From heftier sign-up bonuses to additional cash-back rewards and interest-fee financing, the 11 major credit-card issuers’ latest credit-card offers are more generous than ever before. Matt Schulz, who is a senior industry analyst at Creditcards.com, which covers the credit-card industry, tells Consumers Digest that now is “the best time in the history of the credit-card business” for you to find great introductory deals.
“It’s such a buyer’s market right now,” Schulz says.
Given that credit-card offers have been generous for the past 3 years, we wondered whether any indication exists that a point will come when the deals reach their peak and start to decline. If so, should consumers act now before the offers start to vanish?
Ten experts tell us that consumers should expect the generous offers to continue for the foreseeable future.
“I don’t think we’re living in a golden age that’s going to disappear next month,” says Jason Steele, who writes about the credit-card industry. “We could have this same conversation in 2 or 3 years. This isn’t a market in which people need to decide when to jump in and when to sit out.”
You should keep in mind that you must have a Fair Isaac (FICO) credit score of at least 740 to get the best credit-card offers. (All credit-card issuers use FICO scores, which are calculated by evaluating your credit data and range from 300 to 850.)
If your FICO score is between 700 and 739, you still can take advantage of some of today’s better credit-card offers, but you’ll have to pay a price, such as an annual fee (as low as $19 but as high as $450, depending on the card). You likely also will pay a higher annual percentage rate (APR) than would a consumer who has a score of at least 740, and you won’t be eligible for the credit cards that have the best introductory bonuses.
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If your FICO score is below 700, you won’t qualify for most credit cards. If you qualify for one, you’ll pay an annual fee and an average APR of 22.98 percent for a card that has little in the way of rewards.
Speaking of APRs, at press time, the average APR on credit cards was at an all-time high of 15.59 percent, according to Creditcards.com. Experts tell us that APRs will continue to rise in 2017, because Federal Reserve is expected to raise short-term interest rates twice more in 2017.
All of the 11 major issuers’ credit cards have a variable APR that’s tied to the prime rate, which is tied to The Fed’s short-term interest rate. The Fed raised the short-term rate by 0.25 percent in March 2017, so APRs immediately climbed by 0.25 percent. You probably didn’t get a letter in the mail notifying you that your APR rose, because credit-card issuers aren’t mandated to notify you when a card’s APR increases as a result of The Fed raising interest rates. (Issuers must notify you and give you 60 days’ notice when they decide to raise a credit card’s APR independent of The Fed’s actions.)
A 0.25 percent increase adds $2.50 in interest per year for every $1,000 in debt. That might not sound like a large increase, but if you carry a lot of debt, the interest can add up, says Sean McQuay of Nerdwallet, which is a consumer-finance publication. In other words, as APRs increase, the importance of paying your monthly balance in full also increases.
INTEREST FREE. Experts tell us that as APRs increase, credit cards that have a zero percent introductory APR become more valuable. We found that 56 credit cards (42 percent) now include a zero percent introductory APR that lasts at least 6 months and as long as 21 months, compared with 61 credit cards (39 percent) that had that feature in 2014. Zero percent introductory-APR deals maxed out at 18 months in 2014.
In the past year, we’ve seen more credit cards that provide zero percent APR balance transfers. These cards are good if you carry a balance on an existing credit card and struggle to pay it off because of interest charges. If you transfer your balance to a credit card that has a zero percent APR balance transfer, all of your payment will go to pay off your principal for the duration of the zero percent period (typically 12–18 months).
BUILD YOUR CREDIT. Experts tell us that secured credit cards, which are credit cards that require a refundable deposit, are more common than ever before.
“Zero percent APR balance transfers are best used when consumers can see a bright light at the end of the tunnel and have reason to believe that they’re going to pay off the debt,” McQuay explains.
However, that doesn’t mean that you should use zero percent APR balance transfers to put off paying your debt long term.
“The unfortunate part is that people think that at the end of their 15, 18 months, they’ll apply for another zero percent APR card and move the balance to that card,” Steele says. “Of course, that could actually prevent you from getting a card. A lot of debt hurts your credit score. I wouldn’t recommend zero percent balance cards as a perpetual funding mechanism.”
Zero percent APR balance transfers also are good for credit-card issuers, which use them as a way to poach customers from other issuers, McQuay says. That’s because you can’t transfer a balance within the same bank. For example, if you have debt on a Chase credit card, you can’t transfer that debt to another Chase card. However, you can transfer the debt to a credit card that’s provided by any other issuer.
“If someone is irresponsibly carrying credit-card debt month to month, moves it to a new card with a zero percent balance-transfer offer and still doesn’t pay it off, that could be very profitable for the new issuer after the zero percent period ends,” says John Ganotis, who is the founder of Creditcardinsider.com, which covers the credit-card industry.
You should keep in mind that most zero percent APR balance-transfer credit cards have a balance-transfer fee of 3 percent or 5 percent. We found just two credit cards, Barclaycard’s Ring and Chase’s Slate, that have no fee for balance transfers that you make within the first 60 days of when you open an account. Ring and Slate also allow a zero percent APR on balance transfers and purchases for the first 15 months and charge no annual fee.
RISK OR REWARD? All of the experts whom we interviewed tell us that the terms and redemption rules of travel miles and points
programs have become increasingly confusing over the past 3 years.
“I’m not sure why no-balance-transfer-fee cards are so unusual,” Steele tells Consumers Digest. “Unfortunately, we’re so used to companies adding fees at random that relatively few people seem to notice or care.”
NEW-CARD BONUS. In the past 2 years, most of the 11 major credit-card issuers boosted, and sometimes doubled, sign-up bonus points, so they would attract customers.
Sign-up bonuses reached a peak in August 2016, when Chase introduced its Sapphire Reserve Card, which gave consumers 100,000 bonus points (or $1,500 toward travel through Chase Ultimate Rewards) when they spent $4,000 on the card during the first 3 months that they had it. What’s more, cardholders also received up to a $300 return on the $450 annual fee, as long as they spent $300 on travel expenses. Chase’s 100,000-point offer expired in January 2017, but as of press time, the credit card had a sign-up bonus of 50,000 points if you spend $4,000 during the first 3 months that you have it.
“Chase’s 100,000 bonus points were the Holy Grail,” says Brian Karimzad, who is the director of Milecards.com, which monitors and rates credit-card rewards programs. “Those kinds of offers don’t come around often. When you see that kind of deal, it’s a good sign that the bank is wanting to increase market share and is willing to offer you rewards to win you over.”
Chase’s Ink Business Preferred Card, which provides 80,000 points after you spend $5,000 during the first 3 months that you have it, is the best sign-up-bonus offer that we found as of press time. Sign-up bonuses that dangle 30,000–50,000 points in front of you are common and likely will remain available indefinitely, Karimzad says.
We also found that 80 credit cards (60 percent) have no annual fee, which is about the same number as before. However, a growing number of credit-card issuers eliminated foreign-transaction fees. We found that 47 credit cards (35 percent) have no foreign-transaction fee as of press time, compared with 37 credit cards (24 percent) that didn’t have it in 2014.
Citibank’s Citi Simplicity is the only credit card that we found that doesn’t apply late-payment fees or penalties. You’ll pay interest on your balance, late payments will show up in your credit report, and Citibank can revoke your card if you miss too many payments. However, it’s still good news whenever a credit-card issuer decides not to charge a fee. No other credit-card issuer says it plans to eliminate late fees.
REWARDS CARDS. Credit-card rewards programs remain as generous as ever before, but all of the experts whom we interviewed tell us that the terms and redemption rules of travel miles and points programs have become increasingly confusing over the past 3 years. (You should keep in mind that they already were confusing 3 years ago.)
Reward flights that used to cost 50,000 miles now cost at least 60,000 miles. In most cases, reward flights are available only on certain days and at certain times, and they pertain only to flights to certain cities. What’s worst of all is that the airlines and credit-card issuers can change the values, destinations and flight times from day to day and give you no warning and no explanation. In other words, you might spend 2 years saving 75,000 credit-card miles for a winter trip to Florida, only to reach the threshold and discover that the trip now costs 95,000 miles or that your airline doesn’t have reward flights that go to Florida during the winter. You also might save your miles for an international trip, only to find that your miles can be used only for domestic trips.
Experts say Delta Airlines has the most confusing rewards system of them all. The airline removed its SkyMiles reward chart from its website in 2015, so you have no dependable way that you can plan for how many miles that a Delta reward flight will cost you.
“The cost of an award flight is whatever Delta says it is today,” Steele says. “Can you imagine going shopping, looking at a price tag, getting to the register and finding out that price is different? How do you make a decision based on that?”
Experts tell us that travel-rewards programs are so tricky that the experts recommend such programs only to consumers who have the time to monitor travel-rewards blogs that break down the details of the best deals.
“It’s got to be a hobby; you have to keep abreast of it,” Steele says. “If you don’t know what you’re doing and you don’t understand it, then it’s very easy to find yourself with a poor value.”
As travel-rewards credit cards become more confusing, cash-back credit cards, which reimburse you when you make a purchase, are becoming more generous, Schulz says. The latest cards typically deliver 2 percent cash back on all purchases, compared with 1.5 percent 3 years ago. Most cash-back cards also give you 2 percent to 6 percent back on purchases that you make within certain categories, such as gas stations, supermarkets and restaurants. The cards typically have categories that rotate every 3 months and quarterly limits (typically $1,500).
“Cash back is a safe haven for people who just want their rewards program to be easy and straightforward,” Steele says. “That’s an outgrowth of the frustrations that people have with travel rewards programs.”
As of press time, one of the best cash-back credit cards that we found was the Citi Double Cash Credit Card, which provided 1 percent cash back on general-purpose purchases and an additional 1 percent when you pay your monthly bill on time. What’s more, no limits existed on what cardholders get in cash back. As of press time, Citi Double Cash Credit Card also had no annual fee.
SUBPRIME CARDS. The improving economy made banks increasingly willing to lend money, not only to consumers who have impeccable credit but also to others who might have less-than-stellar credit.
Experts tell us that secured credit cards, which are credit cards that require a refundable deposit from the consumer and generally have a spending limit at that amount, are more common than ever before. Secured credit cards typically are the type of credit card that’s available if your FICO score is 640 or less.
We found that a few secured credit cards now give you as much as 2 percent cash back on purchases at restaurants and gas stations and 1 percent elsewhere. We found two secured credit cards, the Capital One Secured and the Discover it Secured, that have no annual fees. Secured credit cards didn’t include rewards before and typically have an annual fee.
“It’s a nice incentive for people who are just getting started with credit or getting back on their feet with credit,” Schulz says.
Besides secured credit cards, unsecured credit cards, which often charge annual, monthly and setup fees instead of a single refundable deposit, also exist. In the past year, Consumer Financial Protection Bureau (CFPB), which is responsible for consumer financial protections, started to crack down on unsecured credit cards’ exorbitant fees. Unfortunately, CFPB’s action on behalf of consumers in this regard might be in jeopardy. The Trump administration said it might seek to repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act—a move that would scale back CFPB and eliminate oversight of subprime credit cards.
CFPB reviews the credit-card market every 2 years and enforces the Credit Card Accountability, Responsibility and Disclosure (Credit CARD) Act of 2009, which makes it difficult for credit-card issuers to raise APRs. What’s good news is that experts tell Consumers Digest that the Trump administration doesn’t plan to repeal the Credit CARD Act any time soon.
“It’s possible we could see more subprime cards with predatory terms, but if people don’t get them, they won’t last long on the market,” Ganotis says.
Greg Tasker has written for AAA Living, Frommer’s Budget Travel and Parade, among other publications.