Credit card offers could work as useful tool
BY TERRY SAVAGE January 20, 2013 6:20PM
Updated: May 3, 2013 12:15PM
As your holiday credit-card bills start arriving, this is a good time to take a close look at what you are paying for finance charges — and consider whether another card with lower rates, lower annual fees, and a low introductory rate for balance transfers might make a dent in your debt repayment.
Or if you aren’t carrying a balance, you might be surprised by some of the cash-back offers being made to entice card-users with excellent credit to switch cards.
Banks are in search of more credit-card business. In the past few years, Americans have tended to pay down balances and avoid the use of excess credit. While that means fewer delinquencies and charge-offs for card issuers, it has also meant less money collected in finance charges and all sorts of fees, from late charges to over-limit penalties.
It’s no wonder that card issuers are rolling out new deals to attract a wide range of customers as the economy and spending pick up steam. According to CardHub.com, the value of initial rewards bonuses is on the rise — nearly 15 percent higher than last year. Plus, the average initial miles or points bonus for taking on a new card increased more than 12 percent from last year — to an average of 10,366 point/miles. (CardHub surveyed more than 1,000 credit card offerings.)
Customers with excellent credit pay an average of 13 percent on carried balances, while those with fair credit paid an average of 19.58 percent in the fourth quarter of 2012. But those in the “penalty box” — for having gone over their credit limits or failed to make minimum required payments, pay an average of 28.23 percent — with some cards charging more than 30 percent interest!
There is no one “best deal” for everyone. The card that works best for you depends on your individual circumstances. Among CardHub’s 2013 survey favorites for those with excellent credit, who are searching for rewards, are the following:
Chase Sapphire Preferred Card: You get 40,000 bonus points for spending $3,000 during the first three months, which can be redeemed for a $400 statement credit.
Blue Cash Preferred from American Express: This card gives 6 percent cash back at supermarkets (up to a $6,000 annual limit), and 3 percent cash back at gas stations and department stores, or 1 percent on other purchases. The annual fee of $75 may be offset by these rewards.
CardHub also highlights best deals for balance transfers:
Slate card from Chase: This card offers a 0 percent introductory rate, and no balance transfer fee or annual fee.
Citi Diamond Preferred: This card offers an 18-month introductory rate of 0 percent, the longest such rate, and it applies to both transfers and new purchases. But there is a 3 percent balance transfer fee.
When choosing a balance transfer, it’s important to be aware of how long the introductory rate will continue. The range is from six to 18 months, with the average of 10 months at the intro rate. Then the rate jumps to slightly over 16 percent, on average, with some as high as 25.99 percent! And, the average fee on balance transfers is 3 percent of the amount transferred.
If you are considering a balance transfer, you may be jumping out of the proverbial frying pan and into the fire, unless you can use that introductory period to pay off your balance.
There are some other interesting card deals out there, designed to catch the attention of money- conscious consumers:
Citi Price Rewind: On certain “eligible” Citicards, and on “qualified” purchases, the consumer can register the purchase and this tool will search hundreds of retail sites for 30 days after the purchase to find a lower price. If a price is at least $25 less than what the card-member paid, Citi refunds the difference — up to $250 per item. Details at www.citi.com/pricerewind.
Discover ‘it’: This strangely named card is a takeoff on the “It Pays to Discover” ad theme. It’s a no-annual-fee card that also has no other onerous fees — no over-limit fee, no foreign transaction fee, and no fee for your first late payment. The card offers generous rewards — up to 5 percent cash back on certain categories that change throughout the year, a 1 percent cash back on all other purchases, and larger bonuses when purchases are made through its ShopDiscover site. Plus there’s a concierge to help you decide how to make best use of the card, including setting your own monthly payment date.
Fifth Third Duo card: While most debit cards can be used either as debit purchases, using a PIN, or “credit” purchases, by signing the slip, these cards typically access only the money in your bank account, depleting the balance when the purchase is recorded. The Duo card lets you access your established line of credit if you sign for your purchase — leaving the money in your checking account available to pay current bills. If you use the card for credit purchases, you can earn points for every dollar spent.
Finding the best card
You can search several websites to compare cards based on interest rates, annual fees, and the rate and cost for balance transfers.
At www.CardHub.com, there is a tool called “Credit Card Advisor” that will sort through the offers for you, after you fill out an anonymous online form indicating your past credit history. Another tool easily helps you estimate your credit standing, without giving personal information.
At www.Bankrate.com, you can search and compare cards by type, or by your credit score. So if you’re looking for a “secured card” (which allow those with no credit history to build credit), or cards with benefits for students, or cash back rewards, or balance-transfers, you can easily compare features.
Keep in mind that your credit report is impacted not only by the balances on your cards and the number of cards outstanding, but by the length of time you have had your credit card. So you might want to pay off, but keep your oldest credit card to maintain your credit standing while you pay down your balances, save on interest, and earn rewards for the money you do spend. It’s a balancing act. And that’s The Savage Truth.