I think of frugality as the conservation of both time and money.    When it comes to money it helps not to think of the least expensive product, but the one with the best value.   For example, in the eighties, a company began importing a car from Yugoslavia, aptly named the Yugo, for a mere $4,000.     That would seem to be a frugal choice, except for the fact that the car was poorly made and unreliable.   While that is an extreme example, it does illustrate that price should not be the only determining factor when making a purchase.

Another illustration would be Wal-Mart vs. Costco.   Wal Mart does have very low prices.    They do this by paying their employees poorly and offering them few benefits and notorious working conditions.   As a result, the personnel I have encountered there are not motivated to assist you and are indifferent to customer satisfaction.   Furthermore, most of the merchandise they sell are low quality products imported from China.   On the other hand, Costco is well known for being one of the nation’s best employers.   They pay their employees above average wages for the retail sector, and offer great benefits.  In return, they retain employees a long time.    This means that they are more efficient and have superior knowledge of their responsibilities.  Their prices may not be quite as low as Wal-Mart’s, but their employees are courteous, helpful, and don’t seem to hate their job.    Sure, many of their products are Chinese imports as well, but there are a lot more quality name brands than at Wal Mart.

I choose to patronize Costco not just because they treat their employees better, but because their employees treat me better.    I have a better experience when I go to Costco, and I know that they are committed to customer satisfaction.    Wal-Mart is like a Yugo, while Costco is like my trusty Subaru, they never let me down.

Look For Customer Satisfaction Guarantees

Some businesses guarantee customer satisfaction.    Costco will take just about anything back, with or without a receipt.   Other examples of companies with iron-clad satisfaction guarantees include REI and Performance bicycle shop.  When you buy quality products from retailers who will stand behind them, you are being frugal even if it occasionally costs slightly more.

The same philosophy works with financial services.  I do my banking with a small, internet based bank.   I chose this bank because they rated highly on customer satisfaction surveys.   They keep their costs down by not having branches all over town.    Instead, they provide first rate customer service over the phone with live human beings based here in the United States.    They charge few, if any fees, and even refund the ATM fees that other banks may charge me.

This Works For Credit Cards Too

You might get some great rewards from your credit card occasionally, but some companies just don’t have their customer service act together.    When I had some cards stolen from my house two months ago, I was able to fix all of the problems with one phone call to one credit card company.   I am still dealing with fraudulent charges from another company, two months later.    Guess which card I will be keeping?

Another example is with reward partners.   Like most travel and reward card bloggers, I am devoted to the American Express Starwood Preferred Guest program.    On the rare occasion that I have had any problem with the card, their website, or even their hotels, I have received a prompt resolution that has been more than adequate.    They do not devalue their program periodically, at least not nearly to the extent that most other programs do (I am looking at you Hilton!).   They also don’t withhold points on discounted stays, like the Intercontinental Hotels Group (Holiday Inn) does.

Bottom Line

I frequently mention that your credit card is not a lifetime relationship.   I also like to remind my readers that the credit card market remains extremely competitive for people with decent credit.   The evidence is as clear as the offers that litter everyone’s mailbox.     On the other hand, it is a good feeling when you find a product or service that delivers real value.    That value is a quality product or service.    When it is coupled with a competitive price, you actually have a frugal choice, even if it is not “the cheapest.”

The Chase Sapphire Card is the latest “revamped” rewards card line up from Chase. From what I can see in the reward program, I think Chase has a winner here. Check out this long review below.

How to Earn Points – The Chase Sapphire Card allows you to earn one point for every dollar that you spend on the card. Reward points do not expire and you can earn unlimited points. As a sign up bonus, you will get 10,000 bonus points. The Ultimate Rewards program also allows you to book travel tickets through their online travel system and if you choose to use that, you will earn 2 points for every dollar that you spend on the card. They also have a shopping portal where they have many online merchant partners. Using your card and shopping through their portal could earn up to 10 points for every dollar that you spend.

Rewards – The reward program for the Chase Sapphire Card is the Ultimate Rewards. It is a rewards program that offers travel rewards, merchandise, gift cards and other rewards. We’ll now go through the rewards.

Travel Rewards – There are a few ways to redeem travel rewards for the Chase Sapphire program. You can use their online travel site and book your flights, hotel stays, car rentals, cruises etc (just like you would with Expedia.com or Travelocity.com). Their travel site should be the same as these online sites with access to most flights and hotels. If you do it this way, you can get earn 2 points for every dollar you spend. By doing it this way, you could also either pay by points or pay by points and cash (from your credit card off course). 100 points is worth $1 (which is pretty standard).

You could also book your travel with other online sites or even off line travel agents. After you have done the bookings, you will just have to inform Chase and you will get a statement credit.

You can also transfer points into miles or frequent guest points with their partners. Below is a screen shot of their partners.

Gift Cards – The Ultimate Rewards also allows you to exchange points for gift cards as well. Below is a screen shot of their merchant partners.

Online Merchant Partners – The Ultimate Rewards Program for the Sapphire Card allows you to earn extra points (up to 10 points) for every dollar that you spend with their online merchant partners. Below is a screen shot of their partners. I got this from my Freedom Card which gives you rebate (or discount) rather points. But the partners are the same.

Merchandise and other stuff – The Ultimate Rewards program also has tons of merchandise and you can also donate your points to charities. But there are just too many rewards to list them all here.

Fees – The Chase Sapphire Card has no annual fee.

Verdict – I am actually quite impressed with this card. Two years ago, I got the Chase Flexible Rewards Card and the rewards were really horrible to start with. But they have steadily improved. Recently, Chase changed my card to the Freedom Card and the rewards are the same as the Sapphire Card (which is why I am able to give you screenshots). There are a few things I like about this card. Firstly, as far as travel goes, there are a variety of ways to redeem points for travel. You can book through their site and earn double points (just like Amex charge cards – but without the annual fee). You can also book your travel with any travel agent (online or offline) like the Discover Miles and Escape Card. So this card is pretty flexible in the way it allows you to redeem points for travel. You could also transfer points to frequent miles and guest programs, but to be honest, their list of partners is not a lot. A card like the Starwood Preferred Guest or the Amex Gold Card would be better if this is how you would like to redeem points.

Their other rewards like gift cards and shopping partners is pretty comprehensive as well. I would recommend the Chase Sapphire Card to folks to want to use their cards for travel and also other rewards but are not hardcore frequent fliers. It has great flexibility in the way you can redeem points for travel. On top of that, there is no annual fee, you can earn unlimited points which do not expire.

Rewards are great.   I have several really exiting vacations planned next year that are financed in whole or in part by points and miles from reward cards.   There is absolutely no way that my family and I could afford these luxuries without my proficiency with earning rewards on my credit cards.

As any wise reward credit card holder knows, credit cards are a financial instrument that is kept only so long as they are useful; they are not a lifetime commitment.    That begs the question, where do my Miles, Points, or Cash back rewards go when I cancel my credit card?

The Three Different Types Of Reward Systems

I can break every reward card down into three different types.

The first is cash back cards. They seems simple compared to other complicated miles and points programs, but there are several different ways that a cash back card can determine the disposition of your rewards.     Many cash back cards give you a check or a statement credit every month.    Others dole out your rewards when a threshold is met.   There are some that give out rewards annually, based on either the calendar year, or your sign up anniversary. Finally, some popular cards have a sort of hybrid scheme.  My Capitol One card is one of those hybrid cash back cards.   I get 1% cash back monthly, but I only see the statement credit when I reach $25 in cash back.     It is my assumption that should I cancel the card, I would get the remaining fraction returned on my last statement.   In addition, I also get another .25 percent back at the end of the year.   The Costco Amex, on the other hand,  is infamous for giving out cash back on an annual basis, every February.   The problem is that if you cancel your card before February, or even if they cancel you, you loose out on an entire year’s reward, which could be hundreds of dollars.

The second type of reward card gives out bank created points. These loyalty programs, like American Express’s Membership Rewards are created and run by the company issuing the credit card.    Each is different, but the general idea is that the bank itself can grant, withhold, or even subtract rewards from your balance, in accordance with it’s program’s terms and conditions.    Those terms and conditions are subject to change at a moment’s notice as well.    My understanding is that if you cancel all of your Membership Rewards credit cards, you loose all of your points.   In other situations, these bank run reward systems withhold points if you are late with your payment, or they may freeze your account altogether.    You will have to do the research yourself to become familiar with your bank’s rules and regulations.

The third type of system is one I think of as a third party affiliate card. A good example is the American Express Starwood Preferred Guest card.     Every month when my statement closes, I get a direct deposit from American Express of Starwood points to my Starwood account.   From that moment on, those points are mine alone, and Amex has no power to touch them.    The same is true of Delta miles accumulated with the Delta Amex or American Airlines miles earned through a CitiBank card.

Which System Is Best?

The Cash Back cards are pretty foolproof, so long as you don’t get heavily invested in an annual return that is based on your membership at some point in the future.   The Costco card is fairly competitive, but I really don’t want my cash being withheld until February of 2011 from purchases I make this January.   In the best case scenario, they are keeping my money for over a year.    In the worst eventuality, they could arbitrarily decide to cancel my card at the end of the year, and I forfeit everything.    Let’s just say I am not interested in leaving a few hundred dollars up to the whim of American Express and Costco.

I am not too excited about bank sponsored loyalty programs either.   It is not that I am worried about my account not being in good standing, it is just that they usually provide less valuable rewards than third party loyalty cards.   This is because the third party, like an airline or hotel chain, is able to offer rewards from excess inventory at very low cost to themselves, while they count on card holders to be more loyal to their brand with their purchases.    It is that higher rate of return, along with the irrevocable reward points and miles that makes me a big fan of third party reward cards like the Starwood Preferred guest Amex.

Gaming The System

Some have discovered that you can cancel your credit card within thirty days of the annual fee and have that fee refunded.   There are even some who have reaped bonus points, only to later cancel their card.     I find this a little ethically dubious.    I have never done it, and I suspect there are only a few cards in which you can get the sign up bonus, and then cancel the card with a refund of the annual fee.   I am torn.   Part of me thinks that this is the kind of loophole that banks always exploit when it is in their favor, while the other part of me really doesn’t want to play at that level.

What do you think?

Just got this email recently from a reader and thought I’d share a couple of tips of how to save money with credit cards when shopping at overstock.com

I just want a credit card to make purchases from overstock

MS. Carolyn Strickland

Answers – Carolyn, there are a few ways to use credit cards for overstock.com purchases. You could get a overstock.com credit card where you can earn points when you use your card and 3 points for every dollar you spend at overstock.com and you can exchange the points you earn for reward certificates where you can use at overstock.com.

However, there are other cards that allow you to get discounts with overstock.com. The two cards are the Discover More Card and the Chase Freedom. I’ll show you some screen shots below.

Chase – The Chase Freedom Card’s reward program is based on their new Ultimate Rewards. One of the perks of that program is that you can access many online merchant partners through your account and earn discounts with their merchant partners. The discounts vary anywhere from 2% to as high as 20%. Overstock.com is one of their partners and you can earn 6% rebates with the Ultimate Rewards Program.

Discover – Discover also has a shopping program called shopdiscover.com that allows you to earn cash rebates with merchant partners as well. Overstock.com is one of their partners and with Discover, you can earn 5% rebates. Here are some screen shots.

How it works? – Basically, when you are card holder of either cards, you have to access overstock.com via your account. The reason for this is to track your purchase with the card (it is the same site as if you typed in directly to your browser). The Chase Freedom pays a slightly higher payout than Discover® More(SM) Card. But I would suggest you check out their other merchant partners as well as I suspect that you would not just be using the card to shop at overstock.com

I had the pleasure yesterday of interviewing Rob Garcia of Lending Club. Lending Club is a person to person financial service where borrowers can apply for loans and investors can fund those loans directly. Below is our radio interview and I will follow that up with a review of the site.

What is Lendingclub.com? – Lending Club is peer to peer marketplace for individual borrowers and investors (or lenders). It was formed in 2006 and after getting SEC approval in 2008, has seen its business grown leaps and bounds. Lending Club issued more than $6M in loans in October, which makes them the largest P2P lending operation in the world, while it keeps growing at an impressive 15% monthly.

How does it work for borrowers – For those who need to borrow, all you need to do is to sign up with some basic information. After the sign up process, you will be sent another set of questions to answer which contains more details like your salary, your job etc. Not everybody could be a borrower as there are criteria to meet. The two most important are your FICO score (which has to be at least 660) and your debt interest to income ratio (excluding mortgage) cannot exceed 25%. You can request a loan for up to $25,000 for a 3 year maturity. The interest is fixed and the loan is unsecured.

Based on the information that you give, Lending Club will run through a proprietary credit score system and assign the borrower a rating and an interest rate. Below is a screen shot showing what the ratings are and what rates are being applied.

How does it work for lenders and investors? – Once again, all you have to do is to sign up. The minimum investment is $25. All you have to do first is to deposit some more from your bank account to Lending Club. (Note that you do not earn any interest for any money sitting with them that is not invested).

You can browse the list of borrowers and even ask them questions about the reason for their loans, their past records etc. It is like being a credit officer.

Lending Club advocates diversification (who doesn’t) and claims that the the average net annualized return (after fees and defaults) is over 9.5%.

What happens when someone defaults? – According to Lending Club, the annualized default rate is slightly over 3%. Lending Club has a collection process if a borrower defaults. According to them, about 80-90% of missed payments are due to changes in bank account or temporary cash flow issues, and these loans become current again within the first 30 days of the missed payment. Late payment fees are charged to late payers and most of the fees goes into the investors pocket. Lending Club will also utilize external collection agencies if the note is deep on default.

Lenders and investors also have a choice of selling their loans in the secondary market. This requires a sign up with FOLIOfn (which is a member of Finra and SPI).

Lending Club is governed by the SEC – Lending Club is governed by the SEC. That that every loan is issued in the form of “notes” and is filed with the SEC.

Tools for Lenders – Lending Club has a statistics page which contains a lot of statistics for lenders. They contain some really cool date like

Below are screen shots of the stats page.

Why is Lending Club able to offer borrowers a lower rate and are they underpricing risk? – I asked Rob in the radio interview why was lending club able to provide a lower cost of borrowing to borrowers and if they were underpricing risk for their lenders. His answer was that Lending Club is not a bank and they do not take deposits or borrower money. Hence, they have no “funding cost hurdle” to overcome. They also do not have costs associated with having branches and a bricks and mortar bank have. Hence, they are able to pass these savings on to their borrowers and investors.

Who is Lending Club For? – On their statistics page, Lending Club has a breakdown of the use of the loans taken out by borrowers. By far and large, most borrowers make use of Lending Club as credit card consolidation loans. Some use them for small business, home improvement. This does not surprise me as credit card issuers have been clamping down on their 0% balance transfer offers. Hence, if you are looking to consolidate your debt, whether is it just credit card or other types of debt, Lending Club is a great alternative if you cannot get approved for these 0% offers. There are several advantages that Lending Club provide.

The blog world is full of credit card experts, like myself, and sometimes even I come across some cool tricks to get what I want out of a credit card company.

Appeal A Rejection

As someone who pays all my cards in full every month, I maintain some pretty good credit.    Naturally, I don’t receive rejection from applications that often.    On the other hand, credit has been tightening, and more people are getting rejected now than ever before.     It turns out that the rejection letter may not be final.    Richard Ingersoll over at Frugal Travel Guy blog has had some success with reconsideration letters. The idea is not that you are providing any new information, but that you are restating your case, potentially to a human being rather than a computer.     I fully expect to be approved for the British Airways Bombshell offer, but if I don’t for any reason, I will definitely give the reconsideration letter a try.

Reallocate Your Credit

Gary Leff over at the View From The Wing Blog points out that American Express is now allowing card holders to shift some of their credit from one card to another.   Apparently, they had previously allowed this at some point, and then stopped doing so.     The idea is that you can have more credit on the card that you use the most.     Gary points out that he had been approved for a particular reward card, but at a very low limit.   Later, he wished to take advantage of a promotion, but couldn’t due to the low limit.   He was then able to shift his available credit from one Amex to another.    I have read lots of stories about people doing this with CitiBank cards as well.    This is a very little known trick that you can keep in the back of your pocket for some time in the future that you may need it.

I am looking to change from Amex to another credit card. I am looking for the best option where my use of the credit card will reward me with Continental airline milage and Marriot reward points. We will use these rewards for family trips. We typically pay off our credit cards in full on a monthly basis and put anywhere from $2,000 to $5,000 each month.

Please advise

Mr Aresh Tahbaz

Answer – Aresh, there are 2 cards that you can possibly. Both are from Chase. They are the Chase Freedom and the Chase Sapphire Card. The reason both cards work is because their reward program, the Ultimate Rewards Program, has partnerships with both Continental Airlines and Marriott. Both cards have no annual fee unlike the Amex charge cards (which also have both Continental and Marriott in the Membership Rewards program).

You can transfer points that you have earned on the card to both Continental OnePass Miles and Marriott Points. Below are screen shots of their program (which you cannot get on their website if you do not have their cards – but I do!!).

Bellow is the funniest letter I have ever received.   The story is that I recently canceled a CitiBank card that I had.    Apparently, I had overpaid my last bill by the princely sum of $0.01.

I have seen this phenomenon before, sort of.   Years ago, when I had a roommate, we used to split our utility bills half and half.   Inevitably, we both rounded an odd number down to the next cent.    One day I got a bill for an outstanding balance of $0.01.    We had the greatest time calling the company up and telling them we couldn’t come up with the money, and would like to pay in installments!

Personally, I can’t really think of a way around this.   If they did not send out checks, then they would be accused of profiting in small increments, like in the movies Superman III and Office Space.

What do you think, should I frame it?

hello I have a credit card debt of 8800 dll, I enrolled in a hardship program becouse of hard times and continued paying my credit card on time for over a year,then i lost my job and i cuold no longer afford making payments,I found a job but I am making half of what I used to make,and still cannot afford to make my payments.

I called the credit card company and informed them of my inability to continue my payments, if things get better in the future i want to pay them back,

my statement shows i am still beeing charged for interest every month,i dont want this number to grow to an amount i cannot reepay so my question is

how do i stop them from charging me interest every month?

mr Esteban Marrufo

Answers – Esteban, unfortunately, a credit card issuer can keep charging interest on your existing balance. That is why paying only the minimum payment, or not paying at all results in interest charges that keep piling up. The best way is to pay it off diligently over time. Choosing to negotiate a debt settlement with your credit card company is another alternative. Otherwise, there is really nothing much you could do about it.

Hi Mr. Credit, I am trying to find out which banks, credit unions, or card companies will allow a card holder to add a joint holder without credit check, and then be able to drop first primary and take over account as primary without credit check.

Fred M.

Answer – Fred, the answer is No. The main account can remove the secondary joint account holder. But the second account holder has to reapply for another card, and then do a balance transfer. If the joint account holder gets a credit card from the same company, then he or she is not eligible for any 0% balance transfer deals.

This is how all credit card issuers operate and I’m afraid that there is no way around it.