The Ford Motor Company and Citibank unveiled their answer to the hugely successful General Motors/Household Bank MasterCard, February 11th. The answer was a new VISA and MasterCard offering a 5% rebate on card purchases, good towards the future purchase of a new Ford. The card is being promoted as a "better alternative" because the annual cap is $200 higher than GM's program and this enables cardholders "to accumulate rebates faster".
Truth is: it is more difficult to accumulate rebates with the Ford/Citibank program than through the GM/Household card. Frankly the difference between the two programs is about equal to the difference between an Escort and a Bonneville.
Even though Ford offers a $700 annual rebate cap over 5 years, the only way to accumulate a rebate credit is through new purchases. To earn the maximum rebate annually a cardholder would have to charge $14,000 per year. This is nearly seven times the average cardholder charge volume.
The General Motors program offers two additional ways to earn rebates. If you transfer a balance from another credit card to the GM card you will earn a 5% rebate and if you charge purchases made with GM's partners, you'll earn an additional 5% rebate. The Ford/Citibank program does not offer a rebate on balance transfers nor a bonus rebate through partners. As a matter of fact, there are no partners in the Ford program. (Ford says it will announce partners in the future.)
General Motors partners include Marriott, Avis, MCI, Time Warner Select, and Mobil Oil. Cardholders earn a 10% rebate on purchases made with GM's partners up to the $500 annual rebate cap. Cardholders reaching the annual cap can continue to earn a 5% unlimited rebate on partner purchases. Theoretically . . . if you moved into the Marriott, rented an Avis car and filled it with Mobil gas for a year you would probably earn enough rebate for a free full size GM car. With the Ford program it is currently impossible to earn more than a $3,500 rebate.
The Ford program has another flaw. It is called an annual fee. In today's marketplace the only way to collect an annual fee is to deliver a high value (real value not perceived value) package of benefits. The only benefit difference between the $20 Ford card and the free GM card is Citibank's Photocard option which allows cardmembers to have their photographs digitally imprinted into the card. This option costs Citibank about $1 per card, a far cry from the $20 annual fee.
The Ford program does have some strong points. The interest rate is 1% lower than GM. The annual fee is waived for the first year and you'll earn a $50 rebate bonus whenever you pay the annual fee in future years. And Ford offers a special 9.9% promotional interest rate between April 5th and August 31st.
All things considered, Ford's counter-punch missed. Chrysler is reportedly entering the ring next.
For consumers does a car rebate card make any sense ?
It does make sense (cents) if you are truly committed to purchasing a new GM or Ford product in the next several years and if you faithfully pay off your balance each month. Since GM and Ford each have a 30% share of U.S. car sales and since three of four consumers carry balances each month, these new rebate programs are not for everyone. In other words the GM card and the Ford card are niche cards much like cards offering airline miles for purchases.
The secret to taking full advantage of niche programs is to funnel all your purchases through the card and pay it off each month. Charging gasoline, groceries, movie rentals, and medical bills are examples of how to boost charge volume without raising your actual spending. If you can discipline yourself, you just might be able to earn a hefty discount on a new car.
If you're not that committed, and you carry a balance (like most everyone else) turn to page three and find yourself some real savings on interest charges and put the difference into a savings or an investment account. In five years or so you might accumulate a nice discount on a car of your choice and you might be in a better financial position to afford the monthly payments.
For more information on the Ford program call 1-800-638-4767. For more information on the GM program information call 1-800-846-2273.
The new and improved GE Rewards MasterCard with no annual fee and a competitive interest rate of 16.9% has the most extensive line-up of merchant partners than any card in the marketplace. It is the equivalent of a frequent flyer's card for shoppers.
GE announced three new partners this month including Volvo, LensCrafters and Pier 1 Imports. Cardholders can now earn the equivalent of a 2% rebate on card purchases and hundreds of dollars of coupons towards purchases at 27 GE partners. Other partners include Macy's and K-Mart.
Since the average Joe can only dream of a new car, the GE Rewards card offers some real savings to everyday shoppers. If you don't shop and don't do coupons, you'll do better applying for one of the low rate or no-fee cards in this newsletter.
For more information on the GE Rewards program call 1-800-437-3927.
One of the best cards offered by a major bank has new siblings. Bank of New York's Consumer's Edge VISA and MasterCard program now offers a no-fee, low-rate card with a grace period and a no-fee, low-rate gold card.
STANDARD VISA/MasterCard
Prog #1: 11.90% (Prime +5.9%) No Annual Fee and No Grace Period
Prog#2: 14.90% (Prime +8.9%) No Annual fee and 25 Day Grace Period
GOLD VISA/MasterCard
Prog #1: 12.90% (prime +6.9%) No Annual Fee and 25 Day Grace Period
For more information call 1-800-235-3343.
