Credit Card Reward Programs Changing

If you plan to use your Citi credit card Thank You points to book a flight for a summer vacation, do it soon because Citi is changing its redemption rules on
March 1. Cardholders of other reward cards should pay attention, because Citi is not the only issuer making changes.

On March 1, Citi's Thank You Network shifts from a fixed point system to a variable point system, and redemption will require 100 points per $1. Hence, a $400 flight will require 40,000 points. Under the current fixed point system, you can redeem 20,000 Thank You points for any domestic coach flight up to $400 in value.

Citi is not the only issuer to change its reward structure. In October of 2008, Capital One dropped its tiered system for a more simple calculation of adding two zeroes to the cost of the flight or the hotel room. A $300 flight requires 30,000 points. A $100 hotel room requires 10,000 points.

"Capital One is promoting this as a simpler way of understanding and using your points. It is much simpler, but it can also be more costly for cardholders redeeming their points. For years, the industry standard has been 25,000 points for a domestic roundtrip airline ticket. The changes are reducing the value of your reward points used for travel," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. "Before you use your points to book travel, make sure that your reward structure hasn't changed and that you know what your conversion will be.

"It is interesting to watch the trends in this industry and how issuers find new ways to make money. A few years ago, issuers raised standard fees and changed the fee structure. They added the default clause in the terms and conditions, and gave themselves permission to raise rates at any time for any reason," says Hardekopf. "Now the changes are a little more subtle, and require cardholders to pay attention to the notices they receive in the mail, or they could get caught by the changes. Even if these changes haven't happened to your card yet, be aware of them and know what to look for. If one issuer makes a change, often many of the others
will follow."

Here are some additional changes recently made by credit card issuers:

*This month, Chase added a $10 monthly fee and increased the minimum payment from 2 to 5% for cardholders who have carried a large balance for over two years and pay only the minimum each month. "While this minimum payment increase is good for forcing cardholders to pay down their balance, this monthly fee has created an outcry from affected cardholders," says Hardekopf.

*Citi has increased the conditions to receive bonus miles. A year ago, Citi PremierPass Elite Level offered 15,000 bonus points if the first purchase was made within 60 days of the account opening. Today, the same card offers 20,000 bonus points after $600 in purchases within three months. "They increased the bonus miles, but if you don't reach the minimum purchase, you don't get the bonus miles," says Hardekopf.

*Discover has also increased conditions to receive bonus miles. Discover once offered 12,000 bonus points. Now, it offers 1,000 Bonus Miles each calendar month that you make a purchase for 12 months from the date your account is opened, with a cap of 12,000 Bonus Miles.

"It is important to read the terms and conditions of any rewards card that you applying for to understand the details of redeeming the rewards you will earn," says Hardekopf.

Credit Card Reform Bill Introduced into Senate

Credit Card Reform Bill Introduced into Senate

Last week, Senators Charles Schumer and Mark Udall introduced the Credit Cardholders' Bill of Rights Act of 2009 to the U.S. Senate. The Bill was authored by Representative Carolyn Maloney and passed the House in September of 2008, but did not make it out of a Senate committee before the Senate adjourned in December. Maloney also reintroduced the bill in the House of Representatives last week.

"We expect that Congress will pass some form of credit card legislation this year," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. "Many of the provisions in this bill are similar to the regulations passed by the Federal Reserve last month. The problem with the Fed's reforms is that they don't necessarily have to be implemented until July of 2010. Many in Congress would like to speed up the changes to help cardholders as soon as possible. Congress and President Obama want to make a stand against some of the unfair practices of the credit card industry and show that they are working to protect consumers.

"If it passes the House and Senate, President Obama will more than likely sign it, since he recommended many of these same changes during his Presidential campaign. Eliminating some of the unfair practices and rate increases of credit cards would be a nice bailout for taxpayers, and could be better than a stimulus check for some families."

A recent rate increase levied on certain Citigroup customers is an example of how cardholders would be protected by credit card reform. In November 2008, Citigroup surprised many of its cardholders with a notification about a rate increase. The cardholders have until the end of January to decline the rate increase and to close the account but continue paying it off at the old rate. If they keep the account active, their rate will increase. The notice was sent to certain cardholders who have not had a rate increase in over two years, and the reason Citigroup gave for the rate increase was the difficult market environment. The Cardholders' Bill of Rights would prohibit arbitrary rate increases like this.

Here is a summary of the Credit Cardholders' Bill of Rights:

* Prevents arbitrary interest rate increases. Issuers would have to give cardholders 45 days notice of any rate increase. Currently, the issuer can change the terms of your card with a short 15-day notice.

* Prevents issuers from retroactively increasing the interest rates on the existing balances of a cardholder unless the cardholder is more than 30 days late.

* Prohibits double-cycle billing and limits issuers from assessing fees on the remaining interest-only balance of a cardholder who has paid his bill on time.

* Provides more time to make your payment. Gives cardholders time to pay their bills by mailing statements 25 calendar days before the due date. It will also prohibit issuers from charging a late fee if cardholder can present proof of mailing payment within seven days of due date.

* Prevents credit scores from dropping because of pre-approved credit cards. Cardholders who are pre-approved for a card have the right to reject it up until the moment they activate it without having their credit adversely impacted.

* Prevents issuers from using the monthly payment to pay off the lowest interest rate first. Issuers should fairly credit and allocate payments at different rates.

* Prevents issuers from imposing excessive fees on cardholders. The proposed reforms would cap the number of "over-the-limit" fees card companies are allowed to charge to three. Some issuers currently charge an unlimited number of fees when consumers exceed their credit limit.

Here is a link to the summary of the Cardholder Bill of Rights:
http://maloney.house.gov/documents/financial/creditcards/2008092 _creditcard_Onepager.pdf

Predictions for the Credit Card Industry in 2009

2008 was a very turbulent year in the financial industry. Many consumers are wondering what to expect in this new year. Here are some predictions for the credit card industry for 2009:

1. Credit card companies will continue to change their marketing strategy. A few years ago, credit card issuers seemed to market credit cards to anyone who had a name or an address. Their goal was to increase the number of applications and get as many cards in a person's wallet as possible, with less emphasis on the person's true
ability to pay off the loan. Credit card issuers have now slashed the number of mass mailings and are reducing some of their online marketing channels. To reduce their risk, they will continue to shift their marketing goal from quantity to quality.

2. Financial institutions might be more helpful to work out a payment plan for debt. Financial institutions have already lost a tremendous amount of money over the past two years. Right now, collecting a portion of the amount due is better than losing the whole amount in default. Acknowledging the financial distress of many households,
banks are showing more flexibility to work out a payment plan with their cardholders who are experiencing difficult times. For some customers, they may waive late fees, lower interest rates, or forgive part of the debt. While this is helpful for the cardholder, it may also cause a sharp drop in their credit score.

3. Congress will continue their attempt at credit card legislation. Credit card regulations passed in December by the Federal Reserve were a good start but Congress will continue their push for more changes. "In addition to the Fed's regulations, we expect Congress to try to create legislation that puts restrictions on marketing that targets teenagers and college students, and put caps on interest rate increases. They may also try to limit "pay to pay" fees for telephone or electronic payments, and cap the number of over-the-limit fees that credit card companies are allowed to charge," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

4. Issuers may continue to reduce offers for balance transfers. The 0% for 12 months introductory rate was once a popular way to market credit cards and entice cardholders to transfer their debt from another lender. Most offers are now dependant on your credit score, the intro rates are higher (instead of 0%) and an intro period may be as short as three months. Most issuers now also charge a balance
transfer fee which is usually 3% of the amount transferred. The lower credit limits may be disappointing for many consumers who are looking at balance transfer offers as a way to pay off high balances with high rates.

5. Credit card issuers will keep looking for any sign of increased credit risk and raise rates if they find it. Issuers keep a close watch on individual accounts. If your credit score drops or your debt ratio increases, this can immediately set off the risk alarm and an issuer may raise your APR. "We had a lot of complaints about rate increases in 2008, and this could increase in 2009 before the regulations begin in 2010. Do everything you can to maintain or increase your credit score," says Hardekopf.

6. It may be very difficult to be approved for a credit card if you have less than average credit. Issuers are looking to minimize their risk after being hurt by so many bad loans in recent years. As a result, consumers with low credit scores might find it harder to secure a credit card in 2009.

7. Credit card issuers will still have the upper hand with your credit card loan. Despite the regulations, credit card issuers will still have room to increase your rates and fees. The only way to control your credit card debt is to pay each bill time and to pay off the balance as quickly as possible.

The LowCards.com Weekly Credit Card Rate Report 01-06-09

The LowCards.com Weekly Credit Card Rate Report 01-06-09

The LowCards.com Weekly Credit Card Rate report is based on
our Complete Credit Card Index which tracks the advertised rates
of 1260 credit cards in the United States.

Our index showed that Annual Percentage Rates for credit
cards decreased this past week. The average credit card
rate was 11.75% for the 1260 credit cards that are
tracked by LowCards.com, a slight decrease compared
to the 11.78% average for the previous week.

Here are the averages from the LowCards.com Complete Credit
Card Index for the previous ten weeks:

Jan. 6 11.75%
Dec.30 11.78
Dec. 23 11.75
Dec. 16 11.77
Dec. 11 11.78
Dec. 4 11.80
Nov. 25 11.98
Nov. 20 12.01
Nov. 13 11.99
Nov. 6 11.95
Oct. 30 12.01


The average cash advance rate dropped to 20.50% up from 20.58% last week.

"Credit card rates continued to move downward after a minor uptick
last week." said Bill Hardekopf, CEO of LowCards.com. "This downtrend
is in line with what we have been expecting after all the Federal Reserve
interest rate cuts over the last two months. We saw a big drop in home
sales numbers released today. That might force rates a little lower, but
they are already about as low as I can remember and there is not much
more room for them to fall."

The credit cards with the lowest interest rates in the nation this week are:

1. 4.00% Nordstrom Platinum Visa
2. 4.50% Wells Fargo Prime Rate Visa Credit Card
3. 5.00% Fifth Third Bank Platinum Prime MasterCard

The LowCards.com credit card rate report is compiled weekly
using data from 1260 credit cards which are tracked on the
LowCards.com website. The Complete Credit Card index is
available here: http://www.lowcards.com/CreditCardIndex.aspx

Rates may occasionally change due to the number of cards
being tracked.

About LowCards.com: LowCards.com ( http://www.lowcards.com )
simplifies the confusion of shopping for credit cards. It is
a free, independent website that helps consumers easily
compare credit cards in a variety of categories such as
lowest rates, rewards, rebates, balance transfers and lowest
introductory rates. It also gives an unbiased ranking and
review for each card.

Dealing with Your Personal Debt

Dealing with Your Personal Debt

2008 was not a good year for banks and credit card issuers. Bad loans and a turbulent economy created financial trouble that was passed along to consumers. For many cardholders, even those with good credit, this meant interest rate increases and credit limit decreases.

"These problems won't magically solve themselves with the start of a new year. We expect the rate and credit limit issues to continue to be problems for cardholders, especially as issuers are forced to deal with implementing the regulations that were just approved by the Federal Reserve," says Bill Hardekopf, CEO of LowCards.com. "The only way to protect yourself against higher rates and lower limits is to pay off your credit card debt."

Here are some consumer tips to reducing your personal debt in 2009:

1. Realize that paying off debt won't be easy, but it is one of the best commitments you can make to yourself and your family. Debt is a growing burden that causes anxiety and stresses in relationships. Realize that it took you a while to get into debt, and it will probably take you longer to get out. Do not get discouraged, no matter how much you can pay off or how long it takes.

2. Start by taking a look at how much you owe. It is easy to just pay the minimum balance for each loan without looking at the total amount due and how long it will take to pay it off, but this "ignoring reality" philosophy will chain you to your debt for a very long time. Collect each of your bills with outstanding debts including all credit cards, mortgage, student loans, auto loans, personal loans, and bank loans. Create a summary sheet that lists the creditor, monthly payment, balance, interest rate, and credit limit for each. List the status of each account, if any bills are past due, and verify the payment due dates.

3. This debt summary may be overwhelming, so prioritize which bills to pay first. If money is short and you can't pay all of your monthly bills, first pay the bills that are a necessity for health, shelter, basic groceries, and basic transportation. Then pay the secured loans such as your car loan. Payments on unsecured loans, such as most credit cards, should come last.

4. Contact your creditors to negotiate lower rates. The less money you pay in interest, the more money you have to pay off your bills. Start with your lender to ask for a lower rate. Then shop around for a mortgage or credit card with a lower rate.

If you are in danger of missing a payment, contact your creditors as soon as you realize you have a problem. They may be able to help you work out a payment plan, lower your rate, or lower your monthly payment. Loan defaults and foreclosures are a costly and growing problem for banks. In the past year, they have become more helpful and open to working out payment plans to keep you paying something toward your debt.

If the first person you speak with can't help lower your rate or make adjustments to your account, ask to speak with a supervisor or someone who can. Persistence may be necessary to find the person who can or will help you. Explain that you are in debt, the steps you are taking to repay it, and what you can pay today. Document all conversations, including whom you spoke with, and the date, time, and the results.

5. If you have multiple credit cards with outstanding balances, focus on paying off the card with the highest interest rate first. Continue to pay the minimum on your other cards until the card with the highest rate is paid off, then focus your effort on the card next in line. Don't close all cards that you pay off. Keep your oldest cards open and occasionally use them to buy a magazine--just pay it off each month. This will help improve your credit score.

6. Pay more than your minimum payment. Your minimum payment is usually only 2-3% of your balance. At this rate, it will take you many years to pay off your debt. Pick your card to pay off and try to double the minimum payment.

Here is an example of the benefits of paying more than your minimum balance: assume you have a credit card balance of $8,000 and your interest rate is 12%. If you pay just the minimum payment of 2% each month, it will take 346 months to pay off the balance and will cost $7,696 in interest. If you pay 5% of your balance each month, it will take 113 months to pay and cost $1,974 in interest.

7. Check into transferring your balance to a lower rate card. If your rate is above 10%, it could pay off to transfer the balance for that card to one that offers 0% for 12 months for balance transfers. If you get 0% for 12 months, this is a great opportunity to pay down your balance. To take full advantage of this 0% interest, pay as much as you can above the monthly minimum. Be aware that credit limits are shrinking and you may receive a smaller credit limit for your balance transfer. Only use this card for paying down your balance, not additional purchases.

The terms of balance transfers aren't as generous as they used to be. Some cards now base the length of the intro period on your credit score. Most cards charge a balance transfer fee of 3% with no maximum. The amount you save on interest payments needs to more than offset the fee.

8. If you have a credit card balance, stop using it for anything other than necessities. Use cash instead. Credit cards are convenient, but if you carry a balance, you are still paying interest for dinners, clothes, entertainment
and things that are long gone. If your APR is 15%, ask yourself if the purchase is worth paying an additional 15% in interest per year. If you use cash, you will not only save money on interest, but also reduce the amount you spend. According to a Dun & Bradstreet report, shoppers spend 12% to 18% less when using cash.

9. Pay your bills on time, every time. Credit card issuers are looking for reasons to raise your rate, and one late payment will probably translate into a rate increase, not only with the credit card, but other creditors as well.

10. If you are surprised by your current rates, check your credit report. It may contain an error that is creating a higher credit score and higher interest rates for you. If you find an error on your credit report, contact the credit bureau to report it. They must respond to your claim in thirty days or remove the information that is incorrect or can't be verified. You can make your dispute by mail, telephone, or online. If the corrected error results in a higher credit score, contact your creditors to make sure they know about your improved score, and ask for a lower interest rate.

11. The good news. If you build a history of paying your bills on time every time, and start paying down your debt, not only will your debt decrease, but your credit score will increase. As your credit score increases, contact your issuers to ask for lower rates.