Credit card issuers have been rolling out an array of attractive incentives to get consumers to choose and use their cards. That’s partly because credit cards still are very profitable for the issuers despite new federal regulations that try to protect consumers from credit card issuers’ worst practices, such as imposing harsh penalties for late payments and jacking interest rates way up. The incentives include cash bonuses of as much as $300 to sign up for cards with rewards programs that offer as much as 5% cash back.
Caution: Many of the best credit card offers are available only to consumers who have very good credit scores. If your credit score is below the mid-700s, your options for a new card will be more limited, but there still are some good ones available.
Today’s best credit card offers…*
While cards that offer rebates of 1% cash back on purchases are common, those that offer much more for many types of purchases are harder to find. Keep in mind that some cash-back cards have higher interest rates, so they may not be appropriate for people who carry balances.
- Best all-purpose cash-back card: Fidelity Investment Rewards American Express offers a flat 2% cash back on all purchases. While some cards offer higher cash-back levels after you have spent a certain amount each year, no other card currently open to new customers can match the 2% rate for all purchases right from the start each year. The rebates automatically are deposited into a Fidelity brokerage, retirement or college savings account. 866-598-4971, www.Fidelity.com.
Alternative: Capital One Cash. It offers 1% cash back on all purchases, but there also is an annual bonus equal to 50% of the cash back earned during the year, for the equivalent of 1.5% cash back. Capital One Cash also has been offering new cardholders a $100 cash bonus for spending $500 on the card within three months and a 0% interest rate on purchases and balance transfers until December 2012. 800-410-0020, www.CapitalOne.com.
- Best cash-back card with higher rewards for rotating categories: Chase Freedom Visa offers 5% on purchases totaling up to $1,500 per quarter in specific spending categories that change quarterly…and 1% on all other purchases. Gas stations and www.Amazon.com purchases are the current 5% cash-back categories…grocery stores and movie theaters in the next quarter…then gas stations and restaurants…and hotels, airlines and purchases from Best Buy and Kohl’s in the final quarter of 2012.
Chase Freedom Visa also has offered new cardholders a bonus of $100 to $300 for spending $500 within three months of opening the account. 800-432-3117, www.Chase.com.
Downside: You must call Chase or visit its Web site each quarter to activate those 5% rotating category rewards, then remember which are current.
Travel rewards credit cards let cardholders earn airline frequent-flier miles or hotel loyalty program points when they make purchases.
- Best airline card linked to a particular airline: United MileagePlus Explorer Card offers 25,000 bonus miles the first time you use the card—enough for a round-trip ticket in the US or Canada, excluding Hawaii. Miles are redeemable on either United or Continental, which are in the process of merging. The card also offers two miles for each dollar spent on Continental and United flights, plus one mile per dollar spent on everything else. Cardholders earn an additional 10,000-mile bonus for spending at least $25,000 on the card in a calendar year. Additional perks include priority boarding on United and Continental flights, two complimentary passes to United’s Airport Club lounges each year and free baggage check for your first piece of luggage on each flight. 866-652-3261, www.TheExplorerCard.com.
Downside: A steep $95 annual fee, although it’s waived in the first year.
- Best travel card not linked to a particular airline: Capital One Venture Rewards Visa offers cardholders two frequent-flier miles for each dollar spent. Those miles can be used on any airline, and there are no blackout dates, seat restrictions or expiration dates. But unlike with traditional frequent-flier programs, there is no set number of miles required for a rewards ticket. Instead, add two zeroes to the purchase price of the ticket you want in order to get the number of miles needed. For example, a $480 ticket requires 48,000 miles. 800-417-0090, www.CapitalOne.com.
Downside: There’s a $59 annual fee after the first year.
Alternative: Venture Rewards’ sister card, Capital One VentureOne Rewards Visa, has no annual fee and offers 1.25 miles per dollar spent on all purchases.
LOW INTEREST RATES
If you carry a balance on your credit card, low interest rates matter much more than rewards programs.
- Low-rate cards: Simmons First Visa Platinum and IberiaBank Visa Classic both offer variable interest rates as low as 7.25%. That’s about the lowest you can find these days, aside from limited-time introductory rates. Simmons: 800-272-2102, www.SimmonsFirst.com. IberiaBank: 800-217-7715, http://CreditCards.IberiaBank.com.
Downside: If your credit score is below 680, your application probably will be either rejected or approved only for a higher rate.
Lots of cards offer 0% introductory rates on balance transfers these days—but how long does that 0% rate last? And what rate applies when it expires?
- Longest 0% introductory balance-transfer-rate card: Citi Platinum Select MasterCard offers a 0% introductory rate on balance transfers and purchases for 18 months, much longer than the typical six-to-12-month introductory rate period. After that, your interest rate could climb to between a reasonable 11.99% and a steep 21.99%, depending on your creditworthiness. 800-311-9098,www.CitiCards.com.
Downside: Although the card’s 3% balance transfer fee is at the low end of the 3% to 4% typically charged these days, it still adds up to $300 for every $10,000 transferred. A single late payment could replace your 0% introductory rate with the ongoing interest rate.
- Lowest balance-transfer fee: Slate from Chase charges no transfer fee for balances transferred to the card within 30 days of opening the account. It also offers a 0% annual percentage rate on balance transfers and purchases for 12 months. Rates then climb to between 11.99% and 21.99%, depending on your creditworthiness. 800-432-3117, www.Chase.com.
Warning: This no-fee balance transfer is a limited-time offer that is not necessarily provided to all who apply for Slate. If you cannot locate the offer on the Chase Web site and you don’t receive an application in the mail offering it, search for “Slate” on my Web site, www.LowCards.com, to apply.
Several credit card issuers have begun marketing attractive new cards to small-business owners.
- Best small-business card: Chase Ink Cash offers a 0% interest rate for the first six months and a higher rate thereafter, recently 13.24%. Cardholders earn a $250 cash bonus if they spend $5,000 in the first three months, and there’s a cash-back rewards program that features 5% cash back on the first $25,000 spent each year at office-supply stores and on wireless, cable and landline services…2% cash back on the first $25,000 spent at restaurants and gas stations…and 1% cash back on all other purchases. 800-432-3117, www.Chase.com.
FOR WEAK CREDIT
Consumers whose credit scores are below 680 or whose credit histories are limited still have some reasonable credit card options…
- Best student credit card: Discover Student Card combines competitive rates—0% for the first nine months, then ongoing rates as low as 12.99%—with cash-back bonuses. Users earn 5% cash back on purchases in rotating categories and 1% cash back on everything else. 800-347-2683, www.DiscoverCard.com.
Downside: By law, students younger than 21 must provide proof of income or a co-signer to qualify for a card.
- Best card for those with middling credit scores (620 to 679): Capital One Classic Platinum MasterCard is a straightforward card for those with middling credit scores. It offers a 0% interest rate on purchases until September 2012, then 17.99% to 22.99% thereafter, depending on your credit score. 800-410-0020, www.CapitalOne.com.
Downside: A $39 annual fee.
*Cards in this article carry no annual fee unless otherwise indicated. Be aware that card features and availability change frequently.
Source: Bill Hardekopf, CEO of LowCards.com, a Web site based in Birmingham, Alabama, that helps consumers compare credit cards and provides rankings and reviews. He is coauthor of The Credit Card Guidebook (Lulu).