[y66]

In his "Your money" column today, Ron Lieber reports that he is switching from his current cash back card, which rebates 1.25%, to the new Charles Schwab Bank Invest First Visa, which pays a straight 2 percent back into his Schwab brokerage account (no foreign exchange fees for use outside the United States and no annual fee).

I thought I had a pretty good deal with USAA but that Schwab deal looks better.

I do not have any financial ties to Charles Schwab!

[kenberg]

Thanks. This is the second time I have heard about the Schwab card. We had some guests over a couple of weeks back who keep close track of such things, and they mentioned it. They regard me as crazy for my negligent approach and make sporadic efforts to make me deal with reality. Mathematicians need a spouse who keeps up with such things, but my wife is also a mathematician.

Anyway, I mentioned this to her and maybe we will actually do it. Thanks again.

Btw: I have been hearing reports that the credit card companies are making every effort to screw everyone they can before the new law kicks in. Rates are jumping, due dates are changing, minimum payments are increasing. I can't vouch for the accuracy or the details.

[Winstonm]

Keep in mind that a "rebate" requires a purchase, and annual fees can wipe out a lot of the gain if the card is not heavily used.

[Rain]

This is a very nice card, no annual fees too.

I'd have gotten it except...I'm addicted to frequent flier miles. =(

Don't forget this could be a visa signature card if credit scores are high enough, so some additional useless perks like "concierge" services are included. (Though google is probably a better bet most of the time.)

My card of choice is the Starwood amex card - $30 annual fee.
Redeem 20000 points and they give you 25000 miles. Accumulate it for premium tickets and it's worth >>5% rebate . I managed to let the rickety parents travel in style twice so far - next year they'd get another trip. Too bad not all places take Amex.

[cherdanno]

Frequent flier miles are worth a lot less than you think they are. I bet you would be better off with a cashback credit card (e.g. bluecash).
Winston - these cards typically have no annual fees, but have high credit rates. So don't ever use them when you might not be able to pay your monthly bill, is the recommendation I think.

[Rain]

FF miles redeemed for premium tickets are worth a lot more. But yes if you redeem for economy tix, then it's not worth as much.

I've redeemed 4 biz class tix for them so far on SQ, each costing about $2.5k SGD = 6.6k USD so far.

Used 120000 miles + some odd taxes.

That's a 5.5% rebate, and the tix included a free stopover, so they could go to 2 countries. Really nice because they'd never get to travel in biz class otherwise. This excludes the mile bonuses like 5000 free if you redeem 20000, sign up bonuses, etc.

I think the last time I calculated, redeeming for first class seats would be worth about 7.5% rebate at least.

I like cashback for simplicity, but ff miles is really sweet if this is the only way you can buy premium tickets.

[Winstonm]

cherdanno, on Jul 4 2009, 02:28 PM, said:

Winston - these cards typically have no annual fees, but have high credit rates. So don't ever use them when you might not be able to pay your monthly bill, is the recommendation I think.

Exactly - these people are not doing this from an overabundance of concern for the well-being of their fellow man, I can assure you.

[kenberg]

Rant Alert

I got to thinking. Which is often a mistake, always a danger.

We almost exclusively use just one credit card. We use it quite a bit and so we get noticeable cash back. I take it, of course. But consider:

As Winston notes these guys are not Santa Claus. If they give me $500 back, it's because my use of the card has provided them with more than that, probably7 a fair amount more. Say $800. This seems minimal. They get it from the merchants.


This means that $800 has been folded into the price of the goods that I purchase. I have to pay this, whether I use a credit card or not. If I want (a portion of) the money back, I have to use their damned card, increasing their take.

Whoever thought up this racket is a ***** genius.

[jdonn]

kenberg, on Jul 6 2009, 07:02 PM, said:

Whoever thought up this racket is a ***** genius.

I think your example is wrong. The credit cards are probably making nothing or next to nothing from people who pay off their monthly balances. They simply make up for it many times over off the people who don't.

Anyway regardless of that, I don't think it's unreasonable to pay for convenience. Plus there may be savings passed down to you if the store doesn't need as many cash registers open, so it's not even necessarily unfair that people who don't use credit cards are incurring some of the cost.

[JoAnneM]

If we put $3,000 on our Discover card every month and they charge the merchants 2.5% they will get $75. Now we get a cashback of 2% which is $60, so Discover has netted $15. Multiply that millions of times and they do okay from people who pay off their accounts every month.

[helene_t]

Do they charge the shops 2.5? That's ridiculous.

Anyway, if the shops get screwed it's their own fault. If CC is more expensive for them than DC or cash, they should just pass on the costs to CC customers.

[kenberg]

The whole mechanism is pretty well hidden, or so I understand. Large merchants, Macy's and so on, have their own cards and often offer a discount for using them. This is a reasonable way to avoid forking over a cut to a third party. For small independent merchants, the few that still exist, this may not be practical.

My very limited experience in having to deal with credit card companies makes me very willing to believe the horror stories I hear concerning people whom they have really gotten their hooks into.
Example: Maybe five years or so ago I requested one of these free checks on my credit rating. It was fine, but I found out that I had a number of credit cards listed as being in my name although from my viewpoint I had canceled them. It took considerable effort to get the things really canceled.
Example: I paid for a flight online with a credit card and there was a box to check to get notified of upcoming specials. Sure. I checked it. It turned out there was a monthly fee for this. I got it canceled and my money refunded, but it took a bit. No doubt the fee was somewhere in the small print but I didn't see it.

So no huge problems for me, but I think they are a sly lot.

I have heard of due dates being advanced and then interest rates being jacked up substantially when the date is missed. I guess the new law addresses this trick, but I think there is much more to be done. And I have been hearing much more about abuses recently.

Some clarity in what the costs actually are would be very welcome.

[Apollo81]

helene_t, on Jul 7 2009, 07:42 AM, said:

Do they charge the shops 2.5? That's ridiculous.

Anyway, if the shops get screwed it's their own fault. If CC is more expensive for them than DC or cash, they should just pass on the costs to CC customers.

They don't get screwed, they just raise their prices by whatever percent they are being charged by the CC companies.

[Apollo81]

jdonn, on Jul 6 2009, 08:40 PM, said:

kenberg, on Jul 6 2009, 07:02 PM, said:

Whoever thought up this racket is a ***** genius.

I think your example is wrong. The credit cards are probably making nothing or next to nothing from people who pay off their monthly balances. They simply make up for it many times over off the people who don't.

Kenberg is right. The CC companies charge the merchants a 2-5% convenience fee per transaction usually with some minimum. That cost is then passed along to you in the form of higher prices -- and they charge everyone that higher price regardless of payment method so you don't realize they're doing it.

This is why some gas stations charge different prices for cash vs credit, and why some takeout places don't allow CCs for purchases under $10, and why small businesses like plumbers, contractors, auto repair shops prefer that you pay by check (if they trust you).

[jdonn]

Apollo81, on Jul 7 2009, 01:07 PM, said:

jdonn, on Jul 6 2009, 08:40 PM, said:

kenberg, on Jul 6 2009, 07:02 PM, said:

Whoever thought up this racket is a ***** genius.

I think your example is wrong. The credit cards are probably making nothing or next to nothing from people who pay off their monthly balances. They simply make up for it many times over off the people who don't.

Kenberg is right. The CC companies charge the merchants a 2-5% convenience fee per transaction usually with some minimum. That cost is then passed along to you in the form of higher prices -- and they charge everyone that higher price regardless of payment method so you don't realize they're doing it.

This is why some gas stations charge different prices for cash vs credit, and why some takeout places don't allow CCs for purchases under $10, and why small businesses like plumbers, contractors, auto repair shops prefer that you pay by check (if they trust you).

It can't be true that they pass on 100% of the cost to consumers. That's not how maximizing profits with a tax works. The consumers and the company would both be eating part of the cost.

Anyway if they charge 2.5% to stores, and pay back 2% to customers in rewards, I think that qualifies as 'next to nothing' even though on a large scale it adds up.

[luke warm]

i think 2.5% is a little on the low side, usually it's around 4%... most merchants do raise their prices to help offset this, thought not usually dollar for dollar

[Apollo81]

jdonn, on Jul 7 2009, 02:16 PM, said:

Anyway if they charge 2.5% to stores, and pay back 2% to customers in rewards, I think that qualifies as 'next to nothing' even though on a large scale it adds up.

The actual numbers are more like 3-4% and 1%. And that 1% is assuming that customers bother to use their rewards. I saw a statistic somewhere that said 70% of all credit card rewards go unclaimed. And I won't even get into rewards programs where the points aren't redeemable for cash.

[mike777]

Apollo81, on Jul 7 2009, 03:34 PM, said:

jdonn, on Jul 7 2009, 02:16 PM, said:

Anyway if they charge 2.5% to stores, and pay back 2% to customers in rewards, I think that qualifies as 'next to nothing' even though on a large scale it adds up.

The actual numbers are more like 3-4% and 1%. And that 1% is assuming that customers bother to use their rewards. I saw a statistic somewhere that said 70% of all credit card rewards go unclaimed. And I won't even get into rewards programs where the points aren't redeemable for cash.

Many states are now claiming such things as unused gift cards. A company must file with the state all unused gift cards after one or two years and the states take them.

http://online.wsj.com/article/SB1246057424...dist_smartbrief

[jdonn]

So perhaps am I really out of it. When I was 15 and worked at a grocery store, I was told they were charged by American Express to accept that card, but not by any other card. Has that changed, or was it never true, or might it only have been true where I worked?

[barmar]

Maybe it was once true. Now, I think American Express charges the merchants more than other credit cards, which is why many merchants still don't accept it.

And while the credit card companies may charge merchants for this service, I don't think they pass most of the cost on. They make up for it in increased sales.