ENJOY A KINDER, GENTLER CREDIT CARD NOW
President Obama recently signed the Credit Card Accountability, Responsibility and Disclosure Act, requiring the credit card industry to meet set guidelines on interest rate hikes and consumer notifications, among other protections, by February 2010. What does this mean? Well, for starters, credit card issuers must put an end to some of their nastiest practices - including raising rates on existing balances for any reason they choose, applying payments to the lower-rate part of a balance while the higher-rate portion gathers finance charges and slashing credit limits to below consumers’ existing balances.
While technically the issuers have more than a year to adhere to the act, there are a few that have already taken steps to implement the changes. Here are four cards among the first to enact these new favorable terms and which offer the best perks for different types of spenders:
Discover Motiva
Best for: Carrying a balance
Introductory offer: 3.99% on purchases and balance transfers for up to 12 months.
APR: As low as 10.99% variable.
Annual fee: None.
Rewards: Make six consecutive on-time payments, and receive a cash bonus equal to your next month’s interest charge. You'll also earn 0.25% cash back on the first $3,000 in purchases annually, and 1% back on everything thereafter.
Per Fed rules, Discover lets cardholders fix their credit limit so that any purchase that would put them above it will be declined. That, along with cash back and bonuses for on-time payments, can help consumers keep their spending in check. This is for the person who is not able to pay off the card in full when it arrives, and doesn’t want to dig into that natural debt hole that usually follows.
Discover is also one of the few payment-friendly issuers, letting you choose your own due date and make free payments via phone -- even at the last minute. It follows the Fed’s rule that any payment made by 5 p.m. on the due date is on time.
Wells Fargo Platinum
Best for: A low rate
Introductory offer: 0% on purchases and balance transfers for up to nine months.
APR: 7.65% variable.
Annual fee: $0, or $19 if you want to participate in the optional rewards program.
Rewards: None included. Opt into the paid rewards program, and earn one point per dollar spent on every purchase.
Wells Fargo won’t raise your rate if you’re late on an unrelated account, and it provides at least 45 days’ notice of rate increases. Also, statements are mailed to cardholders at least 25 days before the due date.
Once the 0% teaser offer expires, the Wells Fargo Platinum card offers one of the best ongoing rates around for a major bank -- 7.65%. (The average low-rate credit card has a rate of 9.01%, according to Bankrate.com.) The catch: You’ll need a bank account with Wells Fargo to apply.
Citi Forward
Best for: Earning rewards
Introductory offer: 0% on purchases and balance transfers for up to six months.
APR: 12.24% variable.
Annual fee: None.
Rewards: Earn five points per dollar spent on books, movies, music and restaurants, and one point per dollar spent on everything else. Pay on time and stay below your limit to earn 100 bonus points per month. You can also earn two one-time bonuses: 6,000 points when you spend $50 within three months of opening the card, and 5,000 when you sign up for paperless statements within that time period.
Pitched as a card that rewards those who maintain healthy credit, Citi Forward reduces the rate by 0.25% every three consecutive months you pay on time and stay below your limit. (Each account has an eight-reduction maximum, or 2%.) While the card is a little gimmicky (it’s not the best card for carrying a balance, despite the pitch), the rewards are some of the best around.
Citibank adheres to Fed rules including those that eliminate double-cycle billing (which computes finance charges based on purchases made in the current and previous billing cycles). It also provides cardholders with at least 45 days’ notice of rate hikes.
Capital One Platinum Prestige
Best for: Transferring a balance
Introductory offer: 0% on purchases and balance transfers for up to 12 months.
APR: 11.9% variable.
Annual fee: None.
Rewards: None.
If you’re transferring a balance, your goal is to minimize the total cost. That means no annual fee, a lengthy promotional-rate term and (if possible) a low transfer fee. Capital One’s Platinum card hits the mark on the first two. Use that 0% as a tailwind to pay off the debt and for best results, don’t add to the balance.
Per the Fed’s rules, Capital One mails out its statements 25 days before the due date, and doesn’t use double-cycle billing. It also lets cardholders set a fixed credit limit that they can’t exceed.
Go for one of the consumer-friendly cards now and save yourself real cash (and real grief).
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