Author Archives: ccwatcher

Sign a Petition Against Deceptive Credit Card Practices

General

Consumers Union is organizing a petition in the hopes that it will lead to meaningful credit card reform. Their list of targeted practices includes:

Universal default: Your interest rate can skyrocket if your credit score declines because of your behavior with other creditors even if you always pay your credit card on time and never miss a payment. Some card issuers will raise your rate if you inquire about a car loan or open a new credit card.

Change of terms: Credit card terms keep changing. Read the fine print and chances are you’ll find this disclosure: “We reserve the right to change the terms (including the APRs) at any time for any reason.” A fixed rate is fixed until the bank gives you at least 15 days notice that it isn’t. If you want to keep your account open, you’ll pay the higher new rate on your existing balance.

Teaser rates: That low rate you signed up for expires suddenly and you end up paying more. A temptingly low introductory rate can climb to 30 percent or more.

Minimum payment: If you pay the minimum payment every month, you’ll end up paying a lot more than what you charged and you could be on the hook for a very long time.

On time payment: Card issuers are systematically mailing statements closer to the due date, giving customers less turnaround time. You can be hit with a late fee even if the payment is mailed on time. The average fee for a late payment has more than doubled in the past decade.

Double cycle billing: Finance charges are usually calculated using the average daily balance. If you alternate between paying off and carrying a balance, you’ll end up paying more interest.

Cash advance/convenience checks: The interest rates on these are higher than your credit card.

Penalty interest and fees: Late payments can raise your interest from 7% to 27%! Rather than rejecting charges that exceed your credit card limit, issuers today often let them go through but then charge a hefty fee — as high as $39.

Fees, fees, and more fees: As if the penalties weren’t enough, you pay more fees for paying by phone or charging abroad. You may have to pay a fee to receive what used to be free year-end summary statements.

Balance transfer switcheroo: Transferring a balance from an account with a high APR to another one with a lower interest rate could come at a high cost. Any payments you make are typically applied first to the lowest rate balance. So while the credit card company uses your payment to quickly pay off that 0 percent transfer balance, you are piling up interest on purchases, at say, 18 percent. Multiple balance transfers will hurt your credit score.

You can read their complete press release here. To support their efforts, sign their petition at http://www.creditcardreform.org/.

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Say Goodbye to Fidelity’s 2% 529 College Rewards Card

Cash Back Cards, FIA

FIA has replaced its existing 529 College Rewards card that earned 2% cash back into a qualified 529 account with another card that earns only 1.5%. While the previous card was a MasterCard, the new incarnation is an American Express. Unfortunately this means that one of the best cash back cards on the market is no longer available to new customers. With these changes, there’s really no compelling reason anymore to apply for the 529 card as opposed to the Fidelity Investment Rewards Visa Signature® Card with WorldPoints, as it will also earn an effective 1.5% cash back.

Existing cardholders will be able to keep their accounts and continue earning 2%, but the card with those terms is no longer available on Fidelity’s credit card page. The new 529 card offer can be found here. Thanks to CardRatings for pointing this out.

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Five Times Delta SkyMiles Rewards, Double Membership Rewards in November and December

American Express, Reward Cards

Amex is doing what it can to capture your holiday spending with even more promos. In addition to this double membership rewards promotion and this one, there’s this offer that gives you 5X more Delta SkyMiles points on your purchases between November 15 and December 31, 2006 for select SkyMiles credit card holders. Alternatively, you can call 1-888-632-0093 and mention promo code H506:0001 to sign up.

There is also yet another double membership rewards promotion that is active, where you can earn double points on eligible retail purchases made in November and December. If your card is eligible, you can enroll it online here.

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Introducing the Credit Card Offers Database: An App-O-Rama Resource

App-o-rama

Recently, I’ve spent quite a bit of time putting together a database of hundreds of credit card offers in what I hope is an easily searchable format. It presents the most relevant information that you look for in a card offer when determining its suitability for inclusion in an app-o-rama: namely, the intro purchase rates and periods, intro balance transfer rate and periods, the associated intro balance transfer fees, as well as whether there is a signup bonus.This is still a work in progress, perhaps not even worthy of a “beta” tag, but I would welcome any feedback at this point, including any errors you may find. If enough people find it worthwhile, I can spend some time maintaining as well as adding to it.

You can find the credit card offers database here.

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An App-O-Rama Primer: How to Profit from Credit Card Offers

App-o-rama, General

An App-O-Rama (also known as an “AoR,” or stoozing if you’re in the UK), simply put, is when you apply for many credit cards at once to take advantage of their signup bonuses and introductory balance transfer offers. If you have good credit, you can easily make thousands of dollars from this technique, with very little real effort.

Today, I’ll step through the process at a high-level. Please note that this strategy is definitely not for everyone. If you fit any of the following profiles, I would heartily recommend not pursuing this strategy:

Who Should NOT Do an App-o-Rama

  • Anyone who is not fiscally responsible — applying for a lot of credit cards and balance transfers means taking on A LOT of new debt. Anyone who cannot be trusted to safely invest this borrowed money should just stop reading here.
  • Anyone who is not meticulous with recordkeeping — the penalties from late or missing credit card payments would wipe out any potential benefit from this strategy.
  • Anyone who needs a new loan soon — an App-o-Rama will trash your credit score in the short-term, so if you will be in the market for a new mortgage, car loan, etc. in the near future, you should hold off on your app-o-rama.

Step 1. Preparation

If you truly want to maximize your profits, you’ll need to do some prep work beforehand to max out your credit score and make yourself as attractive as possible to credit card companies so they will approve you for many cards with high credit limits.

There are a couple of easy ways that you can help your score out. First, try to avoid applying for any new lines of credit for at least six months to a year before starting your app-o-rama. Each time you apply for credit, your credit score takes a slight hit. Ideally, you would minimize the number of credit inquiries you’ve had within the last year, since that is roughly the time frame in which inquiries affect your credit score. Applying for new credit is also bad since opening a new line of credit will decrease the average age of your credit accounts, which is another factor that weighs in your score.

It would also be wise to pay down any existing credit lines that you have to manageable amounts, as the percentage of available credit you utilize is another important factor in your credit score. You will definitely want to stay below 50% utilization of credit, but the lower, the better.

As you’re putting your credit profile in order, start doing research into the credit card offers that you intend to apply for. An admittedly biased source (me) thinks that this blog is a great resource to use to find worthy credit card offers. In particular, check out the credit card offers database.  You should pick not only cards that you intend to use long-term as everyday cards, but you should also single out cards that offer good signup bonuses or introductory balance transfer offers. Be especially wary, however, of balance transfer fees associated with introductory rates–even if a credit card offers a 0% intro rate, it may not be worthwhile to take if it comes with an uncapped 3% balance transfer fee, since it may be difficult to find an investment that would recoup that cost.

Step 2. The Application Process

Once you’re ready to start, the application process itself should be fairly straightforward. Since there is a small lag time until an inquiry shows up on your credit report, you’ll ideally want to apply for as many cards in as short a period of time as is reasonable. Obviously, if a bank can see that you’ve already applied for ten credit cards very recently, they’re far less likely to approve you for your eleventh. For this reason, it’s probably best to apply for cards all on the same day. It’s also preferable that you apply for your most desired cards first, since the likelihood of rejection will increase as you go along.

Step 3. Profit!

Your work is not all done after you’ve been approved for a bunch of new cards.
For one thing, there’s the record-keeping. If you applied for a number of balance transfers, you’re going to have to be meticulous in tracking when to pay them, how much to pay, and when their intro period ends. If you can’t do this properly, it will end up costing you. Set up automatic payments, track it in Excel, use online reminders, or use an aggregator like yodlee–track it however you like, just make sure everything gets paid on time.

Also, unless the balance transfer offer comes with an accompanying low-interest rate offer on purchases, you’ll want to put the card away and make sure it never gets used until the balance is paid off. A standard clause in credit card terms and conditions trips up many newbies. That clause states that any payments will go towards the lowest interest rate debt first. This means that if the intro APR is 0%, and the standard APR is 20%, if you mistakenly purchase something on your card, you’re stuck paying 20% on that purchase until the whole balance is paid off.

Last but not least, you will need to invest all of your newfound balance transfer money. I personally would advise against putting this money into anything that isn’t risk-free and liquid. Right now, the FDIC-insured E-loan savings account paying 5.5% fits the bill nicely.

In Summation

This game has reached very widespread popularity in recent times, because of the ease in which signup bonuses and intro offers can be turned into profit. I suspect that is the reason that we’re seeing several card issuers tighten up the terms of their introductory offers. The times of easy money aren’t likely to last forever, so it pays to take advantage while you can.

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