The new federal rules for credit cards kick in February 22, preventing issuers from, among other things, jacking up interest rates as easily as in the past. Now four major credit card companies — American Express, Bank of America, Chase and Citi — are now trying to become your new BFF, with "consumer-friendly" cards.
Among the new features they’re offering: lower rates if you pay on time; the flexibility to craft your own rewards program; and the option of paying off some purchases interest-free each month. Some of the cards also have online tools and tracking systems to help you monitor spending.
Consumer-friendly offerings may seem like an about-face for an industry famous for hidden fees and encouraging customers to spend now and pay later, at stratospheric interest rates. And some banks are already finding ways to get around the new law. But with 47% of consumers saying they trust credit card companies less than they did a year ago, according to the Auriemma Consulting Group, issuers need you more than ever. “You can argue their motivation to death,” says Curtis Arnold, founder of CardRatings.com. “But we are seeing more consumer-friendly terms, new cards, and new initiatives.”
For the most part, the rates and fees for these cards are not as low as the ones MoneyWatch recently recommended in “Best Credit Cards for You,” but these new-fangled cards do offer some different features that make them worth checking out. Here’s a rundown on four new consumer-friendly credit cards to consider, with their features and downsides.
- Downside: Since most economists expect rates to rise this year, the Basic Visa rate is almost sure to go up in coming months. Even today, it’s about four points higher than the 13.63 percent average rate for variable cards. This is not a good card for anyone who carries a balance; instead check out a card with a lower rate.
If you want to keep things simple ...
BankAmericard Basic Visa is a stripped-down card designed for one purpose: making purchases with plastic. There are no rewards, no annual fee, and just one variable interest rate (now 17.25 percent) that applies to balance transfers, cash advances, and purchases. BofA guarantees that the index used to set the rate (prime plus 14 percent) won’t change. And as long as you pay on time, your rate will only rise if the prime rate does.
- Downside: This card isn’t a great deal if you’re transferring a hefty balance from another card, since the interest rate givebacks don’t apply to balance transfers.
If you always pay on time ...
Citi Forward Visa is a rewards card that gives you a lower rate and more rewards points for doing what you ought to: paying bills on time and staying under your credit limit. The card starts with a 0 percent rate on purchases and balance transfers for seven months followed by a variable rate of prime plus 10.99 percent (that’s 14.24 percent today) on subsequent purchases. Every time you go three billing periods paying on time and staying under your credit limit, Citi will lower your rate by .25 percent — up to 2 percentage points over the life of the card. Based on today’s prime rate, your Visa card rate could be down to 12.24 percent in two years. To keep you on the straight and narrow, Citi lets you use an assortment of free online credit education and spending tools.
That same good behavior pays off in rewards points, too. Normally, Citi Forward Visa cardholders earn five points for every $1 spent on restaurants, books, music, and movies and a point for every $1 spent on other purchases. But you earn an extra 100 bonus points each month by demonstrating the wise debt management noted above. Redeem points for merchandise, gift cards, and travel through Citi’s ThankYou Network.
- Downside: Blueprint isn’t of much value if you pay your balance in full every month. If that describes you, sign up for this program only if you like Chase’s rewards programs.
If you just want to charge big-ticket items ...
The Chase Blueprint program allows you to avoid owing interest on items you really can afford to pay in full, while letting you run up a balance on expensive purchases, such as airfare or hotels. Think of it as feature that combines a no-interest, pay-in-full charge card (think American Express) with a credit card that lets you carry a balance. Blueprint is available on all of Chase’s Visa and MasterCards: Slate, Freedom, Sapphire and Ink.
With Blueprint, you separate out the everyday items you’ll want to pay in full every month, such as gasoline, dinners out, or movies. That way, you won’t owe interest on them, even if you carry a balance on other items. Chase also lets you designate a large or unexpected purchase to pay off over two billing cycles without interest, like that winter trip to the Caribbean.
And for a sizable purchase that’ll cost you interest, Blueprint can calculate a monthly payoff plan to minimize your charges. Say your refrigerator goes on the fritz, and you want to pay off the new one within a year: Blueprint will calculate how much you need to pay each month to do it and chart your progress on your statement.
- Bonus: Zync’s basic annual fee is just $25. So even if you pay for an extra pack, you’ll pay a $45 total annual fee, versus $95 for an AmEx green card or $125 for a gold card.
- Downside: The rewards payout on AmEx is a little chintzy. Based on American Express’s conversion rate, where 100 points equals $1 in rewards, you won’t qualify for a $100 gift card at a participating restaurant until you’ve spent $5,000 on restaurants, concerts, or theater tickets.
If you want to design your own rewards ...
The still-in-beta American Zync card from American Express puts you in control of the card’s rewards program. It’s a little bit hokey, but it may appeal to some: You earn one point for every dollar you spend with the card and can then sweeten the AmEx membership rewards by adding so-called Lifestyle Packs (too bad they sound like condoms), which let you double points for spending in specific categories you designate. There are now four packs, with more coming. The ECO Pack, free to cardholders, pays 2 reward points for every dollar you spend with selected merchants rated “green” by Greenopia, an environmental screener. The other three Packs — “Go” for travel purchases, “Social” for restaurant, concert, and theater spending, and “Connect” for mobile, cable, and Internet services — cost $20 per year apiece and let you get 2 points for every $1 spent in their categories plus discounts when you redeem the points.
Rewards points can be carried over from one year to the next and can be traded in for gift certificates from participating merchants or applied toward future purchases. Zync cardholders also get access to American Express’s Money Manager, a financial management tool that allows you to link and monitor all your bank accounts, credit cards, investment accounts, mortgage loans, car loans and student loans.
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