Steve Case Tries to Start a Revolution

General

According to USA Today, Steve Case, former chairman of AOL, is backing a new type of credit card called the RevolutionCard. Designed to compete against the entrenched companies in payment systems, its features include:

  • a line of credit
  • the ability to store up to $15,000 on the card (loaded electronically from the user’s bank account)
  • free online payments
  • interest rates pegged to the card holder’s credit rating
  • beefed up identify-theft protection:
    • PIN-based, with no name or account number on the card
    • Allows creation of temporary one-use PINs

In addition to these unique features, RevolutionCard intends to carve its niche by offering low fees to both consumers and merchants. For instance, merchants will only be charged 0.5% of the sales price per transaction processed. Consumers will save money with free online payments (similar to Paypal), no annual fee and interest rates based upon the customer’s current credit score.

Of course, ramping up card acceptance to critical mass will be a significant challenge, but currently the card does claim acceptance by about 100,000 merchants including Barnes & Noble. Its goal is to reach 7 million merchants in 3 years.

To find more information, see www.revolutionmoney.com. To apply for a card, see www.revolutioncard.com.

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Report: Two-Thirds of Consumers Mishandle Intro Rate Balance Transfers

Balance Transfer Offers

Perhaps there’s a good reason why introductory balance transfer offers are so prevalent–and it’s not because credit card issuers are being charitable. Not only are they an easy way to attract new customers, but they also seem to be quite profitable for the issuers.

In a working paper from the MIT Department of Economics called “The Age of Reason: Financial Decisions Over the Lifecycle,” the researchers found that of the nearly 15,000 people surveyed, roughly two-thirds made new purchases after transferring a balance using the teaser rate.

Experienced credit card users know that this is one of the easiest credit card traps to fall into: any new purchases made on your card will accrue interest at the regular interest rate, but any payments that you make will first be made towards your balances held at the lowest interest rate. As a consequence, it’s a mistake to ever make new purchases with a higher APR while holding a low rate balance.

According to the study, however, more than one-third of customers continued to make new purchases every month, racking up interest at the higher rate. Another one-third made some purchases during the first six months, but must have noticed the higher interest charges and stopped.

As long as these trends continue, it seems there’s little chance that credit card companies will stop making these offers, which is good news for those who know how to play the game.

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Chase Freedom Makes Dynamic Rewards the Default

Cash Back Cards, Chase

Chase announced today changes to its Freedom card that should make it even more attractive to customers. Now, by default, the card comes enabled with the dynamic rewards program. Previously, Chase Freedom cardholders would get triple points only on gas, supermarket and fast food purchases. Now, cardholders will automatically receive triple points in the three categories where they spend the most in a given month out of a total of 15 categories. The other spending categories include department stores, drug stores, movie theaters, movie rentals, dry cleaners, health clubs & gym memberships, beauty salons and spas, pet supply stores and veterinarians, mass transit and local commuter expenses, telecommunications, utilities, and cable/satellite TV and Internet bills.

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Amex Introduces the Plum Card for Small Businesses

American Express, Business Cards, Cash Back Cards

American Express is launching a new, innovative credit card for small businesses. It is designed to allow cash flow management with maximum flexibility, featuring two unique options:

Pay Early Discount
Pay your balance in full within 10 days of your billing cycle date and get a 2% discount when your month’s total spending is above $5,000 and 1% when it’s $5,000 or below. The discount is applied to all new eligible charges in that month, and will appear as a credit on your following month’s statement.

Defer Pay Option
Take up to two months from the closing date on your monthly statement to pay your new balance in full–all without interest or finance charges. Just make an initial payment of 10% by the Please Pay By date on your billing statement and you can extend payment on the rest until the next month’s Please Pay By date.

The card does have an annual fee of $185, which is waived the first year.

To add a bit of drama, Amex is limiting the number of cards initially issued to 10,000. You can find more information on the card, as well as request an application at this link.

Before you consider applying, though, consider this: unlike personal credit cards, the rebate on business cash back credit cards is taxable. In contrast, miles are not. That’s why, if you do any traveling, I would recommend instead a business credit card that earns miles like the Starwood Preferred Guest Amex.

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Citi Tweaks Perks for AT&T Universal Cards

Citibank, Reward Cards

Citi is in the process of rolling out changes in benefits for its AT&T co-branded credit cards. As part of these changes, the card names have also changed. The AT&T Universal Platinum Card will be renamed the AT&T Universal Savings Platinum Card and the AT&T Universal Rewards Card will be known as the AT&T Universal Savings and Rewards Card.

Both cards will now offer 10% savings for the first 12 months and 5% thereafter on eligible AT&T products and services equal to the amount spent on their other purchases. The savings will appear as a billing statement credit during the billing period the purchases were made. Cardmembers can earn up to $350 in savings each calendar year.

While both cards will offer a no-fee introductory balance transfer for 12 months, the Platinum card will no longer offer a 0% intro period on purchases. Other perks such as two free directory assistance calls each month, up to 30 prepaid phone minutes each month and free mobile phone insurance, will also remain.

Full details of all changes are currently reflected at Citi’s website here and here, but are not expected to appear on http://www.universalcard.com until September 12.

For current details on these cards, see these links:
AT&T Universal Savings & Rewards Card
AT&T Universal Savings Platinum Card

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Credit Card Users Feel the Pain as Credit Crunch Spreads

General

In what could be considered the latest fallout from the subprime mortgage crunch, the Financial Times reports that credit card companies were forced to write off 4.58% of payments as uncollectible during the first half of 2007, an increase of 30% over the amount during the same period of 2006. Citing data from Moody’s, late payments also rose, while the quarterly payment rate fell for the first time in more than four years.

Analysts at Moody’s suggest that as interest rates have crept up and the housing market has slowed down, consumers are less likely to pull equity out of their homes to pay off their credit card debt. However, Moody’s also told the F.T. that it is unclear if the people defaulting on credit card payments are the same people defaulting on subprime mortgages, in part because underwriting standards have generally been more strict for credit cards than mortgages.

There already has been some reaction among credit card issuers. The Wall Street Journal reported last week that USAA has tightened their underwriting standards and raised their score cutoffs slightly on their auto loans, credit cards and personal loans. USAA is also being less generous with its automatic credit line increases. According to the WSJ, lenders can afford to be more selective and to charge more for their services because more consumers — increasingly locked out of home-equity loans and lines of credit — are using their credit cards more. Recently, Bank of America, Capital One, and Discover have all raised rates and fees for some credit card customers.

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Lifespring Health Everyday Rewards Visa Platinum Card

Balance Transfer Offers, Reward Cards

Lifespring Health, a company that offers a free rewards program in the healthcare sector, has teamed with National City Bank to launch a no annual fee credit card. The card earns points that can be used towards health and fitness expenses, Health Savings Accounts, and insurance premiums.

Features of the card include:

  • 4% back on gas at the pump — up to $250 monthly (Net purchases over $250 do not earn rewards)
  • 3% back on cinema and video rentals — up to $150 monthly (Net purchases over $150 do not earn rewards)
  • 2% back on groceries, restaurants and fast food — up to $750 monthly (Net purchases over $750 do not earn rewards)
  • Up to 1% back on nearly everything else, with no cap (0.25% on other net purchases up to $10,000; 1% on other net purchases every day)
  • No fee 0% APR balance transfer for 12 months

The 0.25% on other purchases up to $10,000 make this a poor choice for a general-purpose card, but the no fee, 0% BT makes it a card to consider. For more details, see this link.

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Amex Adds AA Lounge Access for Platinum and Centurion Members

American Express

American Express Platinum and Centurion Card holders can now enjoy complimentary American Airlines’ Admirals Club lounge access when traveling with a same-day ticket on the carrier. Card holders are allowed to bring their spouse and children under age 21 or up to two travelling companions to the clubs, which feature amenities such as showers, cybercafes and complimentary snacks.

Amex Plat and Centurion cardholders will also continue to enjoy access to the lounges for Continental Airlines, Delta and Northwest Airlines.

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