Discounts for Using Cash

The Wall Street Journal's Brett Arends recently produced a great article titled "The Death of The Rewards Card."

As you probably already know, when you use a credit card to pay for a purchase, a small cut goes to the bank that issued your card. An smaller cut goes to the "middle-man" bank, the bank that handles the processing. Invariably, these fees are paid by the retailer. When dealing with volume, these small fees add up fast. In fact, many retailers complain that these fees are so burdensome that they can't afford to hire new workers, and help this limping economy get back to prosperity.

With credit card banks like American Express and Discover, the processing is not handled by another party (no middle-man.) This doesn't mean that transactions handled by these banks are cheaper for the merchant. In fact, if you ask a merchant if the fees associated with accepting American Express are higher than those associated with accepting Visa or MasterCard, the merchant is likely to tell you: yes, they are. In my own real world experience, however, I found that accepting American Express cost me about the same. That's because my transaction volume was very low, and the middle-man bank I was using for Visa and MasterCard payments was charging me a hefty fee for keeping my merchant account active.

I canceled my merchant account 2 years ago. Got too expensive for my meager volume. I now use PayPal for credit card payments, as it's very convenient, and the fees are manageable.

OK, enough with the primer. Onto this article by Mr. Arends.

Legally, all types of merchants who accept credit cards, from gas station owners to web designers, have always had the freedom to offer a discount for paying with cash instead of a credit card, thus eliminating the fees associated with accepting credit cards.

Most merchants, however, were not in the habit of pursuing this money-saving option because the payment networks used "restrictions" to discourage the practice.

The Dodd–Frank Wall Street Reform and Consumer Protection Act(1), which is now law, eliminates those "restrictions" and gives retailers true freedom to offer discounts for using cash over a credit card.

Mr. Arends contends that this could spell the end for the rewards credit card. Mr. Arends predicts that consumers will eschew using a rewards card and take the discount for using cash instead. Bottom line: credit-card rewards are great, but cash is better. Mr. Arends' thesis statement goes something like this:

"...Plastic is so over. The new cash is, er, cash...."

I totally disagree.

My position:

• Consumers like using cards. In my opinion, most people would not be comfortable carrying around wads of cash so as to enjoy discounts offered by retailers and other merchants. Using credit cards is much safer, and convenient. Would you be comfortable carrying $1,800 in cash when you go to buy that new flat-screen TV you've always wanted? I don't think so. I know I wouldn't. What if I was in NYC visiting family and fell asleep in a super crowded subway car (I used to doze off on the subway all the time when I lived there)? I might wake up and find that my cash has been "borrowed." On the other hand, if I accidentally dropped my credit card on a subway train, all I'd have to do is make a quick, toll-free call to my credit-card bank, and all would be fine.
  
  
• Has Mr. Arends forgotten about purchase protection? How much protection do you get with cash? Zero. Recently, someone tried to cheat me by selling me a broken laptop LCD backlight inverter, which was supposed to be brand new. I tried to get the problem resolved but the retailer didn't answer his phone, and didn't respond to emails. Solution was easy: let my credit-card bank deal with it. Got my money back.
  

However, I do agree with the author's statement, that:

"...Credit cards are bad for your wealth..."

No doubt, this is true for anyone who carries even a small balance from month-to-month, and pays interest on it. But for those who know how to use credit wisely, credit cards are...well...cool.

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60% APR On A Credit Card In Mexico

Lots of folks like to complain about how American credit-card banks make big profits by charging high interest, fees and penalties. It's true: before the new credit card rules became law this year, some bank were charging unreasonable fees and interest, mostly to those who have bad credit or no credit history.

But imagine if you lived in Mexico, where the typical APR on a credit card is 30%! Ouch!

And get this: Banco de Wal-Mart, which operates in Mexico (a.k.a WalMex), has a credit card that has an annual percentage rate of 60%. Let me spell that out in case you think it's a typo: sixty percent annual percentage rate.

That 9.99% APR credit card in your wallet isn't looking so bad now, is it?

For the full Marketplace story, click here.

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New Credit Card Rules Going Into Effect On August 22, 2010

If you've ever paid a really high late-payment fee, or if you've ever felt like a sucker after reading the terms and conditions associated with a new credit card and realized you accepted an unreasonable fee schedule, then you'll like today's news. On August 22, 2010, the nation's top banking regulator -- the Federal Reserve -- is set to put into place new rules that limit certain credit card fees. For example, credit card banks will no longer be able to charge more than $25 as a late payment fee, while a penalty fee can no longer exceed $20.

Here's a clip from yesterday's Federal Reserve press release:

• "... Prohibits credit card issuers from charging a penalty fee of more than $25 for paying late or otherwise violating the account's terms unless the consumer has engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs it incurs as a result of violations.
  
  
• Prohibits credit card issuers from charging penalty fees that exceed the dollar amount associated with the consumer's violation. For example, card issuers will no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20.
  
  
• Bans "inactivity" fees, such as fees based on the consumer's failure to use the account to make new purchases.
  
  
• Prevents issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
  
  
• Requires issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.

The final rule represents the third stage of the Federal Reserve's implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009, which was enacted in May 2009. The provisions of the Act addressed in this rule will generally go into effect on August 22, 2010..."

For more, visit this Federal Reserve webpage.

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Chase Sapphire: Living the Good Life (A Review)

It seems that many rewards cards today try to restrict the way you redeem your rewards, forcing you to choose between either cash back, merchandise, or miles. The Chase Sapphire card is strikingly different. Cardholders have the flexibility to redeem their rewards points on just about anything-hotel rooms, airfare, or simply cash back. Alluring sign-up incentives and decent card terms make the Chase Sapphire card a cut above the regular plastic.

Oscar Wilde once said, “I can resist everything except temptation,” and the Chase Sapphire card certainly is not lacking in that department. With 10,000 bonus points after your first purchase and no earnings cap or rewards expiration, the Sapphire makes it hard for even the most disciplined individual to say no. The Sapphire card boasts a low 12.24% APR on purchases and balance transfers, has no annual fee, and earning one point for every dollar spent gives you the ability to rack up points to choose a reward(s) that truly suits you.

The Ultimate Rewards program is one of the most generous rewards programs out there today. With no points expiration or black-out dates, if you can dream it, Chase will make it happen. Ever wanted to swim with dolphins? Treat that special someone to a VIP concert experience? How about a five-star dining experience to spoil your family? By using the Sapphire card, you can turn an ordinary day into an extraordinary one that won‘t soon be forgotten. Many of the events offered through Ultimate Rewards are exclusive to cardholders, making each excursion truly one-of-a-kind.

Racking up rewards points is as easy as swiping your card. Earning one point for every dollar is great, but when you shop within the Chase online mall portal that has over 300 merchants, you have the potential to earn up to ten points per dollar spent. You can even earn double points when you book your airline seats through the Travel Booking Tool. But worry not. If travel rewards aren’t quite your thing, you can redeem your points for gift cards to spend at your favorite stores. Rewards start at $25 for 2500 points. Or you can even choose to “pay yourself back” by using your points for a statement credit.

In addition to the Ultimate Rewards program, the Chase Sapphire card has all the attractive features people have come to expect from Chase. The features include Trip Cancellation and Travel Accident Insurance, Auto Rental Collision Damage Waiver, Zero Liability for fraudulent purchases, and a personal concierge. One of the best features included for wielding the Sapphire card is the ability to talk directly to a customer service person. By calling the number on the back of your card, you instantly are connected to a live person instead of “Pressing 3 to…” Chase also gives its cardholders extra peace of mind if their card is lost or stolen. They will expedite a replacement card to you and even arrange emergency cash for you until your new card arrives.

For those that like to keep a close eye on their finances, the Chase Sapphire also comes standard with Blueprint. By using Blueprint, you can decide how you’d like to pay down those larger purchases and watch your balance drop. Chase also sends you a year-end report, organized by purchase type. This easily helps you track your spending for the past year as well as making filing your tax return that much easier.

Unfortunately many of us will never have the opportunity to enjoy the luxuries this card has to offer; it is designed for those in the top 15% of household earnings. Even still, it is an excellent choice for those who do qualify, giving them the chance to make their every dream come true. As for the rest of us…well, we can still browse, right?

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Treasury to Sell Citigroup Common Stock

Yesterday, the U.S. Treasury Department announced that it plans to sell all 7+ billion shares of Citigroup common stock during the rest of 2010. Here's a clip from the press release:

"...The U.S. Department of the Treasury today announced its intention to fully dispose of its approximately 7.7 billion shares of Citigroup, Inc. common stock over the course of 2010 subject to market conditions. Treasury received these shares of common stock pursuant to the June 2009 Exchange Agreement between Treasury and Citigroup, which provided for the exchange into common shares of the preferred stock that Treasury purchased in connection with Citigroup's participation in the Capital Purchase Program. Treasury has engaged Morgan Stanley as its capital markets advisor in connection with its Citigroup position.

Treasury intends to sell its Citigroup common shares into the market through various means in an orderly and measured fashion. Treasury intends to initiate its disposition of the common shares pursuant to a pre-arranged written trading plan. The manner, amount and timing of the sales under the plan is dependent upon a number of factors.

This disposition does not affect Treasury's holdings of Citigroup trust preferred securities or warrants for its common stock..."

This is certainly good news for the American taxpayer, as the government will reap a tidy profit as a result of its emergency investment in the bank.

Treasury is going take its sweet time selling these assets, so it'll be some time before we can know how Citi will fare without the government crutch.

Are we ready to start recommending Citi credit cards as a result of this news? Nah. Once the government has divested itself from Citigroup, we'll be engaging in at least another 12 months of watching before we make a decision on Citi cards.

For now, we are still very keen on the Discover More card, or any card issued by American Express.

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A Clean Slate with Chase: Slate

Summary: The Chase Slate card is a no-frills card that, combined with Blueprint, can help users pay down their balances faster. With great introductory and balance transfer rates it is easy to go from large balances to no balance in the blink of an eye.

Life seems to have a way of creeping up on us when we least expect it. Unforeseen expenses pop up, emergencies happen, and sometimes the only way to pay for them is by credit card. But when you have the Chase Slate card at your side, you will be able to manage those unforeseen expenses with ease, helping to make your financial life a bit easier. Its simple, no fuss design makes it the perfect go-to card in case of emergency.

Chase has designed the Slate card for those with a good to excellent credit rating, and uses a tiered pricing structure to determine the applicant’s APR. The main factors in determining which tier the applicant falls under are their credit history and credit score. Chase currently has three pricing tiers; Elite, Premium, and Standard, and the APR’s for each tier are as follows: 13.24% variable for Elite; 17.24% variable for Premium, and 22.24% variable for Standard.

The Chase Slate card features a zero percent introductory rate for both purchases and balance transfers for twelve months for those that qualify for Elite or Premium pricing. Standard pricing cardholders will qualify for zero percent interest on balance transfers for six months. Chase Slate has no annual fee, so that all your payments go toward paying your balance down instead of paying to use the card.

The Slate card also come standard with Blueprint by Chase. This amazing set of tools allows you to stay on top of your debt and learn how to pay it off. One of the best features of Blueprint is Full Pay. When using Full Pay, you can select the categories of purchases, like gas or groceries, that you want to pay in full every month. As long as you make your Blueprint payment before your payment is due, no interest will be paid on those purchases. Even if you carry a balance, interest will only be applied to the purchases that are not a part of Full Pay.

The other features of Blueprint are Split, Finish It, and Track It. Split is designed to help you set up a payment plan for specific, larger purchases while Finish It applies the payment plan to your entire balance. Track It categorizes your purchases, whether it be gas, groceries, or dining out, and separates them so that you can see where your money is being spent. The nice thing about your enrollment in Blueprint is that it isn’t set in stone. You can change your settings to meet your financial needs from month to month without penalty. And as long as you pay at least your minimum due before your due date, your account will stay in good standing.

The Slate card also has great additional benefits provided to you at no extra cost, just for being a Chase cardholder, like:

• 24/7 Fraud Monitoring - Your account is monitored for suspicious activity and reported to you as necessary.

• Zero Liability for Unauthorized Purchases - Find a charge on your statement you didn’t make? You won’t have to pay for it, though certain restrictions do apply. Be sure to check the details.

• Email and Text Alerts - Not sure when your payment is due? Can’t remember if a payment was made? By using email and text alerts, you will always be on top of your account. While this service is free through Chase, standard text messaging and/or data rates may apply.

• Global Acceptance - The Chase Slate card is co-branded with Visa, so it's accepted in 26 million locations worldwide in over 150 countries, easily covering you in the event of an emergency.

The biggest drawback to this card is the lack of a rewards program. This card was designed for the credit card user who either uses credit sparingly or who wants to pay down a higher balance from elsewhere. There are also other cards out there that have a lower APR; while Slate cards do have a lower rate than some, they certainly are not the lowest. Knowing what you want and need in a credit card will help you determine whether the Chase Slate card is right for you.

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The Chase Freedom Credit Card, A Review

Summary: If you are looking for a no-hassle rewards card, look no further than Chase Freedom. With its simple rewards platform and easy reward redemption process, earning and using your rewards has never been simpler.

Finding that perfect rewards card can be likened to finding a needle in a haystack. With so many options from so many different credit card companies, it is easy to become overwhelmed. If you are looking for a simple, easy-to-use rewards card look no further than the Chase Freedom card. Chase has designed a simple rewards platform that makes it easy to earn and redeem your rewards. Coupled with no annual fee, unlimited rewards, and rewards that never expire, how can you go wrong?

The Nitty-Gritty

With the Chase Freedom card, you can enjoy a zero-percent APR (annual percentage rate) for the first six months your account is open. Your creditworthiness will determine your APR, which starts as low as 12.99%. The Freedom card also gives you the ability to transfer balances to your card at zero percent interest for the first twelve months your account is open, but it must be done when you initially apply for the card. Otherwise a minimum 12.99% rate applies for any balance transfer, again, depending on your credit history. You’ll want to stay on top of your payments; any account over 60 days past due reverts to the default 29.99% APR, potentially reducing any rewards you might accrue if you carry a balance. It should be noted that to even be considered for this credit card, you must have a good credit history. In addition, employment status and annual income are also important factors when determining your creditworthiness.

Chase Blueprint

Once you are approved for the Chase Freedom card, be sure to enroll in Chase Blueprint to begin managing your account. Blueprint allows you to take control of your finances, providing you with the necessary tools to pay down/pay off your account balance. This service is free to all Chase Freedom cardholders, and can be altered as needed to meet your needs. You can specify which purchases you’d like to pay in full to avoid interest charges as well as which purchases you’d like to pay for over time, called Split. You can split the payments up over however many months you’ll need, and Blueprint will track your progress on each statement until it is paid off. Their Finish It tool shows you how long it will take to pay off a large balance, showing you the amount in interest you will save as well as how many fewer payments you’ll have to make.

Rewards

At the core of the rewards program, you earn a full 1% cash back on every purchase with no earnings cap. Chase has also taken a leaf from Discover’s page and added rotating rewards and a shopping portal to earn additional rewards on purchases. The rotating rewards program allows you to earn 5% back on purchases made in various categories that change every three months. Quarterly enrollment is required to ensure that your purchases are properly tracked, and earnings are capped at $600 per month. Using the Chase shopping portal allows the participating merchants to track your purchases and issue your rewards. Merchants like Bath & Body Works, Best Buy, Home Depot, iTunes, and Wal-Mart all allow you to earn percentages from each purchase ranging from 1% to as high as 20%. There are a few merchants that give you a preset dollar amount per purchase rather than a percentage, so be sure to check before you buy.

Rewards Redemption

Redeeming your hard-earned rewards is always the best part, and Chase offers several redemption options to choose from. You can opt to redeem your points for travel by booking online through Chase travel, which is powered by Orbitz. You can also redeem your rewards for gift cards from merchants like Best Buy, Dunkin Donuts, Lowes, or Target. Of course, you can also choose to receive the good ‘ole greenback to do whatever your heart desires. With the Chase Freedom card, the sky is the limit and the choice is yours.

Bottom Line

The Chase Freedom card is an excellent rewards card for those who want either cash back or gift cards to their favorite stores. This card is easy-to-use, has a simple reward calculation formula, and has an easy rewards redemption process. However, in order to enjoy the benefits this card offers you must have a good credit rating. Chase Freedom also has higher interest rates than some of the other rewards cards out there which do not translate well for those who will carry a balance. If you are a frequent flier, you may want to find a card that allows you to amass airline miles coupled with the other frequent traveler perks other cards offer.

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