The Foreign Conversion Scam

By: Jason Steele

03/03/2009

I am always complaining about credit card foreign exchange fees. I love earning rewards, and I love traveling overseas. The last thing I want to do is to give up mindless foreign conversion fees that are greater than my rewards, every time I use my credit card in another country.

I have my Capitol One card that I use exclusively outside the US in order to avoid those fees, yet there is another, even worse scam out there. “Dynamic Currency Conversion” is a repulsive scam that is perpetrated by merchants who accept credit cards in order to rip off travelers.

“Dynamic Currency Conversion”: a Complicated Phrase That Means Scam

The idea is that the merchant, not the credit card company, will perform the conversion and charge your credit card in dollars. Guess what, their conversion rate is terrible and the merchant gets a cut from the conversion company. If you don’t believe me, read it right from the website of First Data, one of the companies offering this “service”. Here is what they claim to be a benefit to the merchant:

Supplies you with an ongoing revenue stream year after year, which increases as international foreign cardholder volume increases.

The companies also attempt to justify this scam by claiming that customers get to see the amount they are being charged in their home currency. For example, First Data claims this is a benefit to customers in that it:

* Allows foreign customers to pay for their goods or services in their local currency while giving them total visibility of their card transaction as it will appear on their credit card statement
* No hidden fees or charges
* Up-to-date rates of exchange based on wholesale Reuter’s rate are fully disclosed
* Dual currencies printed on their credit card receipt
* Consumers can make an educated and informed decision

So it is a benefit in that it charges you more, but explains it clearly. Wikipedia has a more detailed description here.

It turns out that the exchange rate offered by credit card companies is actually a very competitive rate. The problem is that most of them also charge a fee. American Express, for example, just raised their foreign exchange fee from 2% to 2.7% this year. That is why I will not use my Amex outside the United States. The “Dynamic Currency Exchange” racket is predicated on substituting that fee for a much worse exchange rate, essentially doubling the fee. Actually, it is worse, as some credit card issuers will tack their fee on to any foreign transaction, whether in dollars or any other currency! Because they spell it out for you ahead of time, the “currency converters” claim it to be a “benefit”.

How Is This Legal?

Legally, the merchants are supposed to ask you for permission before they perform their own conversion. The check in staff at your hotel or your waiter at a restaurant is supposed to say something like “Would you prefer it if we charged your credit card in your home currency?”. After that, you are supposed to be able to decline this “service”. In reality, there are many reports that this doesn’t always happen. Good luck if you are in a country where you don’t speak the local language, and your waiter attempts to explain this “option” to you in Bulgarian after he runs your card.

By far the best explanation of this practice that I have seen comes from this article in the Washington Post from 2005. While some of the details are out of date, the concept is still accurate.

My Advice To You

The whole idea of reward cards is that you get something back from each charge. Dynamic Currency Conversion and Foreign Exchange fees turn your cards from reward cards into penalty cards every time you step out of the country.

When traveling to foreign countries:

Use a credit card like Capitol One or Schwab that has no foreign transaction fees.

Decline all offers from merchants to convert your charge to your home currency.

Save your receipts, especially on big ticket purchases like hotels and rental cars. Request a chargeback on any purchase where a merchant uses this scam without your consent.

Chevron Credit Card Review

By: Mr Credit Card

chevroncreditcard

Summary – The Chevron credit card is specifically designed for those use their gas from Chevron and Texaco stations. You can earn rebates by using this card at their stations. Let’s find out more about this card.

Rebate Formula – The Chevron credit card pays you 10 cents per gallon rebate when you get your gasoline from Chevron and Texaco stations. You will earn 3% rebates on non-fuel purchases at their stations. For other regular purchases on the card, you will earn 1% rebates. You can earn up to $300 in rebates in one calendar year.

Annual Fee and APR – The Chevron credit card has no annual fee. The apr ranges from prime rate plus 7.99% to 14.99%. The card uses the average daily balance method (including new purchases) to compute balances.

Chevron Credit Card Gas Rebate Break Even Analysis

It is actually not easy to compare this card with it’s peers because of it’s rebate formula. Most other cards that pay rebates on gasoline pay between 2% and 5% rebates. But instead, this card pays you 10 cents per gallon. So the rebates vary depending on what the price of gasoline is. So rather than do an extensive comparison, I think it makes more sense to do some break even analysis. We will calculate the break even for 2%, 3% , 4% and 5%.

Break Even for 2% – The break even analysis for a 2% rebate is $5 per gallon. We have not come close to this yet. So it is pretty clear at today’s prices, you are getting more than 3% rebates on this card.

Break Even for 3% – The break even analysis for a 3% rebate is $3.33 per gallon in gasoline.We have certainly been at the threshold.

Break Even for 4% – The break even analysis for a 4% rebate is $2.50 per gallon. Well, it has been a long time since we have even seen gas prices prices that low.

Break Even for 5% – Gas prices need to be at $2.00 for you to earn a 5% rebate equivalent.

Chevron Peer Comparison

Rather than going through a comparison with every card, I thought that it would be best to just highlight the rebate that other cards give. This is because with the way this card is set up, it is impossible to do a real apples to apples comparison as the rebates you will earn depends on gasoline prices.

Among gas station specific cards, the Shell, BP and Marathon pay 5% rebates. The Lukoil pays 4% while the Hess and Gulf pays 3%. Among cash back cards that allow you to earn gas rebates at any station, the The PenFed VISA Platinum Gas / Cash Rewards Card pays the best rebates for gas at 5% and also 2% for groceries. The Costco credit card pays 3% for gas and 2% for travel and dining expenses, while the Blue Cash EveryDay pays 2% rebates on gasoline and department stores and 3% on groceries.

Does the Chevron Card make sense?

Pros – To be honest, I cannot think of any thing great to say about this card.

Cons – Rebate for is a fixed amount based and hence, the rebate percentages varies with gas prices.

Verdict – If you look carefully at the rebates formula of this card, you will realize that this card works out well when gas prices are low. As on now, gas prices remain at a level where at best, you will earn 3% rebates. But is that good enough? Looking at the competition today, probably not. The better gas station cards pay 5% rebates. And even the PenFed VISA Platinum Gas / Cash Rewards Card pays 5% on gas, and that applies to any gas station. Though you may only be filling you gas a Chevron Texaco stations, I suggest you consider getting one of the cards that we have mentioned in this review instead. That way, you will earn a fixed percentage in rebates regardless of where gasoline prices are.

Chevron Credit Card
Reward Benefits
Rebate Percentages	Earn 10 cents per gallon at Chevron stations Earn 3% rebate on non-fuel Chevron Purchases Earn 1% rebate on all other purchases
Caps on Rebates	$300
Cost/Fees/Interest rates
Introductory rate	N.A.
Annual Fees	No annual fee
Purchase APR	Prime Rate plus 7.99% to 14.99%
Cash Advance APR	Prime Rate plus 14.99% min is 19.99%
Penalty/Default Rate APR	29.49%
Min Finance Charge	$1.00
Grace Period	20 days
Balance Calculation Method	Average Daily Balance (including new purchases)
Cash Advance fee	3% min $10.00
Foreign Currency Conversion fee	3%
Over-the-credit-limit fee	$35.00
Late Payment fee	$0 for a balance up to $14.99; $15 for a balance of $15.00–$49.99; $20 for a balance of $50–$99.99; $29 for a balance of $100–$249.99 and $39 for a balance of $250 or more.

Starwood Points Vs. Cash Vs. Cash and Points, and More Amex Shenanigans

By: Jason Steele

03/02/2009

So I got my gazillion points from the “Big Delta Promo” and booked my trip to Israel for next winter. Israel however, is not known for it’s great winter weather, and my wife and I thought that we would treat our hosts, her aunt and uncle, to a few nights at a nice hotel some place where there is better weather.

Specifically, I was thinking of the Le Meridan hotel and spa at the Dead Sea. Here was the choice I faced: I could merely purchase the rooms for $110 a night. Frankly, that is not a bad rate in a country like Israel where hotels tend to be somewhat pricey. I could also book a room with points for 7,000 of my precious StarPoints. Finally, I could choose the “Cash and Points” option.

Note that the “Cash and Points” option was not listed online as being available, yet I read somewhere that their online reservations tool was notorious for not listing this option. It turns out that the option is frequently available only when you call the reservations office.

Let’s Do The Math

If I used the 7,000 Starpoints instead of paying the $110 price, it would return a mere 1.57 cents of value per Starpoint. That is pretty darn mediocre in my opinion. At that price, I would barely been coming out ahead of just having used my Capitol One card for cash, and used the cash for a room. Actually, it is even worse. Since I am now Starwood Gold, thanks to my generous patronage of my Starwood Amex last year, I would get 3 Starpoints per dollar spent. So really, I would have to divide $110 by 7,330 Starpoints paid and not earned, netting me almost exactly 1.5 cents per Starpoint used/passed up.

Using the “Cash and Points” option is intriguing possibility. They want 2,800 Starpoints plus $45. Essentially, I am “ing” 4,200 Starpoints for $45, or 1.07 cents per Starpoint. If I factor in the points received for paying $45 for the room, 135 points, it goes down slightly to 1.04 cents per Starpoint. Frankly, I will as many Starpoints as I can get at 1 cent each.

What is the value of the 2,800 Starpoints spent? Well, subtracting $45 from the $110 a night room rate availability, I get $65 for 2,800 Starpoints, or 2.3 cents per point used. Not great, but still better than the value I would have gotten from most airline cards and any cash card out there, not counting spending on “special categories” of course.

The value of my Starpoint here is not great as this particular property is inexpensive for it’s redemption rate of 7,000 Starpoints a night. It was raised last year from a lower rate of 3,000-4,000 points per night. Perhaps in a more peak travel period, this hotel would be more expensive an thus return a better utilization ratio.

There are two other factors making the “cash and points” option a good value for me. First, I just don’t have that many Starponts, having redeemed tens of thousands of them for the “Big Delta Promo”. Second, being Starwood Gold, I will get some nice amenities such as an upgraded room and a late checkout. I actually came across postings by others who have been upgraded to a suite at this hotel because they are Starwood Gold. The late checkout is really quite nice since there is little to do at the Dead Sea outside of the resort. Unlike many vacations destinations where you spend little time at the hotel, at the Dead Sea the hotel and spa is the destination.

Amex Costco Cautionary Tale

I recently read this story and some others like it about the Costco Amex. I am a big fan of Costco. I shop there frequently and I support them because they are a far better company to both their employees and their customers than other discount retailers, specifically Wal Mart. Their co-branded Amex seems like a good deal with a decent reward rate. Unfortunately, the reward comes due once a year, in February. If, for some reason, you decide to cancel your card before February, or Amex decides to cancel you, your reward for the entire previous year is forfeited. When you combine that policy with Amex’s new found penchant for closing their customer’s accounts for littel or now reason, you have a recipe for disasters.

I will reluctantly give Amex the benefit of the doubt. If they were to cancel 52 cardholder’s accounts at random, there is a very good chance that three people would claim that they were cancelled within two weeks of receiving their annual award. Perhaps 5 would be upset they were cancelled within a month of getting their reward.

That said, I would be very upset if Amex pulled that on me. That is one of the reasons that while I shop and Costco, and use my Starwood Amex there, I will not sign up for the Costco Amex.

Buying A Car On Credit And Then Defaulting

By: Mr Credit Card

02/28/2009

What happens when you a car on credit and then default on the credit card?

One of our readers, David, had this question:

What if I a 4k car with 1k down (total 5k) on a credit card and then make the minimum payments for a few months before I “can’t” afford them. What happens?

David

David,

If you finance a $4,000 car on credit and then default on the payments, it will ruin your credit. Let’s take a closer look at the situation though.

What happens when you default on a credit card?

Defaulting on a credit card sets a specific path in motion:

The credit card company will begin collection activities – This begins with calling your house, and calling you at work or on your cell phone. If you refuse to speak with them, or continue not making payments, you move on to step two.
Collection Activities become more persistent – You will get several letters in the mail. If you refuse to speak to your credit card company at all, or tell them they have the wrong phone number, your account will go to what is known as “Skip – Trace”. The skip trace divisions of credit card companies exist to track you down. This means that they will literally call everyone in the phone book who shares the same last name as you do, among other things.
Your debt will be sold – After refusing to make payments over several months, and having no contact with you, the bank will most likely cut it’s loss and sell your debt to a debt collection company. Or they will outsource it, and collect a percentage of anything the company manages to get form you.
If you refuse to speak to the professional collection company (and they will use even more aggressive and rude contact methods) then the collection company will usually seek a judgment.
You will have to go to court and settle your debt, or your wages will be garnished.
The only way the debt will disappear after this point is if you either pay it, or declare bankruptcy.

So, that’s the bad route. At every step along that path you will have the opportunity to make a payment arrangement and take care of the debt.

Alternately, If you were to put $1,000 down, finance $4,000, and make the payments for a few months, you could:

After making your payments for several months, contact a debt negotiation agency. This agency will represent you to the credit card company, and negotiate to decrease the amount of your debt drastically.
In order for the debt negotiation company to do this properly, they may make late payments in order to reduce the total amount of your debt. (Not all companies do this, but some do). It means that you will have late payment records on your credit report. You can challenge those late payment marks later, but there is no guarantee that you can have them removed.
The debt negotiation agency will have to close your credit card account in order to negotiate and reduce your debt.
You will also need to be prepared to make a larger, one – time lump sum payment. If the debt negotiation company can negotiate the debt down to around 33 cents on the dollar, then that is the payment you will have to be prepared to make in order to get the settlement.
Debt negotiation companies can help anyone reduce their debt, even those that probably can afford the payments. However, this method does damage your credit score. You will have to decide whether or not several late payments, a closed credit account, and a record of a settlement on your credit report is worth reducing the $4,000 debt of the car down to around. $1,320.

Aside from the obvious ethical factor, you will be paying more in interest on new loans for years (because of your ruined credit), completely negating any reduction in the price of the car over the long haul.

“Fun” With Starwood Amex

By: Jason Steele

02/27/2009

Generally, I prefer that my credit cards be seen, but not heard. I don’t want a “relationship” with my credit card company, and I don’t want to hear from them unless I have a problem.

So Much For That Theory

The other night, I placed a $300 clothing order from a well known online retailer. I paid an additional amount to upgrade the shipping. The next day, I received a voicemail from Amex on my home telephone indicating that they wanted to verify the charge for security purposes. I later received a call on my cell phone to the same effect. After verifying the charge was authorized by me, I thought the matter was resolved.

So Much For That Theory

Several hours later, I received an email from Amex, asking me to contact them. I figured that it was about the same issue, just sent out after it was resolved. I then received an email from the retailer telling me the charge was declined, and asking me to call them. I did call them and told them the story and asked them re-run the charge. They informed me that the delivery date had been pushed back. So much for paying extra for expedited delivery and the convenience of online shopping.

At this point I am getting a little upset. I paid extra for expedited delivery and everyone is dragging their feet.

A few things could have happened better.

1). Amex could have contacted me sooner in order to have me verify the charge without delaying shipment.

2.) The retailer could have contacted me sooner in order to have me resolved this before delaying shipment.

3.) Amex could have realized that I have ordered from this retailer before, several times, in the past, albeit not recently. That should have told them that the charge was legit.

I do find it odd that a relatively small charge at this retailer set off alarm bells, while I made a charge of $1,200 a few weeks ago from a company I had never shopped with that went through just fine. On the other hand, perhaps this online merchant is the subject of more fraudulent spending.

Nailed That Renewal Bonus!

A few months ago, my wife’s Starwood Amex came up for renewal and it’s $45 renewal fee. I asked her to call and ask for a renewal bonus. It didn’t work, and I figured it was because she really hadn’t spent much on it as we had got it for the sign up bonus and had since used it very little.

Now, it was time for my renewal bonus and I thought I would give it a try. First, I made sure to choose the prompt for “canceling a credit card.” At this point, I had so many Amexes that I actually would cancel if they didn’t give me a bonus. The conversation was surprisingly brief and frank. It went like this:

Me: I am considering canceling my card because of the annual fee unless I could have that waived or get some bonus Starpoints.

Amex: I can’t waive your fee, and I am only allowed to give you a maximum of 3,000 bonus points for renewal.

Me: I’ll take it.

Then, it dawned on me to consider if that is a good deal. Obviously, my wife and I have other Starwood Amexes, so canceling this one wouldn’t be a big deal. We would just earn our valuable Starpoints on a different card.

What Is The Value Equation?

$45 for 3,000 Starpoints equals exactly 1.5 cents per Starpoint. As I have shown many times, I can regularly find value in Starpoints in the 3-4 cents per point range at many of their hotels. It is getting harder, but you can still find some value in converting Starpoints to airline miles, especially at the 1-1.25 rate you get when you do it in a 20,000 mile block.

Of course, I got somewhat lucky when I converted tens of thousands of Starpoints to Delta miles only to take advantage of the “Big Delta Promo”. Since that was clearly a one time deal, converting Starpoints to Delta SkyMiles is now a loosing proposition. These days a SkyMile is worth merely 1 cent when purchasing coach airfare and I was only able to extract 1.7 cents per SkyMile from a business class international ticket I redeemed this week. You can fare better on almost all other carriers.

Since I wasn’t going to be using the 3,000 miles for conversion to Delta’s miserable program, will I get my $45 worth? Well, there are still many Sheratons that you can redeem 3,000 Starpoints for a night’s stay. Typically, these are in smaller towns or near major airports. Still, a night there easily costs double what I paid for these SkyMiles. In fact, it is rare to find a Starwood property where your StarPoint is worth less than 1.5 cents, so, worst case scenario, I think it is a wash. Better yet, I may just qualify for Starwood Gold again (by spending $30,000 on the card this year) if I don’t switch cards mid year. With Starwood Gold, I will get free upgraded rooms and late checkouts, a significant value when traveling with children.

I guess I am putting up with Amex’s shenanigans yet another year.

The Fair Debt Collection Practices Act

By: Christina

What should you do if you feel like debt collectors are violating your rights?

A reader, Stan, had this question:

Please help! I am in a very bad situation with my debt. I am working on this however and starting to show some progress. I would just like to know what are my rights or say the rules that must be followed by companies that are in the business of collecting mine and others debts.

Also if the Debt collectors violate any of these rules or laws can they be sued, for say actual damages, punitive damages, attorney fees, or the like? I know there are laws out there I just can’t seem to find them.

I have one company calling me every day at my job. Not only am I not allowed calls at work but I could actually lose my job if they found out. I have told the collector company this everyday for a week. Are they allowed to keep calling me at work?

Is this one of the laws? I keep hearing that they are not allowed but just can’t seem to find proof.

Thanks,
Stan

Thanks for your question Stan.

The easiest solution is simply to deal with your creditors. Call them back when you are at home and set up a payment arrangement. This will stop collection practices immediately.

As far as your rights, there are several, and they are covered under what’s known as the Fair Debt Collection Practices Act.

You can read the full version here:

The Fair Debt Collection Practices Act (pdf)

It’s a long act (28 pages) so I’ll give you the highlights here.

The Fair Debt Collection Practices Act:

A debt collector may not communicate with a consumer in connection with the collection of any debt at any unusual time or place, or a time or place known or which should be known to be inconvenient to the consumer.

[A debt collector may not communicate with the consumer] at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication.

This means that if you have told the collection agency that they cannot contact you at work, then by law they cannot contact you at work.

If you have not yet told the collection agency that they can’t call, then they still have a right to.

Usually you’ll want to say something like:

“I am at work. This is an inconvenient time for me to talk to you. I could lose my job because I am not allowed to have these types of calls at work. Do not call here again. “

That’s it. Period. If they call you at work after that they are breaking the law.

The Fair Debt collection practices act is long, but it’s an important document to read if you are in the middle of collection activity.

Many collection services will walk all over your rights until you tell them that you know what your rights are. They will call early in the morning, late at night, while you are at work, etc.

Stand up for your rights here because they are your rights. You do not have to put up with this sort of treatment from a collection agency.

However, the first and best option is simply not to ignore your debt. Call your creditors and set up a reasonable payment plan. It will get you out of debt faster, and you will not have to deal with the shady tactics that collection companies use.

If you have no money to pay on your debts, try calling and making an arrangement anyway. If you contact them and attempt to resolve the account, they will leave you alone.

Thanks for your question!

Another reader, Hope, had a quick question that everyone should have the answer to:

I am trying to find the "physical" address to the 3 main bureaus to send a certified letter. Can anyone help me please?

Hope

Hi Hope, thanks for your question.

The reason you can’t find an address to send your certified letter to is because all three credit bureaus regularly update their mailing addresses every couple of years.

This is an excerpt from our free guide: How to Successfully Dispute An Item On Your Credit Report.

TransUnion:
TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19022-2000

Equifax Credit Information
Services, Inc.
P.O. Box 740241
Atlanta, GA 30374

Experian / NCAC
PO Box 9556
Allen TX 75013

*Note: Experian frequently changes it’s mailing address, so before you send your dispute out, you will want to contact them by phone and verify the address.

Experian’s telephone number: 1- 888- 397-3742

Hope that helps!

Thanks again for your question Hope, and good luck on your disputes.

Have a question for us? Leave a comment below!

Best Frequent Flier Card Strategy For Light Spenders

By: Jason Steele

02/26/2009

I came across an exceptionally well worded question about reward cards over at Flyertalk. I thought I would take a moment to answer it it detail. The question is:

I am trying to decide on the best frequent flyer / credit card strategy to meet my goals and travel / spending habits. There are so many choices it’s dizzying!

Goals:

I would like to earn enough rewards to pay for vacations for myself and my wife. We usually like to go for about one week per year, usually in the United States (especially to national parks). We would also like to visit Israel at some point.

I would like to be able to earn enough to pay for the whole vacation – flights, rental car, hotels. For the Israel vacation this is not necessary because we can stay at relatives, so I just need to earn enough for the flight.

I do not care about getting upgraded seating on flights or getting other amenities.

Travel / Spending Habits:

My wife and I travel 2 or 3 times per year roundtrip from BWI to LAX (~ 4,650 miles direct, up to 200-300 more miles with stopovers). We usually use United, US Airways, Northwest, or Southwest.

We do not frequently stay at hotels or rent cars except on our yearly vacations.

We are not big spenders. We currently spend about $1,500/month on living expenses, with any extra money we make going towards investments.

The approximate monthly breakdown is as follows:
$850 rent & utilities
$230 insurance
$70 gas
$350 groceries

My wife has 32,750 miles with Continental, 11,000 with United, and 10,000 with American. I have 4,800 miles with Northwest and 2,500 with United.

I have excellent credit so I can usually qualify for the best credit card deals.

I’ve looked at the following credit cards: Individual airlines cards, Starwood Preferred Guest, CapitalOne No Hassle Miles Ultra for Professionals, and a combination of Citi Premier Pass Elite and Citi Dividend cards.

What would you suggest as the best strategy for me?

I am Glad You Asked

First, as someone who regularly visits Israel and stays with family, I know exactly what you looking at. First, take a minute to read the answer I gave regarding a similar query about using reward cards to travel to Israel. It sounds like you are based near Baltimore Washington International airport (BWI), therefore, you really don’t have any non-stop flight options to Israel in your area since El-Al ended it’s service to Dulles a few years ago.

That said, you have several domestic loyalty programs that will get you to Israel either directly or through their partners. Since, as you say, you are not a big spender, there is not a whole lot of miles to be gained with a reward card, so you want to choose it and use it very wisely. At this point, I would stay away from Delta/Northwest. Sadly, their frequent flier miles are loosing value nearly as fast as the Zimbabwean Dollar. Just last night, I booked a ticket for travel to Israel for 230,000 in business class, yet even their coach tickets were 190,000 SkyMiles. Most airlines are offering them for half the price. Delta claims to offer a lower tier for rewards to Israel, but it is rarely available. When I went to Israel last year, my wife and I used, with great difficulty, 230,000 United miles for two business class tickets to Israel on United’s partner Lufthansa.

What we learned was that United miles are very difficult to use on their partners due to Starnet blocking. A better strategy would be to fly US Airways and accumulate points in their program. If you have to fly United, simply ask for your mileage to be credited to your US Airways Dividend Miles account. Since they are both members of the Star Alliance, United will credit your US Airways account. Even better, that trick will work with Continental, they will soon be joining the Star Alliance.

Work For Those Miles

If you are going to travel very infrequently, you can take a less direct route to your destination in order to earn more miles. Perhaps your next trip to LAX on US Airways can go through Charlotte, for example. Obviously, both you and your wife will want to get the US Airways credit cards with their considerable sign up bonuses. You may also consider getting her a Continental Airlines reward card as well, if only for the sign up bonus.

I would recommend the American Express Starwood card as well. Starpoints can be easily converted to miles with dozens of airlines, including both US Airways or Continental, with 5,000 point bonus for every 20,000 points transferred, making it an effective 1-1.25 exchange rate. In addition, it is also an awesome hotel rewards card as well.

Use Every Trick In The Book

Once you commit to a strategy focused on a single program, like US Airways, leverage every opportunity to earn rewards. Charge every expense possible, no matter how small, so long as you always pay your balance in full. Look for dining, hotel, shopping, and rental car offers everywhere. Often you can get miles simply by getting an insurance quote, or signing up for an email list. I’ve seen car dealers hand out coupons for miles when you have service done, and there is even the famous story of the Pudding Guy.

With your limited travel and spending, getting a free vacation will take some work, but if you are clever and persistent, you can make it happen. Take it from me, your wife’s uncle’s fold out couch in their Tel Aviv apartment is much more comfortable when you flew there for free.

Thank You Points? No Thank You

By: Jason Steele

02/25/2009

Citibank is making some major changes to their “Thank You” points reward program. The Consumerist has gotten ahold of a letter sent to one of their customers explaining the changes:

As of March 1, 2009, we are changing some of the terms and conditions that will affect your ability to earn and redeem ThankYou Points. The following is a list of some of these changes:

1. ThankYou Network may be revised in a manner that may affect your ability to use the ThankYou Points you have already accumulated;

2. If you make a late payment on your participating Sponsor Account, any ThankYou Points you earned through that Sponsor may not be available for redemption until you pay the reinstatement fee disclosed on www.thankyou.com/help.jspx

3. If your ThankYou Member Account is closed for any reason, you will lose any ThankYou Points in that ThankYou Member Account. If your participating Sponsor Account is closed, you will no longer be able to accumulate ThankYou Points and may lose the ThankYou Points that you earned through that Sponsor and through ThankYou Network. If all your Sponsor Accounts are closed, we may close your ThankYou Member Account;

4. If you combine your ThankYou Member Accounts, any action taken concerning points from one Sponsor Account may affect all the Points in your ThankYou Member Account;

5. If your ThankYou Member Account is frozen, you may be charged the processing fee disclosed on www.thankyou.com/help.jspx to unfreeze your ThankYou Member Account;

6. ThankYou Points will not expire as long as you have qualifying purchase activity at least once every 18 months unless ThankYou Network is terminated;

7. ThankYou Points may not be redeemed and may be lost if your Card Account is not open or current;

8. If your Card Account is closed you will not be able to earn ThankYou Points and you will lose any accumulated ThankYou Points that have not been transferred to your ThankYou Member Account including Flight Points that have not appeared on your billing statement;

9. The fixed flight option for Travel Rewards is no longer available. Please use the online booking tool at www.thankyou.com for variably priced Travel Rewards.

What Is Important Here

As you can see, the program is undergoing some pretty serious changes. As credit card holders, frankly, we are used to receiving notices of changing terms. The vast majority of these changes are always to our detriment, yet they usually try to phrase it like it is helpful. It is often difficult to tell the important changes from the fine print.

The most important one, they save for last, is the changing of the “fixed flight option” for travel rewards. This has been providing more value to members than the fixed flight option. In response, most observers are recommending that you spend any points that you intend to use for air travel between now and March 1st.

What Else Are They Saying

To me, what sticks out is not so much what they are saying, but how they are saying it. They frequently use the word “May” to describe everything. That is a very vague word. What I interpret it to mean is that they will do these things, however, there is a slight chance that customer service could waive it if you are nice to them.

Either way, they are positioning Thank You points as being directly tied to the good standing of your account. It is interesting to note that not all reward programs work that way. I can open and close my American Express Starwood accounts, without affecting my points with the Starwood Preferred Guest program, an entirely separate entity. Making a late payment on my USBank Northwest Airlines WorldPerks Visa in no way affects my ability to redeem WorldPerks points for flights.

What Should You Do

Obviously, try to take advantage of the Fixed Flight Option now. Then, you might wish to reconsider your membership in this program. I am not a holder of a “Thank You” points earning card, and I don’t really know anyone who is. Therefore, I am not in the best position to say if this card still returns much value. My advice for this card and others is always to look at how much value this card is returning per dollar spent. If you are getting less than what you can for a cash card, it is time to cancel. If you have other reward cards that are returning greater value per dollar, it also may be time to cancel. Finally, if you do chose too say “No Thank You” to your Thank You points card, use all those points before you do.

Amex Theories And Explanations

By: Jason Steele

American Express is like some person with multiple personality disorder these days.

In the last few months, they have granted me credit, and then submitted me to a financial review.

They have written people letters telling them they are being penalized based on where they shop, and then both denied it and said they will stop doing it.

Now, we learn that they are actually paying people $300 to cancel their accounts. What gives?

One Possible Explanation

I can’t explain all of Amex’s recent craziness, but I have been struggling to see why they would pay you to close your account. This story is picking up traction in the mainstream media, albeit several days after my readers learned about it.

Here is my theory: Big Spender X is starting to default on his credit cards. Amex’s computers show this is the case and want to jettison this excess baggage. If they offer him $300 to pay off his Amex account, perhaps he will do so first, before defaulting on his other accounts and/or declaring bankruptcy. Interestingly, the $300 payment comes in the form of a gift card. Why a gift card? Well, it is not a statement credit, it is not an account that could necessarily be visible to a bankruptcy judge, nor is it really cash. If I were about to declare bankruptcy, maybe having a “gift card” wouldn’t be such a bad place to keep some money from my creditors.

Amex Closes The Loopholes

Some savvy reward card aficionados, myself included, have been exploiting a loophole in American Express and other company’s reward cards. Now that Amex is closing the loophole, I don’t mind publicizing it a bit more. The trick is to purchase something that can be deposited in your bank account, netting you free mileage or reward points.

It doesn’t take too long to think of what your bank will accept as a deposit. The most obvious thing a bank accepts is money. Where can you money with your credit card? Clearly, making a cash withdraw on your credit card for this purpose is not wise, as you will be charged several percent as a cash withdraw fee, and immediately start incurring interest. Where else might you charge money to your credit card? Amazingly, the United States Mint accepts credit cards! Even better, they occasionally offer coins such as the new Presidential Dollar series to customers on a direct ship basis, with no shipping charges. Simply order money, and then deposit it in your account to pay off the charge.

The benefits are numerous:

1. You get the reward points for the transaction.

2. You can conceivably either earn interest on the deposit in the amount of time, up to 45 days it may take between when you deposit the money and when it is paid on your monthly statement. You could also use the deposit as a short term advance to smooth out an ripples in your cash flow.

3. You can reach the minimum spend requirements that various credit cards impose for certain benefits and bonuses. For example, last year I spent $30,000 on my Starwood Amex, qualifying me for Starwood Gold Status.

4. Finally, you can actually use the coins for their originally intended purpose. I have learned through my travels that most countries have long offered coins that were at least a dollar. Frankly, it is both novel and convenient to pay small expenses in dollar coins.

For American Express card holders, the same loophole has always been available to purchasers of traveler’s checks. If you lived near an American Express travel office, you could purchase traveler’s checks with no commission. Unused checks could then be deposited in your bank account, just like cash.

Just this week, I received a notice of a change in terms from American Express. It specifically said that, as of April 1st, they would no longer offer reward points for purchases of traveler’s checks and other cash equivalents. That language would seem to include coin purchases.

Is This The End Of That Trick?

Surprisingly, my prediction is that it will not be. As far as I can tell, only the reward points are being withheld. I can see no reason why someone couldn’t reach their minimum spending requirements or take out a free, short term loan, purchasing coins or traveler’s checks. Until Amex starts treating coins and traveler’s checks like cash withdaws, I suspect many people will still order them for purposes other than intended. Furthermore, there are plenty of valuable reward points offered by Visa and Mastercard issuers that can still be accumulated through the U.S. Mint.

At least for now.

Insurance and Other Credit Card Rip Offs

By: Jason Steele

02/24/2009

I came across this article in Consumer Reports about 10 insurance policies you don’t need. Wouldn’t you know it that half of them are actually offered by credit card companies and are a complete waste of money.

Tour de Scam

Let’s take a look at how your credit card company is trying to scam you by selling you “insurance”

First, Consumer Reports lists:

Credit-card-loss protection. It pays off losses if your card is stolen and the thief goes on a spending spree. Plans cost $7 to $15 a month. But federal law limits your loss to $50 per card. Instead: Put credit-card numbers in a safe place, and report lost cards ASAP.

If you didn’t know this, you have already failed credit card 101. In fact, I have never heard of anyone even being charged the $50 per card. In the few instances where I have had my credit card number stolen, my bank has immediately credited my account in full for the fraudulent charges. What is really fraudulent is the way credit card companies try to pretend that you could be liable for fraud in order to sell this junk. I can’t think of a bigger scam.

Next, we have the:

Credit-life insurance. Credit-card companies, banks, and other organizations that finance a purchase or lend money offer policies that repay a loan if you die. According to the Consumer Credit Insurance Association, the average rate across the nation for credit insurance is 50 cents per $100 of coverage. This means a consumer pays $30 a year to insure a $6,000 loan. That’s a lot of money when a healthy, nonsmoking man of 40 can $100,000 of 10-year level term coverage for as low as $100 a year. Instead: Make sure you have enough term life to cover loan payments.

This one is not quite a scam, just a really bad deal. It is not only 5 times the market rate for insurance, but it ignores the fact that your loans are subject to court proceedings after you die. If you are making interest payments on credit card debt, that is bad enough, to “insure your debt” at inflated prices is a terrible deal.

Number three is:

Credit disability insurance. This policy will pay minimum installments on a loan, typically up to 36 months, if you are disabled according to the terms of your policy. A policy may cost $21 per $1,000 of coverage. Instead: Make sure that your disability plan will cover your expenses, including any loan payments

This is pretty much the same as the credit life insurance. It is a terrible deal that is best covered by other insurance products.

Number four is:

Credit-card balance insurance. Credit-card companies market this policy which makes minimum payments on a credit card, if you are ill, disabled, or lose your job. Monthly premiums are based on the card’s balance. For instance, at 90 cents per $100 and a balance of $3,000, you’d be stuck for $27. At that balance level your yearly premium would be $324. Instead: Create an emergency fund that will cover 3 to 6 months of your expenses.

Yet another waste of money. There is a trend here. If you are so in debt that any temporary disability will cause you to default, clearly you are ripe for marketing very low value insurance like this. This only pays off your minimum balance, which we all know will not pay off your debt until well after the next ice age.

Number five is:

Identity-theft insurance. Sold by banks, credit-card issuers, and specialty insurers, it covers the cost of repairing your credit and sometimes attorney’s fees. Policies cost $20 to $180 a year for up to $25,000 in coverage, which does not include unauthorized charges or funds siphoned from accounts. Instead: Check your credit reports regularly. You can now get a free annual credit report from each of the three credit bureaus (Equifax, Experian, and TransUnion).

This is a tough call, as identity theft insurance could be a good thing. Unfortunately, similar to most travel insurance, it has so many holes as to be as useful as a leaking life raft. It doesn’t include unauthorized charges, the biggest problem is your thief gains access to your bank account. The real danger of identity theft is loss of time and aggravation sorting the whole thing out. I am not sure how an insurance company can go about reimbursing you for that.

One Possitive Note

I am giving the credit card companies some grief here, but one of these insurance policies is actually unnecessary because you have a credit card. That would be the rental car coverage. Fortunately, you can decline the coverage offered by a rental car company because your credit card, in most cases, will provide coverage for you. My only warning to you would be to carefully read the terms of your credit card’s rental car insurance. Several countries are not covered, and most specialty vehicles other than basic cars are not covered.