There was a time when credit card rewards programs were dominated by points that could be traded for merchandise, and miles that could be used to buy airline tickets and other travel benefits. Those are still highly popular, but a new study suggests that cash-back deals are catching up fast.

Credit card offers increasingly feature cash

Mintel Comperemedia is a company that tracks direct marketing credit card offers that are targeted at consumers. Yesterday, it unveiled its latest research results, which cover the period from January to April 2011, and these suggest that cash-back deals are increasingly being used as sign-up incentives.

During the first four months of this year, 23 percent of all card offers included a cash incentive (often in addition to continuing cash-back or other credit card rewards) just to sign up. During the same period in 2007, just 1 percent of these solicitations included such an offer.

Credit card rewards too generous?

Some of these sign-up incentives are extraordinarily attractive, and Mintel Comperemedia singles out Chase as particularly generous. Capital One and Discover are also well-known issuers of cash back rewards cards. However, the researchers also raised a warning flag for card issuers. Andrew Davidson, one of the company’s senior vice presidents, remarked in a statement:

It is getting to the point where, in some cases, the incentive is so attractive that consumers may as well apply for a card to cash-in on its incentive regardless of whether they have any serious intent to use the card in the long term. The challenge for issuers will be getting these incentive-driven switchers to change their spending behavior and become loyal cardholders.

Credit card companies competing for customers

Some people immediately associate the word “generous” with credit card companies. However, they tend to be senior bank executives. The rest of us are probably asking: Why the sudden rush of altruism? There are probably two main reasons:

1. Card issuers can again afford to invest in marketing. Credit cards were excluded from next month’s proposed cap on interchange fees, and issuers may even see a boost in credit card use as a result of that (see Credit card companies likely winners in Senate battle this week). Moreover, The Associated Press reported just yesterday that late payments on cards have fallen to pre-recession levels, and default rates are rapidly returning to normal.
2. After some pretty dire years, credit card companies are again expecting the good times to roll (see Credit card companies full of the joys of spring). And they all want as big a piece of the industry’s profit pie as they can get. Hence their throwing of money at incentives that they hope will buy them market share.

Credit card applications – is now the time to start signing?

If Andrew Davidson is right, and these exceptionally generous sign-up offers present challenges to card issuers, then some might soon be withdrawn. If you’re in the market for bargains, now might be the ideal time to start completing credit card applications for the best rewards cards.

Last week, a small group of partner companies unveiled Google Wallet, a new service that allows you to access your credit card securely and pay for goods and services at brick-and-mortar outlets using your smartphone. Google Wallet partners include Google, Citi, MasterCard and Sprint so it’s probably a good idea to take the new product seriously. Stephanie Tilenius, Google vice president of commerce and payments, said in a statement:

“Today, we’ve joined with leaders in the industry to build the next generation of mobile commerce. With Citi, MasterCard, First Data and Sprint we’re building an open commerce ecosystem that for the first time will make it possible for you to pay with an NFC (near field communication) wallet and redeem consumer promotions all in one tap, while shopping offline.”

Putting the “app” in credit card application

Here’s an example how Google Wallet may change your credit card use. You’re in a store or restaurant that has PayPass payment technology (currently there are 124,000 in the U.S.). The time has come to get out your credit card but this time you reach for your smartphone, hold it close to an NFC terminal and tap your screen once. That’s it. No swiping, no signing, no waiting.

That’s the way it could be, if Google Wallet becomes available to consumers as scheduled later this summer. However, there are some caveats. To start with, the credit card application is initially only going to work with a PayPass-eligible Citi MasterCard or with a virtual Google Prepaid card. And, for the time being, it can only be loaded on a Sprint Nexus S phone. Needless to say, Google hopes that other credit card companies, smartphone manufacturers and mobile carriers will soon join its party.

Credit card use hard to change

Presumably, because the partner companies recognize that people tend to be conservative when it comes to payment methods, some tempting offers and discounts are planned to encourage consumers to use Google Wallet.

It took a long time for online shopping and banking to be trusted as secure, and many are likely to be equally wary of wireless shopping. However, in a press release, Google claims that its new product is highly secure:

“Google Wallet is engineered to enable secure payments and goes beyond what’s possible with traditional wallets and cards. It will require an app-specific PIN and in the first release, all payment card credentials will be encrypted and stored on a chip, called the secure element, that is separate from the Android device memory and is only accessible by authorized programs.”

That “app-specific PIN” is a bit of a sticking point. You may have to tap your smartphone screen only once in order to send a payment, but first you’re going to have to access the app, and enable it by keying in your four-digit personal identification number (PIN). That’s not a major headache, but it does detract somewhat from ease-of-use claims.

Credit cards in cyberspace

Many commentators believe that credit cards in their traditional plastic form will all but disappear over the next decade or so, to be replaced by apps such as this one. And, certainly, plenty of technology and credit card companies are working on similar products to Google Wallet.

However, widespread consumer acceptance may take longer to achieve than some currently expect. “Early adopters” love innovation per se, but others may take some persuading that there are compelling reasons to switch to this sort of new technology.

And it may be that the road hasn’t been all that smooth for Google so far. An MSNBC story, which ran under the headline “Tech industry abuzz over ‘Google Wallet,’” was dated June 21, 2005.

Maybe you’re not too worried about your credit report, which is the document used to calculate your credit score. Perhaps you’re not planning to get a mortgage or auto loan. Maybe you aren’t going to fill in a credit card application anytime soon. So you don’t think you should be concerned.

Well, think again. Your credit report isn’t just viewed by lenders. A poor one may make it difficult or impossible for you to rent an apartment, obtain phone service, get a job or land a promotion. Yes, many employers run credit checks before hiring people or promoting existing staff. These are all reasons to take your credit report seriously.

Credit report errors widespread

You should certainly monitor your credit report closely and regularly. The fact is that errors on credit reports are much more common than many think. Addressing this issue in December (Five rules for fixing credit report errors), this blog quoted experts’ estimates that between 50 percent and 70 percent of all reports in the U.S. contain at least one inaccuracy.

As a rule, everyone should check their record at least once a year. Many people are comfortable with services that provide continuing access, including Equifax 3-in-1 Monitoring and TransUnion’s TrueCredit Monitoring.

Credit report errors hard to shift

It’s a mistake to assume that credit bureaus are happy to correct any inaccuracies that arise on your report. They’re paid by credit providers, not you. Often, they won’t accept your word about anything. If you set out to correct an inaccuracy, start out with the assumption that you have a battle on your hands. Treat the credit bureau that has the error as the enemy. Having said that, being rude or confrontational could be counterproductive. Be polite but persistent.

Last week, Tara Siegel Bernard wrote a New York Times piece on this very subject, and her advice closely reflected this blog’s advice:

1. Don’t use a credit bureau’s online dispute resolution service.
2. Mail letters “certified mail, return receipt requested” and keep copies.
3. Don’t provide originals of documents that support your assertions (cancelled checks, old statements, proof of previous addresses, court papers and so on), but do enclose copies.
4. Copy everything, again using certified mail, return receipt requested, to the creditor (credit card company, auto loan provider, mortgage lender, etc.) that originally supplied the incorrect information to the credit bureau. As the bureau’s customer, its request for a change is more likely to succeed than yours.
5. Don’t give up if you fail to correct an error yourself. Find an attorney who has in-depth experience of the Fair Credit Reporting Act, and go to court if necessary. You can find a lawyer through the National Association of Consumer Advocates.

It’s that time of year again when Hollywood stars migrate from Rodeo Drive to the Croisette, and desert the Sky Bar for the cocktail lounge of the Hôtel du Cap-Eden-Roc. Brad Pitt and Angelina Jolie probably don’t have to worry too much about how to pay for things when they’re at the Cannes Film Festival, but when we mere mortals venture overseas, it’s generally a good idea to plan credit card use ahead of time.

Here are four tips for using credit cards abroad:

1. Credit card terms overseas

If you think your credit card terms are punishing when you’re at home, wait until you get overseas. Most credit cards charge 2 percent to 3 percent on all foreign purchases, which can be a nasty shock when you get home. American Express and some other credit card companies offer products that don’t levy charges on foreign purchases. In addition, some debit cards don’t charge for foreign ATM withdrawals, and you should check if yours is one of them before you go.

2. Credit card companies need to know you’re going

Tell your credit card companies about your itinerary (dates and places) before you leave. If you rarely or never leave the United States, and a charge suddenly and unexpectedly appears on your card from a bar in Prague, your card issuer is likely to call you to check the transaction. Miss that call, and your account could be frozen, which could cramp your style and potentially ruin your vacation.

3. Expect transaction processing problems

Many parts of the world now use chip-and-pin technology in place of the magnetic strip that still appears on the back of American credit cards. Theoretically, this shouldn’t be a problem, but in practice it can pose difficulties, especially when you’re using machines to buy rail tickets, pay highway tolls and so on. Keep a little more local currency on you than you normally would to cover these eventualities. And also carry your passport everywhere. Some merchants demand bullet-proof identification when processing transactions that don’t involve a chip-and-pin credit card.

4. Don’t be a victim

There’s usually no need to be paranoid when you’re overseas. Depending where you are, crime rates are often lower in other countries than in the U.S. However, as a tourist, you may be at particular risk of being targeted by thieves, and taking measures to avoid being a victim and to cope if anything does happen are both intelligent steps to take. Here are four steps you can take:

1. Make copies of all your key documents (including passports and credit cards) and keep them separate from the originals. Keep them in a hotel safe if you can.
2. Make a list of the numbers you would need if your cards were to be lost or stolen. Remember that it’s not always possible to dial some numbers (800 numbers in particular) from overseas locations. Check with your card issuer’s website or call center for a number that will work where you’re going.
3. Don’t carry extraneous personal information, such as your social security number, because it could be useful to an identity thief.
4. Don’t let your credit cards out of your sight when you pay for things. You may be as likely to find crooked merchants, and skimming machines that facilitate card cloning, in Bogotá and Barcelona as you are in Boston and Baltimore.

And, whether you’re Brad and Angelina or just plain, old John and Mary, bon voyage.

The Pew Charitable Trusts‘ Safe Credit Cards Project yesterday published a revealing report into the business of business credit cards. Many of these credit cards are great for corporations and small businesses, but applying for one as a consumer can be a costly mistake.

Credit card regulation askew

When Congress passed the Credit CARD Act of 2009, it excluded credit cards aimed at businesses, which generally have “corporate,” “business” or “professional” in their names. That was a perfectly reasonable move, and follows a precedent set by legislators back in the 1970s. The reasoning behind the legislation? Two companies (one the card issuer, the other the business client) have a more equal bargaining position than a bank and a consumer. After all, consumers generally lack the legal advice and business savvy of a business client.

That’s great in theory, but Wednesday’s Pew document (”U.S. Households at Risk from Business Credit Cards”) sheds new light on the practice. Nick Bourke, director of Pew’s Safe Credit Cards Project, observed in a statement:

“Every month more than 10 million business credit card offers are mailed to households at all income levels. The sheer number of offers that are sent to homes all across the nation represents a risk to millions of American families.”

In other words, huge numbers of consumers are constantly being tempted to sign up for products that are completely beyond the reach of existing credit card regulations.

Credit card rates and rewards that look great

Credit card offers for business products ARE tempting. According to IndexCreditCards’ credit card rates monitor, the average annual percentage rate (APR) today for a business rewards card is 16.21 percent. The same figure for consumer rewards cards is 17.48 percent.

And credit card rewards programs on many business cards can be exceptionally generous. For confirmation, check out the Capital One Venture for Business offer or Chase’s Ink Cash and its $100 bonus cash back deal.

Credit cards that suit you

Private citizens can be forgiven for yielding to temptation by signing up for low rates and great credit card rewards without realizing that they are also signing away their legal rights to consumer protection. When this credit card news blog covered business plastic last September (Corporate credit cards for consumers), it highlighted just how dangerous these products can be. In that blog, it recounted the story (which first appeared in The Sacramento Bee) of Misty Seeley of Rancho Cordova, Calif.:

“(Seeley) told the Bee that her issuers had shortened the time she has to get in a payment after receipt of her statement from 25 days to 14 days. And they have increased her late fees from $29 to $50. Neither of those moves would be legal for consumer cards under the Credit CARD Act of 2009.”

However, the blog went on to say that consumers who don’t need protection (those who are never late paying no matter how often a card issuer juggles with dates, who never go over their credit limit and who can absorb any penalty rates without finding themselves in trouble) can benefit from holding a corporate card.

It is those consumers who are less organized and less wealthy who still need to be protected from potentially predatory practices. Perhaps that’s why Pew advocates extending the provisions of the CARD act to “any credit card product that requires an individual to be personally or jointly liable for account expenses,” and forcing credit card companies to tell applicants if a product doesn’t carry normal consumer protections.

This time last week, this blog ran a story (Credit card offers that tempt) about how credit card companies are engaged in stiff competition, and are coming up with increasingly attractive offers to win new customers. With summer looming ever closer, now could be a good time to check out a couple of cards that could make your vacations more comfortable, more enjoyable and less expensive.

Credit card deals for the poolside

Arguably, two of the strongest credit card rewards programs for travelers have resulted from an alliance between Chase and Marriott, the global hotel people. These are the Marriott Rewards Credit Card and the Marriott Rewards Premier Credit Card, both from Chase.

In many respects, including credit card rates and most fees, these are very similar products. Balance transfers, cash advances and foreign transactions all attract the same 3 percent fee across the two cards. For both, expect to pay between 14.24 percent and 19.24 percent variable annual percentage rate (APR) on any balances you carry forward, depending on your credit score.

And, speaking of credit scores, it’s unlikely that an application for either card would be successful unless yours is toward the Excellent end of the spectrum.

Credit card rewards for the traveler

The real differences between these credit cards become apparent when you compare their bonus rewards and their annual fees:

The Marriott Rewards Credit Card from Chase

1. Annual fee: $30 (waived in the first year)
2. Earn 22,500 bonus points with your first purchase
3. Receive an e-certificate worth two free nights’ stay on approval of your application
4. Those bonus points and the e-certificate can be worth up to five nights at Marriott locations
5. Get 10 nights’ credit toward earning Marriott’s “Elite” VIP travel perks every year
6. Earn three points for every dollar you spend at a Marriott location
7. Earn one point for every dollar you spend on other purchases

The Marriott Rewards Premier Credit Card from Chase

1. Annual fee: $65 (waived in the first year)
2. Earn 30,000 bonus points with your first purchase
3. Annual free night’s stay
4. Those bonus points and e-certificate can be worth up to five nights at Marriott locations
5. Get 15 nights’ credit toward earning Marriott’s “Elite” VIP travel perks every year
6. Earn five points for every dollar you spend at a Marriott location
7. Earn three points for every dollar you spend on airfares, dining and car rentals
8. Earn one point for every dollar you spend on other purchases
9. Receive 15,000 bonus points when you redeem a seven-night stay

Choosing the best credit card deals for you

If you’re a keen traveler who enjoys vacationing in luxury, and if you’ve a good credit score and rarely carry forward significant balances, then these two credit cards should almost certainly make your short list. How should you choose which to apply for?

Well, that’s simple. You should use the same process that you do when choosing any card: sit down and realistically assess what your spending patterns are, what your needs are, and how the different credit cards perform in meeting those needs. In this case, you just have to work out whether the higher annual fee of the Premier product is worth to you the extra rewards it can bring.

Last Tuesday, comScore®, a company that describes itself as a “global leader in measuring the digital world”, published its latest Online Credit Card Report. Although some of the document focuses exclusively on credit card use on the Internet, much of it takes a broader view. And among its most interesting insights are those concerning how consumers think when they’re applying for a new card.

Credit card applications: the selection criteria

In December 2010, comScore conducted a survey of almost 2,000 Americans who use the Internet and have at least one credit card. Purists should note that not all credit card users are also Internet users, so the results may not reflect the general population entirely accurately. However, given the near ubiquity of online usage in this country, any skewing of outcomes is likely to be tiny.

Anyway, the survey asked those respondents who had shopped for a new credit card in the previous 12 months about the factors that were most important in choosing the product they ultimately applied for. The results were:

1. Low annual percentage rate (APR)/interest rate–38 percent
2. No annual fee–25 percent
3. Rewards program–16 percent
4. Introductory offer for new account–13 percent
5. Low APR for balance transfers–8 percent

Researchers then asked all respondents (not just those who’d shopped for a new card over the previous year) to score the importance to them of certain credit card features. The resulting ranking was:          

1. Low APR/interest rates–40 percent
2. No annual fee–28 percent
3. Rewards or points–13 percent
4. Card accepted as most merchants–8 percent
5. High credit limit–5 percent
6. Reputation of the issuer–3 percent
7. Customer service–2 percent
8. Low APR for balance transfers–1 percent

People who write about credit cards come across a whole lot of stories about consumers who’ve made dumb choices. And this may lead them (your blogger included) to believe that people in general pick their plastic using poor criteria. But the comScore research suggests that this belief may be mistaken, or, at least, exaggerated.

The study breaks down results between people who perceive their credit scores to be excellent or good and those who think they’re fair or poor. And, to a large extent, both groups value selection criteria in ways that suit their needs.

For example, those with excellent/good credit scores worry less (34 percent) about having a low APR than those with fair or poor credit reports (53 percent). And that makes perfect sense. Those in the first category are less likely to carry forward balances than those in the second. That means that they should be less concerned about credit card rates; they’re less likely ever to have to pay any interest.

Credit card rewards

The same applies to credit card rewards or points. Those who believe they have excellent or good credit rank these higher (17 percent) than those who identify themselves as having fair or poor scores (6 percent). And, again, that suggests an informed and self-interested awareness. APRs tend to be higher for plastic with rewards programs, and those who are likely to carry forward balances frequently are often better off prioritizing low credit card rates. Those who never pay any interest should often seek out the most generous rewards program.

Credit cards & lifestyle

The trick to choosing a new credit card is first to sit down and make a realistic appraisal of how you’re likely to use the product. If you’re struggling to cope under the burden of high credit card rates on significant debt, then you should prioritize finding great deals on balance transfer credit cards. If you never carry forward balances, focus on rewards. If you frequently carry forward significant balances, look for low interest credit cards.

This isn’t rocket science, and the comScore study suggests that there’s a good chance you’re already making intelligent choices–and that’s especially likely to be true given that you’re an Index Credit Cards visitor. However, another part of the study could be read as meaning that most consumers don’t invest enough time in carefully comparing all the available offers. So make sure you’re not one of them.

Tomorrow, this blog will dig further into the comScore research to find more useful information.

Last Friday, this credit card news blog carried a report about the enormous increase in offers that credit card companies are mailing to prospective customers. The numbers are staggering: in the last quarter of 2009, 551 million such solicitations were sent out; a year later, that number was 1.4 billion.

These statistics come from Mintel Comperemedia, a company that describes itself as “a service that provides direct marketing competitive intelligence.” And, last December, one of its senior vice presidents, Andrew Davidson, revealed an insight that a lot of us could find strange: many recipients of junk mail don’t regard it as junk at all. A surprising 24 percent of Americans studiously compare the card solicitations they receive, prompting Davidson to observe: “Consumers are doggedly persistent when it comes to comparing credit card offers, and will use the rewards program with the best cash-back rate or highest points return per dollar.”

Credit card companies competing for business again

On March 31, Davidson followed up his remark with another insight:

Competition is intensifying in the credit card industry as the volume of credit card offers continues to rise. As a result, credit card issuers are starting to look for new ways to stand out in an increasingly cluttered mailbox.

Credit card applications worth making

So the fact that Americans are being selective about the credit card applications they’re prepared to make is forcing card issuers to come up with ever more enticing deals. And, right now, there are a couple of offers in particular that are well worth exploring.

However, there are two caveats. First, few credit card companies are interested in attracting those with poor credit scores, and many offers are available only to those with good or excellent reports. And, secondly, offers come and go, and you may have to act quickly to catch the one that’s best for you.

Chase Freedom® Visa $150 Bonus Cash Back

One of the outstanding credit card deals at the moment is the Chase Freedom® Visa $150 Bonus Cash Back card. At a time when many card issuers are scaling back their sign-up bonuses, Chase has chosen to increase the one on this product. Now, you get $150 cash back just for filing a successful application, providing you spend at least $500 on the card during the first three months after it’s issued.

This credit card may not be right for those who regularly carry forward large balances because its APR varies between 11.99 and 22.99 percent, depending on your creditworthiness. However, it has no annual fee, and offers a generous rewards program. You get 1 percent cash back on all purchases, and a further 4 percent (making 5 percent) on those made within categories that change each quarter. There is a cap on the amount of 5-percent rewards you can receive in any given quarter.

Balance transfer credit cards–standout deal

Anyone looking at balance transfer credit cards should almost certainly have the Discover® More–24 Month Promotional Balance Transfer card high on their short list. Yes, you have to pay a 5-percent balance transfer fee, but after that you get an exceptional–probably unique–24 months paying zero percent APR on the amount you transferred.

And that is one of the all-time outstanding credit card deals, at least for those who need a break from interest payments.

A bombshell CNNMoney.com report says JPMorgan Chase has a contingency plan under development for a $100 or even $50 spending limit on individual debit card transactions.

Why on earth would any bank deter debit card use? Simple. The Federal Reserve is drafting regulations to lower “swipe fees” (the cut of the transaction value that merchants have to pay every time a card is swiped), and the financial services industry is in panic as it sees a key source of revenue heading for the exit. Chase alone could see income from swipe fees drop $1 billion a year if the Fed moves forward.

Credit card use set for resurgence?

When Congress passed the Dodd-Frank Act, requiring the Fed to act on swipe fees (they’re also called “interchange fees”), it chose to regulate only debit cards. So now the banks are thinking of steering customers away from what’s about to become a low-profit product, and towards one that still attracts maximum swipe fees – credit cards.

Dedicated readers (Hi, Mom), may not be surprised to learn that around here that’s regarded as good news. Back in December, Index Credit Cards published a column (7 ways in which credit cards beat debit cards) that pointed out credit cards are better than debit cards. Of course, credit cards can be toxic for those who can’t manage them well, but they’re excellent for the self-disciplined consumer.

Credit card applications now?

If you’re about to increase credit card use, now would be an excellent time to make sure you have the right plastic in your wallet. And, if you find you haven’t the appropriate credit cards, don’t hesitate to make a credit card application right away.

When choosing a new card, you have to make a realistic appraisal of how you’re likely to use the product. Only then can you decide what’s most important. For example, if you pay down your balance in full every month, then ignore credit card rates; you’ll never pay interest anyway. If, on the other hand, you always or sometimes carry balances, then you need to explore low interest credit cards.

You also have to be realistic about your likelihood of qualifying for a particular card. Generally speaking, the very best deals are available only to those with stellar credit scores. But you may still get approved for a first-class mainstream card even if your credit score doesn’t currently make you vertiginous.

Best cash-back low interest credit cards?

If your credit score is excellent, then you might consider the True Earnings Card from Costco and American Express, which CBS MoneyWatch describes as among the industry’s top cash-back credit cards. It has no annual fee, your Costco membership is paid and it offers generous rewards, especially on gas and dining out.

Other highly recommended products include the Discover More Card – $100 Cashback Bonus, and the Citi Platinum Select MasterCard.