I am and have been since 1998. The card I currently have is the Citi PremierPass card which I got in 2007. Though I own the card, I don’t use it very often because the rewards from the card isn’t better than those I receive from other cards. Basically, I can get 2% cash back, in the form of ThankYou Points, for every dollar spent at gas stations, grocery stores, and drug stores, plus 1% anywhere else. It’s still a decent rewards program (the card is offering 20,000 bonus points for new accounts), but I get better rebates by a combination of a few cards. For example, when filling up my car or shopping at grocery stores , I use Chase Freedom Card to get 2% cash back; when eating out at restaurants, AmEx TrueEarnings Card is my first choice sine I can get 3% rebates, if AmEx is acceptable. For everything else, I just use Fidelity 529 College Rewards Card to get 2% rewards. While I would love to use a single card for every purchase, it’s unfortunate that there’s no a one-card solution that gets the most out of the money spent. Thus, I have to take the multi-card approach.

Anyway, credit card rebate isn’t what I want to talk about here. The topic today is about a recent announcement from Citibank about its credit card usage and interest rate policy. According to an article on MSNBC, the only way for Citi cardholders to avoid the current round of interest rate hike is to meet the monthly spending requirement, as much as $750/month in some cases, imposed by the nation’s second largest credit card issuers. However, it’s not that you can avoid the rate increase all together even if you charge the required amount on your cards every month. The rate still goes up. What you get is the rebate of the portion of the financial charge on your balance due to the rate increase.

Well, it looks just like another way the credit card company tries to make its interest rate hike look nicer when it is still allowed to do so. I doubt how much it can ease the burden on cardholders who carry balance on their cards because to get the rebate, you will need to spend $750 every month, and the more you spend, the more interests you need to pay and if you can only manage to pay the minimum every month, the deeper you will be in the hole if you are trying to pay off your credit card debt.

The best way to deal with credit card interest rate is, in my opinion, not to have any credit card debt at all. If you pay your monthly bill in full each and every month, how the card issuers manipulate rates and terms won’t matter too much to you.

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2. Citi Diamond Preferred Rewards Credit Card Review
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Rewards programs from most credit cards usually reward cardholders with cash backs, frequent flyer miles, or points. The AmericanDream Card, on the other hand, gives card members entries to the sweepstakes. Every time a dollar is spent on everyday purchases with the card, an entry to the monthly American Dream jackpot is earned. Card members can receive up to 1,000 entries per qualified transaction and there’s no limit on the number of entries one can earn. Sounds interesting, doesn’t it?

During the promotion period (from now till September 30, 2009), the card is offering some incentives to encourage people apply for the card, including:

• 1,000 lottery entries for just applying for the card;
• 50 entries for every referral and another 1,000 entries for every approved application;
• 100 entries for paying bills online;

So what exactly is up for grab? Well, the grand prize for one lucky winner each month’s drawing is 0.5% of the total amount spent by all card members during the month, up to $25,000.

What do you think of this card? While the jackpot is pretty impressive, I won’t put too much into the odds of actually winning, obviously depending on the number of users and how much money they spend. To increase your chance of winning the sweepstakes, you will have to spend more money. The spending, however, could end up earn you nothing if you don’t win the lottery. I’d prefer a guaranteed return for the money I spend via a reward program that guarantees something, might that be rebates or miles.

Anyway, that’s just me. Take a look at the AmericanDream Card to see if it’s your type.

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2. Discover More Card $50 Bonus
3. Want To Lower Your Citi Card Interest Rate? You Must Spend More Money With It

AMEX has just launched a web page to let a small group of selected card members simplify their finance. If they pay off the remaining balance on their cards and close the accounts, they will receive a $300 prepaid card as a reward. The $300 reward sure sounds pretty generous if we only look at the amount being paid (they never paid that much to open a new account before), but the message from American Express is equally loud an clear: Thank you, but your business is no longer wanted!

I have been a AMEX card member for years. In fact, AMEX is the first issuer to approve me a credit card. Though there were some issues with them in the past, my overall experience with them is quite positive. This news, however, is very disturbing. Since the current credit crisis began more than a year ago, we have seen credit card issuers take dramatic measures to protect themselves by sacrificing cardholders’ interests. They have sharply raised interest rates on cards, even those with customers never late in making a payment. They also cut credit limits for those with excellent credit scores. If you a card that has been idle for 2 years, they could just close it first then inform you later.

Now, they will pay you to leave. I’d suggest AMEX to make the offer available to every cardmember, not only those with high balance and low activity, to see how many will hang around with them.

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An article on USAToday says that Chase, the largest credit card issuers in the nation, is adding a $10 monthly fee,or $120 a year, to credit cards with low promotional interest rate. According the the article,

The change affects consumers with low promotional rates who have carried a large balance for more than two years and made little progress paying it off.

Which, I think, essentially describes a situation we call 0% balance transfer. If you are not familiar with the term, then what people like myself do with 0% balance transfer (BT) is that we apply for a credit card that offers 0% introductory APR for a period of time, then either transfer balances from high APR cards to the 0% APR card to save on interests, or simply deposit the money to a high-yield savings account like FNBO Direct to pocket the interests and pay off the remaining balance when the offer is due. The reason why 0% BT works is there’s no fee involved when transferring the balance. However, such offers are getting hard and hard to find as many issuers, such as Citibank, introduced balance transfer fees as high as 3% of the total transferred amount. When most banks only offer sub 3% APY for savings accounts, there isn’t much money you can make from balance transfer. And since there’s no interest for the balance, you only need to pay the monthly minimum while keeping most of the money in bank accounts to keep earning interests until the offer expires. Generally, you can get 0% APR for 12 months, but you can also get a low, but non-zero, APR for much longer time, some time a life time.

As you can see, the key of the 0% BT business is no fee. If you have to pay a fee, let it be a $10 monthly fee or 3% of the  total amount, your profit from doing 0% BT will be eroded, or totally vanished, unless there’s a cap on the maximum amount of fees. So what Chase is doing now (BTW, Chase Freedom card is still offering 0% APY for 12 months), charging fees for low, long-term promotional rate, effectively killed the 0% BT, though there’s no word on whether the fee is also applicable to new accounts or only the existing ones.

Either way, it’s a bad news not only to existing card members, but also for potential customers.

Related posts:

1. Want To Lower Your Citi Card Interest Rate? You Must Spend More Money With It
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So what’s new in the FICO 08 system?

The new FICO score will still be in the range from 300 to 850 as the current score and it will permit piggybacking authorized accounts, a tactic that many parents use to help their children obtain and establish credit. However, FICO score will incorporate “new patent-pending technology that materially reduces the potential score impact associated with the abuse of authorized user accounts.”

In addition, FICO 08 “is supposed to do a better job of predicting borrower defaults, be more forgiving of one-time slipups and take a harder line on repeat offenders” (The Wall Steet Journal). The new score will also do a better job in helping lenders identify subprime borrowers and borrowers with less sound credit history.

Obviously, the new score takes more measures to protect lenders than consumers, but lenders may not be as eager to jump in and adopt the new system. They will typical test the score first to see whether the new system can better protect their interests. If not, they may never adopt the new score at all. For consumers, the waiting could be months, if not years.

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1. Issuers can’t change interest rates at will. They must give card holders at least 45 days advance notice after the account opens in one year.
2. Card members will have at least 21 days to pay their bills without being considered late.
3. Payment will be allocated either to the highest interest balance or proportionally to all balances.
4. Card issuers can’t use balance from previous billing cycles to calculate financial charges.
5. Fees for subprime cards can’t exceed 25% of the available credit limit at account opening.

However, the new rules won’t be effective until July of 2009, which is almost 19 months away from now. Are issuers really need this long to implement the changes? I don’t know. Maybe it just gives them the time to do what they want to do before the new rules kick in.

Unfortunate as it is, you don’t have to wait till July 2009 to get a new card because there are a few cards comply with the new rules right now. BillShrink.com has posted a list of credit card that comply with parts of the new rules (no card currently complies with five items). For example,

• Citibank has 15 cards that give customers 45-day advance notice before rate changes, complying with Item 1, including PremierPass Card, Driver’s Edge Card, and Dividend Platinum Select Card.
• Discover has 5 cards comply with Item 2, including More Card, Mills Card, and Open Road Card.

According to BillShrink, so far no card complies with Item 3. An example of Item 3 is when you take a 0% APR balance transfer offer of $10,000 and use your card to make a purchase of, say, $50 at the same time. Currently what credit card issuers are doing is all your payments are automtically allocated to pay the 0% APY balance transfer while letting the $50 balance from purchase to collect interests for them, at 10% or 20% APR.

While these changes are good in pretecting customers against credit card companies, there is one practice you take to protect yourself right away instead of waiting for the new rules: Pay your credit card bills in full every month. No credit card issuer can hurt you if you pay bills in full.

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