What's in Your Wallet Part II: Let's Shop for Credit Cards

I have been enjoying talking to my UNM colleagues about Katie’s post on what's in our wallets.  There are different credit cards for every demographic imaginable.  For example, there are cards with rights to all airport clubs and even the right to a personal shopper, for the truly rich and famous.  There is plenty of free pizza to be had with the cards touted to college students.

While I fancy the Costco Amex, my colleague Peter Winograd suggests the US Bank VISA Travel Card (20,000 points qualifies for a $400 ticket on any airline, plus a 10,000-point bonus for first use plus double points for certain categories of purchases); the Compass Bank VISA (5% return on purchases at drugstores, supermarkets, gas stations, plus 1% on everything else); the CitiDividend MasterCard (5% on certain categories of purchases, with the categories changing every three months; 1% on everything else)…
 
I’d love to hear more about some of the other gems out there so, like Bob (I mean George Clooney), I’d relish some reader participation, particularly thoughts on which cards they love.  You can also shop here if you currently have no favorite.

And, I have a question. When should a person actually pay an annual fee on a credit card?  I usually (call that always) opt against annual fees, but I am sure there are times when it pays to pay them.  Let’s hear it.

Comments

[Katie Porter]

I think one argument for an annual fee card is that the fee offsets at least in part the cost of the rewards. (Of course, this also makes the rewards less of an economic benefit to the consumer). Annual fee income means that less of the revenue to fund rewards comes from interchange. Since interchange fees are costs to merchants that they pass along in the form of higher prices to ALL their consumers (including lower income consumers who disproportionately pay with cash), an annual fee card *may* result in less cross-subsidization. Scott Schuh and his coauthors from the Boston Fed have an interesting paper that attempts to measure the size of benefit that card users (higher-income) get from using cards. http://moneywatch.bnet.com/saving-money/blog/consumer-reporter/paying-cash-youre-penalized-anyway/621/

So enjoy your credit cards--on the back of the poor! (Yes, I'm pushing the point to be provocative here).

[Alessandro Machi]

I did an expose' over a year ago on how AMEX STRIPPED credit card customers with high miles by closing their credit card, and how one of the Airlines was trading frequent flyer miles with AMEX for a lower interest rate on a loan.

Possibly one of the most despicable, blatant, arrogant acts a credit card company could do, and it never made the news.

I actually saw the first half of the story on television, (AMEX customers with over a million miles having their cards closed), and discovered the second part (Airlines trading frequent flyer miles for a reduced interest rate on a loan) on my own.

I put the two together and wrote a story about it. lol, I even wrote
a comment at credit slips over a year ago exposing the fraud.
http://www.creditslips.org/creditslips/2009/03/warning-credit-card-practices-can-be-detrimental-to-your-and-their-health.html

Its the second one I wrote, the first one I wrote was about Chase Bank.

[FactChecking]

For a rebutal to that argument see, the paper from the new america foundation http://assets.newamerica.net/sites/newamerica.net/files/policydocs/Surcharging_May_2010.pdf

[Nathalie Martin]

FactChecking, took me long enough but I just blogged out this cool articel you posted. Thank you!

[Charles]

Hi Nathalie,

I pay for an annual fee on my Amex Starwood card because I love getting starwood points. SPG points are a great value for staying in starwood properties like St Regis, Sheraton, Westin, etc and they also convert at 1.25x ratio to airlines like AA.

BTW, your link to college students is broken. Feel free to try this link: http://www.creditdonkey.com/student.html