Another week, another new credit card launch. That, at least, is how it feels. As credit card companies begin to feel strong again after the body blow that was the credit crunch, they’re starting to fight one another for market share. And that can benefit consumers, because some of the new products are noticeably better than older ones. Here are two of the latest cash back credit cards.

It may not have been as tough as 2009 or 2010, but this year hasn’t been easy for all too many Americans. So it was good to hear last Thursday that 62 percent of respondents to a survey of holders of rewards credit cards said that they plan to get away this summer, presumably leaving only 38 percent who expect to have a “staycation” at home, or who perhaps are on “permanent vacation” due to lack of employment.

Credit card rewards useful

The research, which was commissioned by Capital One, also found that 40 percent of those interviewed expected to redeem credit card rewards to help fund their 2011 summer vacation, compared with about one-third last year. Those who intended to take the redemption route said they’d be cashing in their points or miles as follows:

1. Hotels: 55 percent
2. Air travel: 48 percent
3. Gas: 42 percent

Unfortunately, Capital One didn’t reveal how those figures relate to last year’s findings, but you might well guess that redemptions for gas are way higher than in the past, simply because of the dizzying heights to which fuel prices have risen. Such an assumption could be encouraged by another of the survey’s findings: 48 percent of respondents said that gas prices would influence their vacation plans.

Credit card companies can celebrate–sort of

All of this is good news for credit card companies that view rewards programs as important marketing tools for attracting new customers and retaining existing ones. The more consumers use points and miles to enhance their lifestyles, the greater the perceived value of those rewards, and the more powerful that tool becomes.

However, the study also revealed that some credit card companies’ programs could still use some work. It’s true that 61 percent of those interviewed said that “free money” was their main motivation for joining a program, and one-third reported that they “appreciate the everyday savings” they provide. However, only 24 percent were “completely satisfied” with their current program. Among the more common gripes were blackout dates (26 percent), and being unable to make last-minute reservations (24 percent).

Capital One vice president Troy Jamison commented in a press release:

Planning a summer vacation can be stressful given today’s economic conditions. With soaring gas prices and increasing airline fares, consumers are seeking greater value from their credit card rewards to maximize their benefits. A key to easing the stress of the financial impact of summer travel is to use a rewards card that fits one’s lifestyle offering simple and flexible means to earn and redeem those rewards on their own terms.

Credit card use abroad an issue

A surprisingly high proportion of respondents (36 percent) said they’d be vacationing abroad, with Rome the top foreign destination. Sixty percent said they were unsure whether their credit cards charged foreign transaction fees, which can typically add 2-3 percent to items charged abroad, while only 19 percent knew for sure that their cards didn’t. (The Capital One VentureOne Rewards Card, as with all Capital One cards, charges no foreign transaction fees.)

Other issues raised included airline costs such as fuel surcharges and baggage fees, which the researchers say “prevented [some] respondents from successfully redeeming rewards for travel.”

As Troy Jamison implied, the trick, as always, is to match your credit cards with your credit card use and requirements. And to do that you need to shop around regularly, comparing deals in detail.

We’re used to thinking of credit card use as something available to us on every single occasion. But a few recent stories are reminders that we either can’t or shouldn’t use our credit cards for absolutely everything. Here are four examples.

1. Credit card use when you want to be naughty

You might think that credit card companies would be shy about pointing their collective finger when it comes to morality. But no. Last week, SmartMoney, a Wall Street Journal website, revealed that at least one card issuer won’t authorize transactions for medical marijuana, even when supplied by licensed outlets in states where its sale is legal.

Some credit card companies also refuse payments for online pornography, and many won’t let you buy casino chips with their plastic. Some consumer advocates believe that these restrictions are impossible to justify, but one lawyer told SmartMoney that he sympathizes with card issuers’ policies, at least as far as medical marijuana is concerned. He says they could be vulnerable under federal law if they were to abet users in their purchases of drugs.

2. When you’re financing your start-up enterprise

Of course, there are some outstanding success stories about entrepreneurs who financed their start-up companies using their credit cards. And, according to a recent item on NBC Chicago, many financial advisers say that it’s fine for credit card debt to have a role in funding small businesses.

However, there are two caveats to bear in mind:

1. Your business credit card is likely to be tied to your personal credit report, so spend on it with as much caution as you do your own cards.
2. If your business plan is as sound as you think it is, how come you can’t find investors or banks to cover that card debt? Business credit card rates may on average be lower than personal credit card rates, but you may be able to access cheaper borrowing.

3. When you already have too much credit card debt

It’s Catch-22. When you have unmanageable credit card debt, you usually are in trouble, and may need to borrow more. What you actually need is to make a plan to get out of trouble, and that often starts by strictly controlling your credit card use. Help is at hand, and every card statement includes a help line number where you can get advice. But few call. Last month, Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling, complained:

The low response rate is confusing, particularly during this current economic environment where millions of consumers have serious financial concerns. Consumers are doing themselves a disservice by not taking advantage of this resource, as reviewing their situation with a trained and certified credit counselor could provide solutions they’ve not considered.

4. When you want a peaceful taxi ride

In some cities, taxi drivers may give you a very hard time if you try to use a credit card to pay your fare–in spite of the fact that their cabs may be festooned with American Express, Discover, MasterCard and Visa stickers. Yesterday’s The Bay Citizen suggests that San Francisco may be the latest such city.

Apparently, cab companies have imposed a 5-percent fee on card transactions, and drivers are understandably resentful over having their incomes “taxed” in this way. The Bay Citizen website has a scary video of the sort of conversation you may expect if you try to flash your plastic in a San Francisco taxi.

Credit card use is good

Don’t forget, credit cards are more secure than cash, and generally provide better legal protections than debit cards or prepaid cards. So get yours out whenever you can. Just don’t try to use your maxed-out business card to take a taxi to your medical marijuana outlet in San Francisco. It could be a frustrating trip.

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.

The trick to finding the best credit card for you is to identify the one that best aligns with your individual needs. Just because an expert recommends a product that might be perfect for many people doesn’t mean that it’s automatically the right choice for you. You need to weigh up what each credit card offers to see how it matches your lifestyle and requirements.

Credit cards for the less-than-frequent flier

The New York Times highlighted last month the Capital One Venture Rewards card as a good choice for those who like to take their credit card rewards in travel benefits, but who aren’t constantly on planes and in hotels. You can earn points on all purchases (not just travel-related ones), and redeem them against airfares, accommodation, and car rentals from any supplier. And because you’re not tied to a single carrier or hotel chain, you avoid those annoying blackout periods.

IndexCreditCards’ own experts rate that card highly, along with the Capital One Venture One Rewards Credit Card and the BankAmericard Power Rewards Visa Signature Card.

Credit cards for the very frequent flier

In order to maximize their credit card rewards, people who travel a great deal often need to align their card choices even more closely with their spending habits. If you almost always fly with the same airline or stay in hotels that share the same brand, then you may benefit by using one or both of their credit cards.

However, if your travel patterns are more eclectic you could be better off finding a product with flexible rewards. The New York Times echoes another IndexCreditCards’ pick when it touts the Starwood Preferred Guest Credit Card from American Express. The Times says that you can get about 1.25 miles for every dollar you spend on this card, which is a real improvement on most cards that carry an airline brand. And you can redeem miles with many different airlines as well as the Starwood hotel chain.

Credit cards for those who prefer cash

Of course, keen travelers don’t have to sign up for products that provide only travel rewards. Some of these have complicated rules that can be difficult to understand, and restrictions–such as blackout dates–that can drive you nuts.

These frustrations can be avoided if you pay for flights, hotel rooms and car rentals using cash back cards. However, bear in mind that you might miss out on some of the perks that travel-specific products may offer.

One of the best cash back cards right now is the Chase Freedom Visa $100 Bonus Cash Back card. This card offers a zero annual percentage rate (APR) for the first six months on purchases (12 months on balance transfers), no annual fee and a $100 bonus if you spend $500 during the first three months after issue. Those kinds of perks go a long way.

It’s finally happened. Your blogger has given away his 12-year old, two-foot thick television (no, not to a museum), and bought a shiny new, wafer-thin HD set, alongside a Blu-ray player. And did he get into his car and drive the 20 miles to his nearest discount electrical outlet? No chance. He bought them online using a credit card.

Credit card use up?

Yesterday’s Financial Times suggests that he wasn’t alone. It quoted figures from MasterCard Advisors’ SpendingPulse monthly “macroeconomic indicator”, which say that online spending by consumers in the US reached $13.8 billion in April, up 19.2 percent on the same month last year.

Meanwhile, The FT says that Amazon’s results for US sales in the last quarter were up 45 percent on the same period in 2010, and ebay’s up 10 percent. Even Wal-Mart Stores Inc. last month began a pilot program that, if successful, could see customers ordering groceries online and having them delivered to their homes. Clearly, something seriously significant is happening to online shopping in this country.

Credit card trends online

SpendingPulse says that it “reports on national retail and services sales and is based on aggregate sales activity in the MasterCard payments network, coupled with survey-based estimates for certain other payment forms, such as cash and check.” And that means that it’s not possible to break out credit card use from all online spending.

But if online credit card trends weren’t matching online shopping trends, that would be a tragedy for consumers. On Monday, this blog (Outfox white-collar criminals with the credit cards in your wallet) explored the inherent superiority of credit cards over other payment methods when making purchases both over the web and elsewhere.

The fact is, a credit card offers significantly more legally enforceable protections against loss than either a debit card or a prepaid card. And nowhere are those protections more valuable than in cyberspace.

Credit cards vs. debit cards–round 2

Many consumers seem to be favoring debit cards over credit cards because they’re scared of high credit card rates. That’s just crazy for two reasons:

1. If you use your credit card in the same responsible, debt-free way that you use your debit card, then you’ll never pay any interest. So why care about credit card rates? Better yet, you get an interest-free loan between a transaction date and your next monthly card settlement date.
2. If things go awry with your debit card, and you end up with an overdraft, that can be just as costly as making late payments or exceeding your limit on your credit card. Last week, the Pew Health Group published a report that revealed just how expensive overdrafts can be. It said, “If overdraft were treated like a short-term loan with a repayment period of seven days, then the annual percentage rate, or APR, on the typical overdraft would be over 5,000 percent.”

In fact, you could be much better off going to a payday lender or even a loan shark than getting overdrawn. But your best bet may be to use credit cards–as long as you do so responsibly.

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.

Credit cards with more secure processing chips, as opposed to the magnetic stripes common in the United States, have long been in use in Europe, Japan, Canada, China, Mexico and Brazil.

In a bid to catch up with other countries, Wells Fargo just announced that in a few months, it will pilot a program testing microchip-embedded credit cards with 15,000 of is customers who are considered to be frequent travelers, according to a New York Times report. The Visa SmartCards, a Wells Fargo product, will have the new chips plus the older magnetic stripe technology so the credit cards can be used both here and abroad.

JP Morgan Chase will also add microchips to its Palladium credit card, which is a card usually issued to customers known to travel abroad. These credit cards will also contain both an embedded encrypted chip and the magnetic stripe so domestic retailers can accept them.

Because the chip technology and the card readers needed for that technology have long been a credit card trend overseas, traveling Americans often have difficulty using credit cards at unattended payment sites like gas stations and ticket kiosks. Conversely, U.S. retailers don’t have card readers that can process the credit cards with the newer chips.

The newer chip and pin technology (entering a PIN number is also required for every transaction), also known as E.M.V., makes credit card use more secure in four primary ways:

1. Making fraudulent use more difficult
2. Preventing criminals from using credit cards because of the cards’ unique digital seal or signature
3. Protecting cardholders in online payment transactions
4. Storing more information than magnetic stripe credit cards

In other credit card news surrounding secure technology, Visa Canada has implemented multiple ways of preventing the skimming of contactless credit cards by fraudsters. Scotiabank now offers Visa payWave credit cards. These credit cards never leave the cardholder’s hand, but instead are tapped or waved in front of the credit card terminal. A tiny radio frequency identification antenna makes this no-contact credit card use possible.

Although some believe this data can be intercepted and used fraudulently, Visa Canada says these Visa cards generate codes that change with every transaction so stolen data is a very limited possibility. Visa also has a zero liability policy so their customers aren’t responsible for any fraudulent charges.

Back in the U.S., MasterCard recently announces its own five-year plan for implementing contactless and mobile phone payments, telling merchants that they will need to be equipped with contactless terminals by October 2012, according to a SmartCompany report.

Credit cards & lifestyle changes are moving right along.

Before the advent of digital TV, Europeans used to laugh at the quality of American television pictures. They’d joke that NTSC (which actually stood for National Television System Committee, and was the technology upon which this country’s color television transmissions were based from 1953) should more accurately stand for “Never Twice Same Color.”

Credit card trends in America–a clearer picture

It was true that NTSC was inferior to the PAL system used in many foreign territories. That’s because NTSC was a much earlier innovation. And it’s often the case that nations that innovate first are leapfrogged by others that piggyback on their genius. (That’s a mixed metaphor that relies on the dubious premise that it’s possible to leapfrog while piggybacking.)

Exactly the same thing happened with credit cards. Invented in the United States, they were quickly picked up by foreigners, and today many countries have more sophisticated technologies enabling transactions.

Credit card companies set for change?

Now there are signs that American credit card companies are set to take back world leadership in technology, according to a white paper titled “Four Important Trends Shaping the Future of Credit Cards,” which was published last week by payment processing company First Data. For instance, it mentions Blueprint from Chase, which is a sophisticated online tool that allows customers to pay down balances (and parts of balances for different sorts of purchases) in ways that best suit them.

How credit card use could change

First Data sees four areas in which technological innovation are most likely:

1. Mobile payments. In this scenario, smartphones and similar devices take over from credit cards as payment media, and could possibly all but replace them.
2. Multifunction cards. These cards could embed many sorts of novel functionality within a new generation of credit cards that retain the size, shape and thinness of today’s plastic. (See section about Dynamics below.)
3. Contactless cards. Many Americans already have contactless cards but relatively few Americans have begun to use them. Also known as “touch and go” or “wave and pay,” contactless cards allow users to make payments simply by holding the card in close proximity to a data reader.
4. Improved fraud protection. There are nearly unlimited methods for protecting card data, including “rolling codes” encryption and PIN-enabled cards that use ultra-thin buttons embedded on the face of the card.

Credit card companies’ best way forward?

First Data sees such technologies as a way for credit card companies to emerge from the challenging environment within which they have had to operate since the credit crunch. It sees this form of innovation as an alternative to the cost-cutting strategies that many issuers have been pursuing in recent years, and a possible answer to the more limited appeal that some traditional marketing tools (such as credit card rewards programs) have.

Another example of American inventiveness comes from Dynamics Inc. This Pittsburgh-based company is deploying the sorts of technology used in smart phones to create smart cards that allow users to choose whether a particular transaction is charged to their debit or credit card accounts. Some of these smart cards can provide high levels of fraud protection when a card is lost or stolen. Citi has already used Dynamics smart cards in customer trials.