Last month the Shell MasterCard was launched as part of a joint venture (called "co-branding" in industry lingo) between Shell Oil Company, Chemical Bank and MasterCard. This new card enables cardholders to earn monthly rebates towards future purchases of Shell gasoline.
Here's how it works: For every purchase you charge you'll earn a 2.0% rebate. By charging Shell gasoline purchases you'll earn a bonus 1.0% rebate. Once you earn $70 in rebates the 2.0% purchase rebate ceases but you'll continue to earn a 1.0% rebate on all Shell gasoline purchases for the remainder of the anniversary year.
The big question: Is the Shell MasterCard worth giving up your current VISA/MasterCard, automobile rebate credit card, airline mileage credit card or your regular Shell credit card ?
The simple question: Will the Shell MasterCard save money ?
The big and simple answer is: Unless you're paying some ridiculous price for your current credit card and you're a die hard Shell customer the Shell MasterCard will probably not save you money or beat the other rebate cards offered by auto manufacturers and airlines.
The interest rate is prime +10.4% for most customers applying before April 30, 1994. (Low risk customers may qualify for a prime +9.0% rate. After April 30, the rate for new applicants will be prime +11.4%.) This is no bargain given the growing availability of much lower rate cards. Consumers with high revolving bank card balances are always better off saving on interest costs than trying to accumulate rebates.
Furthermore you may be paying a much lower interest rate on your current Shell credit card if you live in a state with a usury ceiling on retail credit cards. For example Arkansas currently limits the Shell retail card to a maximum interest rate of 8.0%. Under federal regulations the Shell MasterCard is only subject to the usury ceiling of the state from which the card is issued.
If you currently have a Shell gas card it is very important to check the rate you are currently paying before applying for the Shell MasterCard. If you apply and are approved for the Shell MasterCard your regular Shell credit card will automatically be closed and the balance transferred to the new Shell MasterCard account.
The $20.00 annual fee for the Shell MasterCard is waived if you apply before April 30, 1994 and if you continue to make a minimum of six purchase transactions per year. By comparison the Shell gas card and a significant portion of VISA and MasterCard issuers do not charge an annual fee nor require a minimum number of annual transactions.
For most cardholders the Shell MasterCard rebate currently translates into a 3 cent or 4 cent per gallon discount on Shell gasoline. A little comparison shopping can easily save this amount. For example in Frederick, Maryland (RAM Research's headquarters) prices for 87 octane gasoline range from $1.04 to $1.18 per gallon. Along the most popular shopping strip a Shell station charges $1.17 per gallon while three blocks away a Sunoco station charges $1.11 per gallon for the same grade.
Will consumers flock to a gas rebate cards ?
Time will tell but we believe consumers find rebates towards cars and airline miles to be far more attractive, akin to an investment account. The concept of earning credit card rebates on the necessities of life will continue beyond the Shell MasterCard and it will probably get ridiculous. A McDonald's VISA or MasterCard earning rebates on Big Macs is not far fetched. Just a few years ago credit cards issued to members of various organizations (called affinity cards) included the Elvis Presley card, the Breyer's Ice Cream card, the Armenian card, and VISA and MasterCards issued to radio station audiences. Co-branding is the hottest new twist in bank credit card marketing today but like its predecessor it will lose steam quickly.
The General Motors VISA/MasterCard will hit the U.K. January 1st. GM has already signed up more than six million accounts in the U.S. and Canada and has redeemed rebates on more than 70,000 automobiles. The U.K. GM card has no annual fee and will carry a 19.9% interest rate. Most U.K. issuers charge 21%-23% and most charge annual fees. U.K. standard cardholders will earn 5% on all purchases and balance transfers up to 500 pounds per year with a 2,500 pound cap over five years. Gold cardholders may accumulate 750 pounds per year with a 3,700 cap over five years. The U.K. issuer will be Household International.
The AFBA Industrial Bank (Colorado Springs, CO) [1-800-776-2265] has fine tuned and simplified its super low rate, nationally available cards. Effective this month AFBA is offering an 8.5% (prime +2.5%) VISA and MasterCard with a $35 annual fee. Consumers may also choose AFBA's no annual fee card with an 8.9% A.P.R. for the first year, prime +6.0% thereafter.
Single digit promotional interest rate offers continue to hit mailboxes across the country.:
1. Prudential Bank (Atlanta, GA) [1-800-822-6369} is offering a 9.9% A.P.R. through June 1. The standard card rate is prime +8.9% with 14.9% minimum; the gold card rate is prime +6.0% with 12.0% minimum. Both cards have first year annual fee waivers, thereafter $19 for standard VISA cards, $35 for gold VISA cards. Incidentally Prudential will start charging a 2.0% cash advance fee on all convenience checks effective June 1 with a $25 maximum for standard cards and a $50 maximum for gold cards.
2. Harris Bank & Trust (Palatine, IL) [1-800-445-4631] is offering a 9.9% A.P.R. on gold MasterCards and an 11.9% A.P.R. on standard cards until November 1, 1994. Thereafter the rates increase to prime +7.9% for gold cards and prime +9.9% for standard cards with a minimum interest rate on both cards of 14.4%. Harris does not charge annual fees, however, cardholders with repeated delinquencies are subject to a $20 fee for standard cards, $35 fee for gold cards and a penalty interest rate of 18.9% (prime +12.9%).
3. CoreStates Bank (Wilmington, DE) [1-800-833-3010] is soliciting for a free gold card with an introductory rate of 9.4% (prime +3.4%) for the first six months. Thereafter the rate rises to prime +9.4% for balances under $3,000 and prime +6.4% for the portion of balances exceeding $3,000. Corestates requires the card to be used at least once per year to retain the no annual fee status.
A revised Do-It-Yourself Credit Repair Guide is now being offered by the National Center for Financial Education (San Diego, CA) 1-800-837-6729. This 50 page publication is available for $10 per copy.
