to notify you when a charge over a certain amount is spent on your card. These alerts can serve as nudges to check in with your finances and record your purchases on your budget tracker.
6. Keep track of your rewards. The effort of juggling multiple rewards cards will come to nothing if you’re not careful about tracking, maximizing and redeeming your rewards. Many consumers aren’t: An April 2013 survey by ThePointsGuy.com found 73 percent of consumers don’t know their rewards balance. So use a tool like AwardWallet.com to track your rewards earnings.
Do you ever find the credit cards in your wallet getting lost among all of those store loyalty cards you signed up for?
If you’re like me, you probably carry around way too many of these cards. In fact, a January 2013 survey by Edgell Knowledge Network showed that the average U.S. household belongs to a whopping 18 store loyalty programs.
I belong to fewer than 10, but that still feels like too many. I signed up for many of the programs, including the ones from CVS and Rite Aid, because I thought it would help me save a few dollars. But some of the programs have just been a hassle. For example, at CVS I often forget to pull out my card. And when I do get “Extra Care Bucks,” coupons on my receipt, they tend to get lost in my purse and I forget to use them before they expire.
Nonetheless some of the programs work well for me. For example, I have a Pet Supermarket card that gets me a coupon for a free bag of dog food (a $20 value) every few months. I shop there all the time because it’s the only local place that sells the pet foods I prefer to buy. And I always remember to use my card because the store employees remind me every single time.
So, how do you decide if you should sign up or say “no thanks” next time a cashier offers you a loyalty card? Here are some things to consider:
What do you have to do?MSN Money advises consumers to think about how much time and effort they have to put into a store loyalty program. Remember that it takes time to keep track of all the cards, sort through terms and conditions and redeem your rewards. Is it worth it?
Will you end up spending more? Part of the aim behind store loyalty programs is to get consumers to spend more. If you find yourself buying more or buying things you wouldn’t otherwise have purchased, you might want to rethink your participation, according to YourLifeforLess.com. Spending $10 to save $1 doesn’t make sense. For me, that’s why the pet food program works so well: It’s something I’d buy anyway.
What do you actually get? According to the research by Edgell Knowledge Network, 81 percent of consumers enrolled in loyalty programs don’t know the benefits. So, it’s a good idea to read through the terms and conditions, find out exactly how the program works and see what kind of benefits you’d get.
How does it make you feel? Do you get overwhelmed by having so much plastic and digging around every time you want to use a card? Or by having to use a smartphone app to keep track of all of your loyalty programs sans plastic, as Digitwirl.com recommends? Do you forget to cash in your rewards, then get annoyed at yourself later? If that’s the case, it might just make sense to streamline your life and concentrate on saving money in other ways.
In today’s guest blog, Michael Dolen of CreditCardForum explains why you’re not likely to find a card with both a great sign-up bonus and a long 0 percent period — and how to choose between these two perks.
Whether it’s a lingering debt hangover from the holidays or just wanting to find a better rewards program, the first part of the year is one of the most popular times to apply for a new credit card.
As a result, card issuers are offering a plethora of great sign-up incentives, featuring low interest rates and big rewards bonuses. For example, you can find 0 percent APR card offers for up to 18 months or 40,000 bonus points deals. Unfortunately, however, you’re not going to score both a long interest-free period and a juicy bonus offer at the same time. Here’s why…
Reason No. 1: Zero percent offers cost banks money
Granted it’s not a lot these days, but banks still have to pay interest on the money they borrow and then lend out to you in the form of a 0 percent offer. Because the bank is already taking a hit on these offers, it’s much less inclined to take another hit by also giving you a cash or points bonus.
Reason No. 2: Two different types of customers
It’s true that everyone likes to earn rewards, but generally speaking, a customer with credit card debt has different priorities from the rewards chaser. People with debt are looking to minimize their interest costs. Those who always pay their bills in full each month, on the other hand, are much more focused on rewards programs, since the APR will be largely irrelevant to them. Rather than target both types of customers with the same offer, most banks prefer to create different cards and incentives for each group.
Reason No. 3: Higher rates help offset the rewards expense
It costs money for credit card companies to give us cash back and airline miles on our purchases. Some of that expense is offset by the processing fees (the fees merchants pay to process your card). In addition, any finance charges we pay on balances also help pay for the rewards. This is why the best reward cards almost always have higher interest rates (not to mention annual fees!) than low-interest, plain vanilla cards.
For example in my review here of the Chase Freedom card, I discuss how it gives up to 5 percent cash back and has a variable APR of 12.99 percent to 22.99 percent. On the other hand, the APRs on low-interest cards from Simmons First National Bank, a purveyor of plain vanilla cards, are astonishingly low at 7.25 percent or 9.25 percent.
Aim for rewards or low rates, not both!
There are some cards that offer both 0 percent APR and a rewards bonus, but you will see their offerings in both categories are mediocre at best. If you want to get the top balance transfer offers on the market, then you will want to go after a card that gives you that and nothing else. On the flipside, if it’s the rewards bonus you are after, you will see the most generous cards don’t give you 0 percent — and if they do, it’s only for a relatively short period of time.
Now if you still insist on having your cake and eating it, too, the best way to accomplish that will be to apply for two separate offers — one for low interest and another for rewards. Be forewarned, however, that every time you apply for a card, the issuer will check your credit, which will temporarily ding your credit score. My advice is to apply for the card you want most first, then wait a month or two before applying for another card.
Michael Dolen is the founder and managing editor of CreditCardForum.com, which is the leading online
forum solely dedicated to credit cards. His “no holds barred” credit card reviews and commentary are regularly featured in financial publications and websites such as The Wall Street Journal, The New York Times, Bloomberg and US News & World Report.
His knowledge and expertise come from real world experiences. After being left with monstrous medical expenses from an auto accident at age 18, he strategically used 0% credit card offers to finance his out-of-pocket costs not covered by insurance. These days, he’s debt free and focuses on finding new ways to maximize rewards and milk cardholder benefits. As a small business owner, he’s also well aware of the struggles that both entrepreneurs and established companies face when it comes to business credit in today’s economy.
When he’s not busy surfing the Web for credit card deals, you will likely find him surfing the waves along Southern California’s coast, where he lives.
LivingSocial, the major competitor of daily deals giant Groupon, has teamed up with Chase Card Services and Visa to offer a different take on a rewards program.
The LivingSocial Rewards Visa Card will give LivingSocial users points on all purchases made anywhere, but the rewards will pack extra punch if the card is used to buy a LivingSocial deal.
The program is geared toward the daily deal addicted. Rules say card members earn five reward points for every dollar spent on LivingSocial purchases, three points for every dollar spent on dining and one point for every dollar spent on any other purchase.Essentially, LivingSocial fans who sign up for the card will get 5 percent back on all their purchases at the site.
“We are pleased to offer social-buying enthusiasts a product that enhances their shopping experience with the ability to earn rewards for their purchases,” Dan Dougherty, director of Chase Card Services, said in a statement.
For each 100 points, cardholders get one LivingSocial Deal Buck. As part of the first-year promotion, cardholders get 10 Deal Bucks for making 10 purchases each billing cycle. They’ll also get 30 Deal Bucks upon approval for the card.
Deal Bucks are applied to the cardholder’s next eligible purchase on LivingSocial, and there’s no limit on how many program participants can rack up.
Combining daily deals programs with their card offerings might be a good deal for issuers, as the daily deal crowd appears to be a safe bet in terms of creditworthiness.A September 2011 Lightspeed Research brieffound that, relative to the overall U.S. credit card holder population, Groupon and Living Social customers:
Are about 50 percent more likely to have household incomes above $75,000.
Have higher credit scores.
Make three times as many credit card purchases.
Are about twice as likely to pay their monthly credit card balances in full.
There are potential rewards for merchants, too, in the form of new and repeat business.
Daily deal companies, which offer online users everything from low-cost manicures to painting classes, to discounted international vacation packages, have been criticized because often the customer uses the deal and never returns.
The new credit card, however, will include incentives for repeat business, John Bax chief financial officer of LivingSocial, told Reuters. LivingSocial has not yet released specifics. Yet Groupon has approached the repeat-business problem by offering loyalty incentives (like extra discounts for returning to a business, or for spending a certain amount).
“We will use this as a platform to encourage people to come back to merchants,” Bax said. “Small and medium-sized local businesses will never be able to have their own credit card or loyalty program. We will be able to bring them the benefits of that.”The co-branded credit card is the first of its kind. Yet issuers and card networks have been making forays into the daily deals market for some time now. In March, for example, American Express launched a daily deals program with Twitter. MasterCard, meanwhile, announced in April that it would be partnering with the Chicago-based Local Offer Network.
When it comes to the type of plastic many people are opting to get in their pocketbooks this summer, there is no doubt that rewards credit cards are the one. Over the last couple of months, within the card industry we have seen a complete overhaul of rewards consumers’ receive. Nearly every issuers has introduced something new that would hopefully give them the edge among cardholders, and one issuer in particular has recently announced their newest program. That issuer is Citi Bank, and with their "Extra Cash" rewards program they are looking to become the leader when it comes to putting more money in cardholders’ pockets.
So what exactly is "Extra Cash"? In short it is a way that Citi cardholders can earn discounts in many of the most popular reward redemption categories in the credit card industry (travel, entertainment and merchandise). As those carrying eligible cards are automatically enrolled in the program they will receive the equivalent of 10% of their purchase amount in "extra cash dollars" which can be used on a wide range of items within an online shopping mall. In all, Citi Bank says that these cardholders can save up to 40% on merchandise bought using the extra cash dollars.
Already this year we have seen great rewards such as cash back, increased points and increased mileage offered just for making purchases that are normally made every day. As the year goes on consumers should be able to expect that issuers will become even more aggressive in their fight for gaining cardholders and market share. We have yet to get to the time of the year where rewards really seem to give consumers the most for their money, so for cardholders 2010 could be one of the most rewarding ever.