Tuesday, April 24, 2007

Miss American Credit Card

If you pay your monthly credit card in full, picking a credit card is basically a beauty contest. How do you decide on one, among the thousands of credit card offerings, if the interest rate is really not of interest to you?
My first serious credit card relationship was with USAir. For an annual fee, rather a hefty one at that, all our dollars spent were translated into miles. Being a PSAWSWLD (Price Sensitive Affluent Wealthier Shopper Who Likes Deals), I loved this. I often charged things I might previously have paid for by check, just to get those miles. But I broke up with USAir when they started to devalue the miles.
At that point I concluded that the best approach was a no-annual-fee card, and any bonus goodies were gravy. Of course you have to be organized and compulsive enough to keep track of the points. People fail to redeem a significant percentage of the bonus points they earn. You also need to use the credit card enough to accumulate enough points to actually qualify for something useful. If you are dividing your charges between quite a few cards, you probably won't benefit from any of them.
Co-branded cards are becoming very popular. People like them because they can redeem their points for products they like. Companies like them because they encourage loyalty. Given a choice of gas stations, you will choose the one whose credit card you carry. I recently got a Starbucks card for an account with a modest monthly balance, since I figured I would never get to the level of a big redemption. Instead, we are drinking the bonus points. Plus to keep us even happier, they occasionally send us a coupon for an extra free latte. I must say this approach is very effective with me.
Affinity cards are also popular; here a [miniscule] percentage of your purchase goes to a favorite charity or cause. You can charge away, knowing that the Sierra Club or Make a Wish Foundation benefit. However, these cards are not very forthcoming about the actual donated percentage, which can be as low as .05%. If you charge $100, the cause receives a paltry 50 cents. Of course it's better than nothing, but I do think such cards run the danger of people FEELING like they're giving a lot more, so therefore not bothering to make actual donations. On the other hand, they do have the benefit of promoting something you care about, and if you'd like everyone to know you are an Ivy League grad, for example, you can whip out your Yale credit card and wave it around. Don't believe everything you see, though. You don't have to be an alum to get the card.
For my business, I have just switched to a new cash-back card. I had one for quite a few years and paid very little attention. About five minutes of online research yielded a similar card with a higher percentage of payback, also for no fee. It certainly pays to not be complacent. Every year or so I review at least one credit card and find a prettier one!
Do you have a good credit card deal you recommend?

1 comment:

Aliza said...

This is not so much a "deal"(although this card doesn't have an annual fee), as an alternative to the Affinity cards like Working Assets. I blogged about my recent search for the most ethical credit card I could find, which is the Salmon Nation card, which I've now been happily using for about a year and a half. There is more information linked on the blog, but basically, the card invests through Shore Bank Pacific, a bank working in community development (albeit not MY communtiy) in conjunction with Eco-Trust which reinvests a portion of your money in environmental/sustainability projects. Unlike every other card, I've seen, as far as I know the card does not operate with the large credit lenders that are often tied to large financial conglomerates, questionable practices and donations, etc. I use it for purchases from smaller vendors that likely don't have Rewards Points relationships with American Express, my other card.