Rebates or give-backs are one way card issuers can still command rates of 16% or more. The purpose of these programs is to create the perception of value while sticking the cardholder with a high rate.
In this issue we will review the latest incentive programs and we will also look at other popular rebate programs. Fidelity Trust Company announced "Fidelity Investors Card" (VISA or MasterCard) on May 18. HOOK: Cardholders receive 1.0% rebate on purchases which is held in a special savings account currently earning 3.29%. Cardholders may also make additional monthly contributions of at least $20. Once the account reaches $1,000 cardholder may transfer the money to other Fidelity mutual funds specifically the Asset Manager or Puritan Fund. BOTTOM LINE: Interest rate (currently 15.9%) is prime +9.9% but will rise to at least 17.15%, July 1st. CAVEAT: If your monthly revolving balance falls below $500 you will be assessed a $2.00 monthly service fee. Also you are limited to a maximum rebate of $100 per year since the annual cut-off purchase level is $10,000. COMMENT: This card is a contradiction . . . Fidelity says this card will help consumers save money and invest in mutual funds however they encourage you (through penalties) to carry a balance and pay a high credit interest rate. This is not a "smart money" card. For more information: 800-323-5353.
Nordstrom announced the new "Nordstrom VISA" card May 17. HOOK: Cardholders receive a 1%-5% rebate on purchases which may be used towards Nordstrom merchandise. Rebate percentage increases with charging volume: 1% for $1,000-$1,999; 2% for $2,000-$2,999; 3% for $3,000-$3,999; 4% for $4,000-$4,999 and 5% above $5,000. BOTTOM LINE: Interest rate is 14.9% through the end of this year then jumps to prime +8.9%. CAVEAT: There is a $30.00 annual fee. COMMENT: The annual fee about equals the rebate earned by the average cardholder. Have you priced a pair of shoes at Nordstrom lately?
GE Rewards MasterCard switched to a 2% cash back program May 13. HOOK: Cardholders will now get an annual rebate check for cash. The rebate is tiered based on purchase volume: 0.5% for $1-$2,000; 1.0% for $2,001- $4,000; 1.5% for $4,001-$6,000; and 2.0% above $6,000. BOTTOM LINE: The interest rate for most applicants is 18.15% (prime +10.9%) however some applicants, depending on credit history will pay 19.65% (prime +12.4%) and some may qualify for a lower 16.15% (prime +8.9%). CAVEAT: You are limited to a max rebate of $140 per year which requires $10,000 worth of charging. COMMENT: While the GE program is a clear improvement over the Discover card cash back program it is still carries a high price tag for most consumers.
Chase Manhattan announces "Cash Builder VISA" on May 12. HOOK: Cardholders receive a 1.0% rebate on purchases or cash advances if monthly volume exceeds $200 per month and a 10% rebate on monthly interest charges if incurred. BOTTOM LINE: Interest rate is prime +9.15% for purchases and prime +10.15% for cash advances. CAVEAT: You will not receive your cash until you accumulate $500 in rebates or after three years whichever comes first. COMMENT: You can build more cash with a lower rate card however among the newer offers Chase offers the best deal for most consumers.
AT&T Universal announces the "Something Extra" program May 2. HOOK: Cardholders receive one point for each dollar charged to the AT&T Universal VISA or MasterCard and one point for each dollar of balance carried forward. Cardholders also receive $1,000 points for enrolling and 10 points for each dollar spent through the calling card feature. Points are good towards thirty different awards ranging from free long distance calling to two free airline tickets. BOTTOM LINE: Interest rate is prime +9.9% and some cardholders must pay a $20 annual fee. CAVEAT: The program has a two year time limit. COMMENT: You're really getting a 0.75% to 1.00% rebate. To get the top reward (120,000 points) really requires something extra from you: $60,000 of charging per year or carrying a consistent $5,000 balance.
Also during May Advanta's Colonial National Bank announced it is testing the "Edvance" card which offers a $50 savings bond for each $2,500 charged, representing a 1.0% rebate.
Average consumers consistently paying off the monthly balance, avoiding all interest charges, can come out ahead with most rebate programs. Cardholders committed to charging everything possible to their cards and having the discipline to pay off faithfully can do very well under these programs. For example by charging $10,000 per year you can earn $140 cash back per year, one free airline ticket every two years or $500-$700 per year towards a new automobile.
