Smart credit card use after Hurricane Irene

Smart credit card use after Hurricane Irene by Peter Andrew 

As people up and down the eastern seaboard continue to clear up in the wake of Hurricane Irene, many are likely to be looking to their credit cards to help pay for repairs and the replacement of wrecked household goods. Its depressing work, and especially distressing for those who are uninsured, either completely or just for flood damage. Business Insider recently quoted one source that suggested that up to 95 percent of all affected homeowners fall into this group.

Low interest credit cards versus rewards credit cards

Wow! Thats a colossal and genuinely shocking figure. And it suggests that huge numbers of victims may be forced to fall back on their plastic just to restore their lives to something approaching normalcy.

If youre one of them, youre likely to be pretty short on silver linings at the moment, and might be attracted by even the minor one offered by rewards credit cards. While youre spending all that money, you may think, you might just as well get some cash back, travel miles, points or whatever.

Good idea. But it may not be the smartest move for all your purchases. For many of those, you should probably be pulling your low interest credit cards from your wallet instead.

Credit card rates, rewards credit cards and credit card calculators

Thats because, on average, interest rates are higher for rewards credit cards than those for ordinary ones. Indeed, at the time of writing, IndexCreditCard.coms credit card rates monitor says that the average annual percentage rate (APR) for consumer non-rewards cards is 14.72 percent, while that for consumer rewards cards is 17.30 percent.

Youd need a spectacularly generous rewards card for it to make sense for you to charge items to it that you know you wont be able to pay down for a long time. Generally speaking, the rule is that its good to use rewards credit cards for purchases that you know you can clear quickly, and low interest credit cards for those that are going to take you longer.

You can use credit card calculators to see how long it should take youand how much it should cost youto pay down balances at your own cards different interest rates. Then you can work out what your personal strategy should be.

Balance transfer credit cards

If your credits good and youre having to load your cards a lot post-Irene, then you might want to consider applying for a balance transfer credit card. There are two reasons why this could be a good idea:

  1. A number of thesemostly from Citioffer zero percent APR on transferred balances for 21 months. Others make a similar offer for 15 months. That could provide you with just the breather that you need to get over the hurricane.
  2. Your credit score could suffer if the balance on any of your cards is higher than 30 percent of its credit limit. So even if you can manage paying down your credit card debt easily, you could be better off spreading the load across more plastic.

Credit card companies human!

One tiny positive revelation that emerged in the aftermath of Irene is that credit card companies are human. Thats not necessarily in the sense that the U.S. Supreme Court thinks, namely that corporations are people. No, its in the sense that theyre run by real-life, breathing and occasionally sentient human beings. Many of them announced that those affected by the hurricane could see their late payment and/or other penalty fees waived, though only for a strictly limited time. Awww. Aint they sweet?

Credit Card Processing Industry Gets Even More Competitive

The average consumer using a credit card may not realize just how competitive the credit card processing industry is for major players behind the scenes.  While most credit card users understand the basics of credit card processing; the business of transferring money from one hand to another remains somewhat of a mystery for the average consumer.  The inner workings of the credit card processing industry may seem unimportant if you are not a merchant or one of the parties involved in making credit card transactions possible, however anyone using a credit card should understand how the processing works as it affects card users as well.

Credit Card Networks

To better understand how credit card processing works, one must first identify the parties involved in the process.  On one end you have a credit card user who initiates the transaction.  By choosing to use your credit card, you authorize the movement of funds from the bank issuing your credit card to the merchant providing a product or service.  Connecting these two are card networks and credit card processors.  Card networks like Visa, MasterCard, Discover and American Express have long held control over credit card processing.  Now, as the industry faces new changes, control over credit card processing may become even more competitive.

New Players Change Industry

Already widely used in other nations, near field communication technology will change the way credit cards are processed.  In coming years, the way in which you use your credit card will change dramatically.  The introduction of smartphones and technology allowing credit card users to simply wave their cell phone in front of a reader opens the door to new players in the industry.  Traditional credit card processing will likely be affected as more companies, businesses and credit card processing parties join the industry.  Although many anticipate a great ease of use for credit card users and merchants, there is always the chance of negative results as well.  If changes in the industry create additional costs for merchants, the possibility is there to see costs passed onto consumers.  This may affect all consumers if the cost of goods and services rise as a result.  On a positive note, with more competition within the industry, there is also a chance that the cost of credit card processing may actually decrease.  If this is the case, merchants who currently avoid credit card transactions due to high processing fees may make the switch to accepting credit cards.

Adjusting To Change

To fully understand how changes in the industry will affect you, it is important to pay attention to how and when these changes will take place.  Card users are encouraged to read card agreements and any news relating to the use of smartphones or near field communication.  Security will remain a priority for all those involved with the processing of credit cards to ensure these changes do not open up the window for fraud and unauthorized use of consumer credit card accounts.  Meanwhile, credit card processors and other parties involved in the processing of payments must prepare increased competition in the industry and how it will impact business models.

A Look at Business Credit Cards

With so many changes going on in the credit and financial sector these days, we thought itd be a great time to take a look at the many options small businesses have when seeking a credit card. The fees, terms and conditions and other factors play such a big role in what a business owner ultimately looks for. So, here, we have it all spelled out.

We like this card for a number of reasons, but mostly, its the versatility thats offered that serves as the big draw for many business owners. The rewards are plentiful, too. You earn an impressive 5% cash back on the first $25,000 spent annually on office supplies, communications services and even cable services. This means those pens, envelopes, cell phone plans and internet services you pay each month can also earn some impressive cash back at the end of the year. Plus, the first $25,000 spent on dining and fuel can earn 2% cash back. Suddenly, those business lunches arent such a frustration. Other purchases earn 1% cash back. Theres a 0% APR the first six months and with no annual fee, this might serve as the ideal credit card solution for your specific business needs.

For a limited time, this new credit card offer for business owners earns members 50,000 membership rewards bonus points after $10,000 is spent and provided its done within the first five months of your membership. For those businesses that require travel, you can earn three times the points on airfare and twice the points for advertising, shopping for office needs and even fuel. With more than 500 brands (and growing) that are part of the OPEN network, this is another ideal solution for many business owners. Plus, the $50 annual fee is waived the first year, additional gold cards are unlimited when you add one more membership fee (in other words, you can have as many additional cards for the price of just one membership fee).

With the tough economic times in recent years, many small businesses have been hit particularly hard, including their credit ratings. The Applied Business card is issued by Visa, has no annual fee, a six month 0% APR intro rate and an APR of 19.99% after that. The best part of this offer is that the credit requirements have been relaxed considerably. Qualifying is much easier than with other business credit cards. Your credit limit will generally range between $350 and $1,000, which makes it a great choice for everyday use. It can also help your business re-establish a stronger credit history, too.

Finally, we take a look at another popular American Express offer. The SimplyCash business card earns card holders 5% cash back on office supplies and wireless services, 3% cash back on fuel and 1% cash back on all other purchases. There are no limits to how much you can earn and the best part is its credited each month to your AMEX statement. Theres no annual fee and an intro 0% APR for up to twelve months. Its simple, no-frills and easy to understand guidelines. The absence of your having to do anything to claim your cash back earnings makes it a sweet deal for many busy small business owners.

The fact is, theres no shortage of business credit cards ideal for businesses of any size. The goal, of course, is to find the one that will transition seamlessly into your own unique business model. The only sure way of doing so is by carefully reviewing all the offers, the various terms and conditions and ensure any particular card will meet your needs. Anything less than that can never be a true asset. The rewards are only as good as how often theyre used.

Cash back is always a sure thing, though for many, the miles rewards allow for small business owners to travel easily in their efforts of growing their companies. The extra time you commit to doing the leg work the better your business is for it. Also, dont forget to differentiate between the traditional credit card and those with charge card dynamics, as many businesses prefer to carry balances over the course of a few months versus paying it it in full each month. Knowing the difference can save a lot of trouble when that monthly statement arrives.

Dont forget to check the PEX Visa Prepaid Card For Business, too.

Debit Card Fees: Bank of America Scaling Back

Reuters) Bank of America Corp, after receiving heavy public criticism for a planned $5 per-month debit card fee, is likely to give customers more ways to avoid the fee, a person familiar with the banks plans said Friday. 

The second largest U.S. bank is likely to allow many customers to avoid the fee by taking measures such as maintaining minimum balances, having paychecks direct deposited, or using Bank of America credit cards, the person said.

Under earlier plans, customers might have needed balances totaling $20,000 across all their Bank of America accounts to avoid the fee.

Bank of Americas unleashed a firestorm of criticism from customers, consumer advocates and politicians last month when it disclosed plans to charge customers $5 per month for using their debit cards, starting sometime next year. The goal was to make up revenue lost to a law that slashes the fees banks charge retailers when consumers swipe their cards.

Some other major banks have quietly pulled back on the charges.After testing a $3 per month fee in two states since February, JPMorgan Chase & Co decided not to charge customers, a person familiar with the situation said on Friday. The test will end next month and will not be extended or expanded, the person added. 

Wells Fargo & Co started testing a $3 per-month fee in five states on October 14. The bank has not had time to evaluate results and has not made any changes in the program, Wells spokeswoman Lisa Westermann said.

Charlotte, North Carolina-based Bank of America is not abandoning the fee now and will likely include it in new account types the bank is testing in three states. The bank plans to roll out these packages nationwide next year.

The $5 per-month fee may still remain an option for customers, the person said.

The bank has said the purpose of the new account types is to provide customers with upfront pricing, instead of hitting them with penalties after the fact. Customers can pay monthly fees of between $9 and $20, or avoid the charges by keeping minimum balances, using their credit cards or having a minimum amount deposited to their account.

While some banks have disclosed plans to apply similar fees, many banks and credit unions decided not to institute the charge and have encouraged customers to switch banks.

The case against rewards credit cards

Earlier this week, The Washington Post published a blog post by Natalie McNeal. You may have heard of her. Shes made something of a career out of first accumulating and then repaying $20,000 in credit card debt. Shes written a book, and has her own website. Excuse your blogger while he tamps down his envy, and composes himself.

Rewards credit cards bad?

Thats better. Anyway, the overall thrust of McNeals blog was that she was (on balance and with caveats) against rewards credit cards in general and travel rewards cards in particular. And she gave three reasons why:

  1. Having had so much credit card debt before, she was determined to avoid it again. And using plastic for most purchases, rather than just exceptional ones as she does now, would mean that shed have to micro-manage her cards so as to be sure she retained control.
  2. Most travel rewards cards come with fees, and McNeal objects to those on principle.
  3. Credit card interest rates on rewards plastic tend to be higher than those on non-rewards cards.

All of those are good points. If youre going to use your rewards credit cards for most of your purchases, you really need to keep on top of managing your payments and expenditure. Everyone hates annual fees. And, on average, credit card interest rates are higher for rewards cards than others.

Rewards credit cards good?

However, only some people need to be concerned about McNeals points. Many have no difficulty in successfully managing their spending and payments. Quite a few are happy to pay a fee because they find the rewards they earn significantly outweigh it. And, as this blog regularly advises, rewards cards should ideally be used only for those transactions that are going to be cleared at the end of the then-current billing cycle; anything else should be charged to low interest credit cards.

You have to admire McNeal, and her counsel is spot-on for those, like her, who have a tendency to get carried away with their plastic. But, luckily, most of us arent in that position. For us, following such advice is about as sensible as asking a recovering alcoholic to recommend a good wine.

Finding the best travel credit card

Earlier this month, Rachel Koning Beals wrote a good piece on travel rewards cards for Business Insider. Beals is clearly an informed and insightful writer, not least because she referenced IndexCreditCards.com in her article. But enough mutual backscratching. The important thing is that she mentioned a key (perhaps thekey) rule abut selecting travel rewards cards:

But long before consumers pack their flip-flops and board the dog, they should review the terms, fees, and interest rates attached to travel credit cards (and all cards with rewards programs), which can vary greatly.

Recently, this news blog reported that, despite growing customer satisfaction with card rewards in general, travel rewards continued to cause resentment. In particular many consumers reported problems with blackout dates and difficulties making last-minute bookings.

So take care when choosing your rewards cards. Find one that suits your lifestyle by comparing the best credit card deals, and then read the small print. Its worth the effort in the long run.