A little while ago Chase ran a sizzling hot promotion where if you signed up for their Chase Freedom card and made a purchase, they’d reward you with $250 (Chase $250 promotion) but lately they’ve been a little tighter on the promotions, until today. Now, if you apply for a Chase Freedom card, you can get $50 after your first purchase plus get 3% cash back at certain locations and 1% at others. It’s not as hot as the $250 promotion from a few months back but it’s certainly better than nothing if you were looking to snag the Chase Freedom card in the first place.

If $50 isn’t enough for you, check out these credit card promotional offers, many of which offer $100 gift cards.

Pay day loan shops (and cash checking and other similar short term loan shops) are often singled out as places that prey on consumers in a tight spot. While I don’t dispute that, I want to point out other places that also prey on consumers in a tight spot that don’t often get the spotlight.

Pay Day Loans Are Bad

Don’t get me wrong, pay day loans are horrible products for consumers because of their high fees, high interest rates, and their propensity to become financial sinkholes. It’s the financial version of someone going in for a routine cavity filling and coming out with a lobotomy. You just need a little extra help to get you to the next pay day but end up paying for years. According to this warning by the FTC, they give an example in which “the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times [42 calendar days], the finance charge would climb to $60 to borrow $100.” $15 to start and 391% APR is horrible but let’s compare to some of these other products.

Refund Anticipation Loans

Refund anticipation loans, tax rebate loans, assisted refund loans, etc. are horrible horrible, don’t ever get a refund anticipation loan. These products are often highlighted as preying on consumers but I felt they should be mentioned anyway. Given the fervor over pay day loans, you’d think a loan with a $30 activation fee, $20 check processing fee, and a 36% APR would get a little more heat than it does. $50 to start plus 36% APR on funds that are guaranteed (if the tax preparer does their job right) by the IRS… seems a little rougher than the pay day loans, which are loans on funds that are not guaranteed.

Bank Fees

According to Bankrate’s 2007 bank study, bank fees are on the rise. Big time. A bounced check will cost you $28.23, average ATM surcharge will run you $1.78, and the average monthly service fee on a checking account was $11.72 (don’t ever pay a fee for a checking account). You’d think that they were lending you money given those fee values! I can understand the headache of a bounced check but let’s get real here, bounced checks never come alone. In fact, considering banks withdraw the largest amounts first, you’re more likely to see multiple bounces than a single bounce.

Credit Card Fees

Again, credit card companies have come under heat too but it still bears highlighting that they’re practices are closer to pay day loans than they are to the Fed. If you make your payment late, most places will charge you somewhere between $20 and $30, with the bias towards $30. Interest rates? High, plus companies have been mailing out letters notifying people that their rates have gone up for no reason. I’ll leave it at that since the credit card industry does take a lot of heat for their practices.

So as you can see, pay day loans are horrible but there are a lot of other horrible and more mainstream products out there that simply don’t get the same exposure. Bouncing a check is like missing a payment which is like taking out a pay day loan, in terms of cost, but at least with a pay day loan you get something out of it (a horrible horrible loan!).

There are plenty of reasons you should use a credit card instead of a debit card (if both are available) but here’s one that is especially compelling. A debit card is directly linked to your checking account, whereas a credit card is linked to an ephemeral credit limit. When Burger King accidentally bills you $2,243 instead of $22.43 or when they bill you $8,648 instead of $86.48, you aren’t suddenly emptied of all your funds.

Debit cards used to suffer from weaker fraud protection, that’s no longer the case. Debit cards used to be less widely accepted because they used a network that differed from credit cards, that’s less and less the case. However, debit cards will always be linked to your bank account (that’s by definition) so when someone accidentally enters in $2000 instead of $20, you’ll be out that money until someone is around to resolve it.

In the meanwhile, any checks you’ve written or any future debit transactions will result in NSF (not sufficient funds) and overdraft fees - which will likely put a smile on your bank’s face and a huge frown on yours.

So, if you want yet another reason not to use debit cards, this is a big one. Don’t underestimate the power of carelessness and stupidity.

Biometrics, loosely defined as the process of using a person’s physical characteristics for identification, is slowly gaining popularity and their use may soon extend to credit cards. Privacy is always a hot button concern in the US, just think back to when AOL released all that search data, and the collection and storage of your physical characters, one of the most personal of things, is something that probably would both a lot of people. So I’m curious, if biometric data were required, would it bother you? If it was optional, would you elect it?

I have mixed feelings on this. I’m not a gung-ho privacy advocate in some aspects and conservative in others. For example, I’m comfortable with people being able to see the websites I surf but I don’t want my information stored somewhere if it’s not absolutely necessary. I can see the value of using biometrics as a means of authentication and so would definitely elect to “activate” any biometric-related security features. It’s easy to fake a signature, it’s much harder to fake a fingerprint or retina scan.

As you probably suspected, one of the places where biometric authentication has become pretty popular is Japan (they get all the cool gadgets and gizmos before we do!). One of the reasons is because in Japan you can generally withdraw from the ATM the equivalent of thousands of dollars each day, so the higher security measures are required. Granted, this is the bank, which knows all your financial information anyway, but it’s an example of how biometrics have been rolled out and accepted.

So, what are your thoughts?

(Image by Joits)

Don’t think cashback reward credit cards are worth it? Well, a month ago I wrote about how the Citi CashReturns card was our wedding spending secret weapon because of its phenomenal 5% cash back rewards program. It was an idea my friend gave me and we’re now thankful he thought of it (and remembered to mention it to us!) because just the other day we received a check from Citi for $532.45. That’s right, in the last month we’ve spent a whopping $13,311.25 on wedding related items (mostly catering deposits, thankfully they took credit cards!) and we’re still a month out from the actual event!

While this is an extreme example, it’s the perfect case of how this CashReturns card has saved us a lot of money. That $500 is like getting our wedding cake for free… or part of our DJ for free… or a tuxedo for free. Another awesome feature of the card is that you don’t have to request the check, something I always felt was a ridiculous requirement. Of course I want my money, why would I ever “stockpile” cash? So, without any prompting, Citi sent us the check (we almost ripped it up because we thought they were convenience checks!).

The only downside to the promotional offer is that the 5% cashback is for only three months but that’s long enough for us to pay for the wedding and a honeymoon… all at an instant 5% discount!

It’s a widely believed fact that your credit score can be improved if you keep your unused credit cards (rather than cancel them). By keeping these cards, you are increasing the average age of your lines of credit, increasing the total amount of credit, and decreasing your credit utilization - all good things when it comes to computing your score. So, why do I always advocate canceling unused cards? I advocate that because I believe it is the safest thing for you to do and is better than keeping unused cards for the credit score benefit.

Security Breaches

GE Money USA, a branch of GE that manages the in-store credit card programs of many retailers, recently reported that one of the nine back-up tapes put into storage at Iron Mountain had gone missing. After a search of the facility, they were unable to locate the missing tape. What was on it? It is supposed to contain the personal details of approximately 650,000 people. Think you are safe because you have nothing to do with GE Money USA? Unfortunately, you’re probably wrong because GE Money USA handles retailer credit cards for over 230 retailers, one of which is the ubiquitous JC Penney company. But look on the bright side, you might be getting free credit monitoring for a year! In all seriousness, while the actual probability you will be affected by data breaches such as this one will be relatively low, wouldn’t you be kicking yourself for keeping around an unused JC Penney card when you could’ve canceled it?

Promotional Offers

If you have a card and the credit card company starts offering hot new promotions for it, then you won’t be eligible for these new offers since you’ve already own the card. So, I’ve signed up for a lot of cards because they offered free promotions (I compiled a list of credit cards that offer $100 gift cards after you first purchase) and then didn’t use them much after the promotion (mostly because cards with better cashback came along), so why not cancel them so you can take advantage of newer promotions? There is generally a period after which the card no longer considers you a customer, usually six months, but after that you are like every other Joe (or Janet) on the street.

Please don’t read this to mean that I think someone should apply for the card for the promotional offer, cancel, then repeat. I’m not advocating that, in fact I think it’s stupid. The frequent applications for credit will destroy your credit score. I just mean to say you want to keep flexible, especially if you aren’t even using the card.

Out of Sight, Out of Mind

If you never use the credit card and never receive a bill, would you check your account for fraudulent activity? I’d say there’s a 99.9% chance you wouldn’t because you wouldn’t think to. You never used it so how could someone else have gotten access to it? However, it’s entirely possible that someone got access to your card and began using it without your knowledge. When thieves steal card information, it’s not uncommon for them to wait a few months before using it. Why do they wait? It’s harder to pinpoint when the loss occurred if it happened months prior to actual fraudulent activity.

Keeps Things Organized

You can’t lose a card if you cancel it! Let’s say you put all of your unused cards into your desk drawer. Six months later, someone breaks into your home and steals all of your cards (or just one, it’s actually worse if they only take one!), how can you possibly remember which cards to cancel? (you would know if you had a personal finance user’s guide!) Let’s say no one steals it but one of them expires and they send you a new one, only to have it intercepted at the mail box by an enterprising identity thief. Let’s say no one does anything bad and you have the card in your desk without incident, what’s the benefit? You have some extra clutter sitting around, extremely expensive clutter if it gets into the wrong hands.

May Not Actually Help Score

One of the main points behind keeping a card is that it improves your average credit line age but that may not be true. If you cancel a recently issued card, it could be possible that the new card is negatively affecting your credit line age metric. While it’s difficult to calculate and probably a waste of time, the credit score boost you are trying to get with the unused card may not be as good as you thought it was.

Ultimately, I think that keeping unused cards lying around is a recipe for disaster. I cancel cards that I don’t use, what do you do?

Liz Pulliam Weston of MSN Money asked five credit card industry experts (basically representatives of companies that run credit card websites) and a frequent flier guru for their favorite cards in one of three categories: travel programs, cash-back programs, and savings programs. Travel programs are those cards that offer miles and upgrades and perfect for those with a lot of travel each year. The cash-back programs are, as you would expect, those cards that offer the best cash-back rebate. Finally, the savings programs are those cards that give you savings towards something, instead of straight cash, such as for a house, a car, or even directly into a brokerage account.

One trend you’ll see is that all of the winning cards are American Express! Is this some kind of conspiracy? Hardly. American Express is less widely accepted because they have higher merchant fees. The higher fees means that they’re able to offer higher reward earn rates because their profits are better. So, in each category you’ll see an American Express card winning out.

Travel Reward Cards

The winner of this category was the Starwood American Express card, a card on my list of $100 credit card signup deals (you get 10,000 points after your first purchase). Number two was the Diners Club MasterCard followed by American Airlines AAdvantage MasterCard, United Mileage Plus Visa, Choice Privileges Visa, and Citi PremierPass Elite MasterCard as honorable mentions. It’s tops because of its flexible points program and it’s higher than average earn rate; which is around 1.25% if you convert things the right way. You earn a point for each dollar spent and you get 5,000 bonus points for every 20,000 points you spend, which is how you get to the 1.25% earn rate (.25% over the competition). The article lists two very important drawbacks: United, in an attempt to force you to use their card, charges twice as many points as its competitors, and, the typical limitation of AMEX card acceptance in general (less widely accepted because of their higher fees).

Cash-Back Reward Cards

The winner of this category was the American Express Blue Cash with Chase Freedom Visa taking second and the Citi Professional Cash MasterCard and Discover Motiva earning honorable mentions. AMEX Blue took top honors because of it offers 5% cash-back on everyday purchases and 1.5% everywhere else (on its highest tier). It also does not have an annual cap on rewards. This makes it good for high spenders but they recommend trying out the Chase Freedom Visa if you aren’t as big of a spender and it automatically picks your three biggest categories to give you 3% cashback on.

Savings Reward Cards

I thought this category was a little forced but a Fidelity Investments 529 College Rewards American Express wins out followed second by the Citi UPromise MasterCard. Citi Home Rebate Platinum Select MasterCard, GM Flexible Earnings MasterCard, and the NestEggz Visa received honorable mentions. So, why the Fidelity card? It offers 1.5% rebates and can supplement a 529 plan automatically every 50 points you earn. I’m not entirely sure why I wouldn’t get a cash-back card instead, but I suppose it “forces” some 529 saving (in the same way that throwing loose change in a jar is saving).

Personally, I think that you want to always go the route of cash-back. Getting rewards and points and everything is nice, but that just means it’s harder for that money to come back to you. With points, you have to spend it on something in the catalog at the exchange rate they dictate. With cash, you do whatever you want. Also, I think having multiple cards (a max of three) is the best way to go because some cards offer better cashback on different categories. For example, I use a Citi mtvU card whenever I eat in restaurants because it offers 5% cash-back and then I use an American Express Costco TrueEarnings on travel and everything else (3% and 1%). Lastly, we use a Citi CashReturns card to float the purchases for our wedding because it’s offering 5% cashback on everything for three months! Using different cards offers you different earn rates so you can match up the peaks.