In this post, I will reflect on the best and worst things, in my opinion, in the credit card world.

First, we’ll start with the bad news followed by the good ones.

Worst of Credit Cards in 2006

1. No more 5% cash rebate cards for EDP

The most significant development in the credit card world this year is the withdrawal of the 5% cash rebate cards from the market. The Citi Dividend Platinum Select Card and the Chase Chase Plus Rewards Card both paid 5% rebates on EDP (everyday purchase items defined as purchases made at standalone supermarkets, gasoline stations and drugstores). These were perhaps one of the most popular cards in the market. However, (sources from these banks tell me), these cards did not make a lot of money from cardholders. Firstly, cardholders who tend to get these cards were very savvy. They paid their bills fully. Because there were no annual fees for these cards, and cardholders tend to PIF (pay in full), and they had to pay out 5% rebates on EDP, these cards were not very profitable.

Chase was the first one to stop marketing the card and in fact withdrew this card from the market. They have now replaced it with the Freedom Card, which pays 3% rebates on EDP and allows you to either redeem points for cash rebates or rewards. The Citi Dividend Platinum Select Card stopped paying 5% on EDP in October. They are now paying 2% rebates on supermarkets, drugstores, gas stations, convenience stores, and utilities including cable. To soften the blow, they have added convenience stores and utilities to the items where you can earn 2% rebates.

HSBC used to have a HSBC Direct card, which paid 5% rebates on EDP. However, if you go to the link on their website, they are also no longer marketing this card!

This development leaves the Blue Cash® from American Express as the only cash back credit card that pays 5% cash rebates on EDP at the moment (and I have this card). They also pay 1.5% rebates on “other purchases”. However, you need to spend above $6,500 in your annual calendar to earn these rebates.

2. Power Rewards Card was discontinued

In the later part of the this year (can’t remember when), Bank of America replaced their Power Rewards card with their Worldpoints reward program credit card. It was a shame because the Power Rewards program had a cash rebate feature which allows cardholders to effectively get a 2% rebate! This was obviously spotted by the folks at BOA. Hence, like the Citi Dividend Card and Chase Cash Plus Card above, one more good cash back card bites the dust.

3. Discover Gas Card lowers limit on 5% gasoline rebates

The Discover Platinum Gas Card used to allow cardholders to earn 5% rebates on gasoline purchase at ANY station for up to $1,500 in the annual gasoline spending. They have now lowered the amount to only $1,200. Once your annual gasoline spending exceeds this amount, you will earn the same rebates as your other non-gasoline purchases (1% after $3,000 in annual spending).

However, with Citi Dividend and Chase Plus no longer paying 5% on EDP, I suppose the Discover® Gas Card is still worth looking at given where gasoline prices are!.

4. Late Fee and Over-the-limit fee increase

Yes, this will happen every year, but the maximum late fees and over-the-limit fees have now moved up to $39. They used to be $35, and they were even lower not too long ago.

These fee increases simply do not make the headlines. There are no press releases telling everyone about them. I just happen to notice them because I am always reviewing credit cards and updating my reviews.

5. Citicards become the first issuer to increase the maximum fee for balance transfers to $250!

Yes, Citibank has become the first credit card issuer to increase the maximum balance transfer fee to $250 for only certain cards. For most credit cards, the average balance transfer fee is as follows ;

3% of balance transfer amount : minimum of $5.00, maximum of $50.00 or $75.00.

If you look at all of Citibanks’ cards, you will realize that the balance transfer fee varies from card to card (unlike most other issuers that have consistent fees). Some cards have a maximum BT fee of $50.00 and some $75.00. But the following cards have increased the maximum to $250.

Citi Dividend Platinum Select Card
Citi Premierpass Card
Citi Platinum Select Card
Citi Diamond Preferred Card

Yes, congratulations Citibank for doing this very quietly. However, Mr Credit Card is always checking out credit cards. Can’t hide for too long! Citi is obviously do testing among their cards with different fees and see which is the most profitable fee structure. I guess we will know the answer when they find out and implement a consistent fee structure across all their cards.

Enough of the bad news. Now let’s look at the best of 2006.

The Best of Credit Cards in 2006

1. Orchard Bank offers 2% cash back rebates on all their Mastercards

Orchard Bank (which is now owned by HSBC) is perhaps the largest and best issuer of sub-prime credit cards that are designed for those with poor or no credit. Their credit cards have more reasonable fees and rates than most other sub-prime credit cards.

Previously, Orchard Bank will send mail offers to selected people with this 2% cash back offer. But now, this card can be applied by anyone. The way it works is that you can earn 2% cash rebates for every dollar that you spend on the Orchard Bank® 2% Back MasterCard®. Best of all, you can earn unlimited rebates.

Why are they offering such a great rebate when no regular cards from the big card issuers are doing this? The answer is probably that because their cards are targeted at those with less than perfect credit, chances are their credit lines will not be large. On most of Orchard Bank’s Mastercard (with the exception of the prime-platinum version if you are approved for it), there are annual fees.

The Orchard Bank 2% Mastercard comes in four versions, so it’s best to check my writeup on my unsecured credit cards for bad credit page.

2. Citi Platinum Select Mastercard now accepts applicants with no credit history

I have got offer long ago from Citi Platinum Select saying that I should get the card to help build my credit. Now, they are publicly stating that they will accept applicants with no credit history. This version will be different from the regular version in that the apr is slightly higher.

Citibank has explicity said that this is is for those with either no credit or fair credit. They will not accept applicants with bad credit. What is the definition of fair credit? Well, you can’t really tell for sure. But my best guess is a 600ish score.

Previously, someone with no credit history will either have to get a secured credit card or a sub-prime credit card with very high fees and rates. Now, there is an alternative. If you have no credit, I would recommend you try to get the Citi® Platinum Select® MasterCard® first before anything else. The card has no annual fee and it is issued from a major issuer.

3. BP Visa lets you earn 2% rebates on travel and dining expenses

Chase improved the Chase BP Visa® Rewards Card this year by allowing cardholders to earn 2% rebates on both dining and travel purchases on the card. This is in addition to the 5% rebates that they pay on purchases made at BP Amoco stations. There are hardly any cards that pay more than 1% rebates on dining and travel expenses. Hence, even if you do not use BP stations for your gasoline, you may want to consider this card.

4. American Express introduces a better cash back business credit card

American Express recently introduced the American Express SimplyCash^SM Business Card, which in my opinion, is an improvement over their regular Blue Cash and Platinum Cash Back business credit cards.

The reason is that previous cash back cards pay you 5% rebates when you make purchases with “OPENSAVINGs merchant partners” and 2% rebates on everythings else. However, once your annual spending exceeds $15,000, the rebates decline to 2% and 1% respectively. Many have also felt that there were too few partners in the OPENSAVINGs network.

The new simplycash card pays 5% cash back on gas, office supplies and wireless services and 1% on other purchases. You can also get discounts from OPENSAVINGs merchants. What American Express have done is to simplify the rebate formula and expand the type of expenses where you can earn 5% rebates. In my opinion, the is perhaps the best cash back business credit card at the moment.

5. Bank of America offers the lowest rate for most credit cards

After taking over MBNA, Bank of America went through a period of consolidating their credit cards. At this moment, BOA is offering very low rates on many of credit cards, 7.90% if you are approved for a platinum plus version of many cards and 13.99% for a “Preferred account” version”. The following card offer such low rates (note : you obviously need to have a very good credit to get this card. Your rate may vary).

Best of all, most of these cards come with a 0% introductory apr offer on both balance transfers and cash advance checks for 12 months. There is also no balance transfer fee on the offer (which looks great compared to the maximum fee of $250 on some of Citi’s cards!)

Bank of America Rewards™ American Express® Card

Bank of America Visa Signature® WorldPoints™ Rewards

Bank of America World MasterCard® with WorldPoints™

Bank of America WorldPoints™ Platinum Plus® MasterCard® Credit Card

Bank of America® WorldPoints™ Platinum Plus® Visa® Card

Bass Pro Shops® Outdoor Rewards Visa® Card

Ducks Unlimited WorldPoints™ Platinum Plus® MasterCard®

Major League Baseball™ Extra Bases™ Credit Card

NFL Extra Points™ Visa® Card

NASCAR RacePoints(SM) Visa® Card

World Series of Poker® Visa® Card with WorldPoints™ Rewards

Conclusion

That sums up my summary and thoughts about the world of credit cards in 2006. I look forward to 2007.

This entry was posted on Thursday, December 14th, 2006 at 9:48 pm and is filed under Opinions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.