Author Archives: ccwatcher

FICO 08: The Next Generation in Credit Scoring

Credit Report

In an effort to more accurately assess the credit risk of borrowers, Fair Isaac is making further tweaks to its formula for credit scoring. The Wall Street Journal and MSNMoney have recently reported on some of the changes in the pipeline. Highlights of the new scoring model, called FICO 08, include:

  • Eliminating the benefits of “piggybacking,” as outlined in a prior post, where scores are artificially boosted by adding authorized users onto an established credit line
  • Rewarding those with more varied types of credit, such as having both revolving (e.g., credit cards) and installment accounts (e.g., mortgages, auto loans)
  • Penalizing those who use a high percentage of their available credit
  • Increasing the importance of keeping accounts active
  • Allowing more leeway for borrowers more than 90 days late on a payment if most of their other accounts are in good standing; conversely, penalizing borrowers who have multiple such delinquent accounts more harshly

The score itself will still have the same scale, with scores ranging from 300 to 850, and be based upon the familiar parameters of payment histories, credit history length, number and type of credit inquiries, as well as the mix of credit accounts in use. Because of disputes between Fair Isaac and the three credit bureaus, however, it is unclear as to the exact timeline of Fico08’s release. For more details, see the WSJ or MSNMoney articles.

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Pet Credit Cards: PetSmart Pet Perks Visa, PetRewards Visa

Balance Transfer Offers, Bank of America, Reward Cards, WaMu

As a doting pet owner, this post at SD about the PetSmart Pet Perks Visa caught my eye. It offers:

  • 3 points per $1 spent at PetSmart, petsmart.com and Banfield, and 1 point per dollar everywhere else,
  • 0% intro APR for 6 months on purchases and balance transfers (with no fee within the first 90 days)
  • $20 PetSmart gift card after first purchase
  • Personalize your credit card with your pet’s photo

As you can see, the offer is not much to “woof” about. (Compare this to the Chase Freedom card, for instance, which trumps this offer in nearly every respect.) But it did remind me of the Pet Rewards Visa, a card which I had previously panned. When looking at the Pet Rewards offer with fresh eyes, however, it actually looks to have a good niche use:

  • Earn 2 points per dollar spent at participating veterinary clinincs, pet food retailers, farm and feed stores, and neighborhood pet stores; 1 point per dollar anywhere else
  • 0% intro APR for 6 months on purchases and balance transfers (with no fee)
  • 500 points after first purchase
  • Personalize your rewards card with your pet’s photo

Now, on the surface these benefits look pretty similar to the Petsmart card. The redemption opportunities for the PetRewards credit card, however, make the difference. You can redeem 1000 points for $20 worth of vet expenses at any veterinary office, turning this card into a 2% card for general use, or 4% if your pet care expenses are with participating vendors. The main issue with redemption, of course, is the convenience factor, as you’ll have to fill out a form and return receipts in order to be reimbursed. For those with pet expenses who don’t mind sending in receipts, however, this card represents a reasonable option.

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The Latest Impacts of the Credit Crunch on Balance Transfer Offers

Balance Transfer Offers, Chase, Discover

In the latest sign that the credit crunch is spreading, the AP reports that the rate of delinquent and defaulting credit card accounts has skyrocketed recently. Credit card companies have been revising their estimates of 2008 write-offs upward due to defaults; for instance, Capital One last month projected at least $4.9 billion of default-related write-offs.

Every issuer has responded in at least some way to mitigate their risks. This is most evident in my survey of offers to new customers. Here are some illustrative examples:

  • Just in the past month, Discover has reduced the intro 0% period for purchases on their consumer cards from 12 months to just 6 months.
  • Despite the decline in the prime rate, Capital One has increased the APR on its consumer cards by half a point, also in the past month.
  • Chase has also been aggressive in systematically reducing its exposure by making its balance transfer offers much less attractive. While Chase’s offers of 12 months at 0% APR used to be plentiful on its affinity cards, the available options have shrunk immensely. In fact, the number of cards that offer an intro 0% APR for 12 months has shrunk from well over 100 a half year ago, to just 7, by my latest count. The max balance transfer fee has also increased on many cards, from $75 to $99.

These changes appear to be working for Chase, as its trust was the one exception in October where delinquencies and defaults both declined. Unfortunately for deal-hunting credit consumers, this may translate into deals being leaner in the times ahead.

For reference, here are the 7 Chase offers that I found still carry a 0% intro APR for 12 months:

On an off-topic note, does anyone else find it oddly coincidental that the only university-related card with 0% for 12 months represents a team playing for the national championship in football?

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Penfed Rewards Visa to Offer 2% Rebate on Groceries

Cash Back Cards

According to Banking Guy, PenFed will be improving their already-excellent Visa Platinum Gas Cash Rewards card. In addition to 5% on gas and 1.25% on everything else, PenFed will begin offering a 2% rebate on groceries as well, starting in January.

With your cash back credited back to your account monthly and no additional fees for purchases made in foreign currencies (other than those imposed by Visa), the card is excellent for general-purpose use. While membership in PenFed is required, it is easy to join. A list of eligible institutions is located here; if you are not already a member of one of these groups, you can join the National Military Family Association for a one-time fee of $20, and become instantly eligible for PenFed membership.

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Chase Freedom Plus Card: 3% Rebate on Spending in Top 6 Categories

Cash Back Cards, Chase

Chase has introduced the Chase Freedom Plus card, a new and improved version of its Freedom credit card. It appears no different than the regular Chase Freedom cards, except that it offers a 3% rebate on spending in your top 6 monthly categories, rather than your top 3, in addition to a 10,000 point introductory bonus. Also, it appears that there is a $30 annual fee, which is waived the first year, although the terms on Chase’s website are conflicting about that.

Link

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US Bank: 0% Balance Transfer for 12 Months, No Fees

Balance Transfer Offers, US Bank

A few months or so ago, US Bank took down its 0% offer on balance transfers for 12 months with no fees on its Baylor Alumni Association credit card, replacing it with a 3% uncapped balance transfer fee.

A few FW members now report that it is still possible to get a no fee balance transfer promo code with the following steps:

To receive 0% for 12 months with no fee, please use promotional code 45248.

You have two options on the website to find the request form for a balance transfer:

From the “Customer Service” Link at the top of the usbank.com homepage:

1. Scroll down to “Credit Card and Premier Line Account Options.”
2. Click on “Manage Your Credit Card or Premier Line Account.”
3. Choose the appropriate drop-down box for your credit card product (i.e., U.S. Bank, Gymboree Visa, Harley-Davidson Visa, REI Visa, SKYPASS Visa, or WorldPerks Visa).
4. Select Balance Transfer.
5. Click Next.

OR…

When logged into Internet Banking:

1. Click on the “Customer Service Center” link in the left navigation bar.
2. Scroll down to “Credit Card and Premier Line Account Options.”
3. Click on “Manage Your Credit Card or Premier Line Account.”
4. Choose the appropriate drop-down box for your credit card product (i.e., U.S. Bank, Gymboree Visa, Harley-Davidson Visa, REI Visa, SKYPASS Visa, or WorldPerks Visa).
5. Select Balance Transfer
6. Click Next.

To avoid any unnecessary late fees, please be sure to continue to make your regular minimum payment to your other account until you see that the balance transfer has been processed.

It also appears that the fees may be somewhat negotiable, if for example, you applied for a no-fee offer that has already expired. So it seems worthwhile to talk to a customer service rep about this possibility if you are in the market for a US Bank card.

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Buy 5 Amex Gift Cards, Get $25 Gadget Lover’s Card

American Express

When you purchase 5 American Express gift cards on their website in one order by December 31, 2007, you’re eligible to receive a $25 Amex-branded “Gadget Lover’s Card” that can be used at a number of electronics retailers including Best Buy, Circuit City, Crutchfield, Electrona, f.y.e., Panasonic Direct, SamGoody.com, Staples, Suncoast, The Sharper Image and Tweeter.

Upon receiving your gift card order, you must return a completed rebate form by January 21, 2008. Gift cards can be purchased in denominations ranging from $25 to $500 and are available at www.americanexpress.com/gift.

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Obama Calls for Government Mandated Credit Card Ratings

General

U.S. Senators Barack Obama and Ron Wyden plan to introduce legislation next week that would create a national ranking system for credit cards. The proposed system would have scale of one star to five stars, with each card’s rating based upon how much risk the card poses to borrowers. For instance, credit cards that allow the issuing bank to raise the interest rate at any time for any reason would receive the lowest rating of one-star. The idea is to allow consumers a quick way to gauge the riskiness of a credit card offer without having to pore over the fine print.

The credit card rating system is part of Obama’s larger financial blueprint, which includes a credit card bill of rights that would ban unilateral changes to the credit card agreement, prohibit changes in interest rate on already inccurred debt and ban interest on late fees.

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Amex MyWishList Holiday 2007

American Express

American Express is back with another edition of “My WishList.” This edition runs from today, November 27, through December 13, 2007. My WishList is a twice-annual program from Amex that offers steep discounts on a limited supply of popular items, as well as limited time Wish Certificates. For a more complete explanation of what the program is and how it works, see this link.

You can see the available offers here.

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US Bank Check Card: Triple Cash Back Bonus Online

Cash Back Cards, US Bank

US Bank has its own exclusive holiday shopping offer for holders of its Cash Bonus Visa Check Card. For a limited time, when you use your U.S. Bank Cash Bonus Visa Check Card to make purchases with select online partners through their Cash Bonus Partner Center, you can triple your cash back.

Details of this offer can be found here. Nearly all of their normal partners are participating which means there are some deals to be had. Some examples:

  • BananaRepublic.com: 15% cash back
  • Barnes&Noble.com: 12% cash back
  • BestBuy.com: 6% cash back
  • BlueNile.com: 15% cash back
  • CompUSA.com: 9% cash back
  • eBay.com: 6% cash back
  • Kohls.com: 12% cash back
  • MyInks.com: 75% cash back
  • NeimanMarcus.com: 12% cash back
  • Overstock.com: 15% cash back
  • PETCO.com, Petsmart.com: 21% cash back
  • Target.com: 9% cash back
  • toysrus.com, babiesrus.com: 9% cash back
  • Wal-Mart.com: 12% cash back

See the complete list of participating retailers here. (Via SD)

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