The so-called “American Express Zync credit card” was released recently, aimed at younger consumers who wish to pay their balance off in full each month (whether they like it or not).
Like many other American Express credit cards, it’s an installment card (also referred to as a charge card) because the full balance must be paid each month; no minimum payment option with this one.
That means there’s no interest or finance charges tied to the Zync card, which is clearly a plus for young consumers who are notorious for getting into debt.
Of course, it diminishes the value of the credit card to some degree, as it’s really a form of convenience, and not so much a revolving credit line.
It’s similar to many of the American Express credit cards already kicking around for older consumers, like the Gold Card, which must be paid in full each month.
The big difference is the annual fee, which at $25, is much cheaper than the credit cards for the big boys.
Zync from American Express is also customizable, with four different packs available for an additional $20 each annually (the Eco Pack is free).
They include the Go Pack, Social Pack, Connect Pack, and Eco Pack, each offering special deals and discounts for the associated lifestyle.
Zync offers standard American Express membership awards, purchase protection, extended warranty, return protection, excellent dispute resolution, and more.
While Zync may be a good choice for parents who want their kids to carry a credit card without the risk of being hit with finance charges, the annual fee can be a bit of a setback.
There are also a number of revolving American Express credit cards with no annual fee out there that offer the same benefits, though there is the risk of getting into more trouble.
It seems the Zync was released with the credit crisis in mind, as revolving credit cards dominated those boom years, and may be getting phased out as card issuers look for profit without taking on as much risk.
Apply here if the card interests you…
(photo: debaird)
This post was written on February 4, 2010
In a few weeks, it will be a lot more difficult to get a credit card if you’re under the age of 21, at least, that’s the plan.
The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (Credit Card Bill of Rights) will go into effect on February 22, and bring with it a number of changes, which I previously wrote about.
But another issue at hand is extending credit to so-called underage consumers, namely those under the tender age of 21.
The impending legislation will require that those under 21 who apply for a credit card either get a co-signer aged 21 or over, or document the ability to repay the credit card debt.
If the under 21 applicant chooses option one, that co-signer will be on the hook for any unpaid debt; if they choose to document income, it’ll probably be rather cumbersome, and certainly not the instant approval we’ve all grown so fond of.
Additionally, if under 21, a credit line increase will only be permitted on a joint account with the co-signer’s permission.
In other words, kids can’t go increasing their card limit without their parent’s knowledge.
So it’s going to be more difficult to get a credit card if you’re under 21, which in one respect, will be a good thing.
But what about those who need the credit, are generally responsible, but unable to get a co-signer or document income?
Will it lead to an increase in the use of prepaid credit cards, or an increase in personal loans, those with much less favorable terms than credit cards?
I hope all the implications have been considered for the sweeping changes, especially since credit cards are often a young consumer’s initial credit building tool (how to build credit).
This post was written on February 1, 2010
Most of us don’t know the true cost of credit, we simply pay attention to what we’re paying in fees and finance charges.
But the cost of goods and services increases as a result of credit card use, as merchants need to pay fees to banks, credit card issuers, and other companies for the infrastructure, equipment, and convenience.
These merchant and interchange fees vary based on the type of transaction, merchant, and card issuer involved.
Visa charges an average of about 1.80% per transaction, while American Express charges around 2.50%, though smaller retailers typically pay between 3.25% - 3.75%.
This is why you’ll often find that not all small merchants accept American Express, as they don’t want to pay the extra fees (Amex also tends to side with the consumer, another drawback for merchants).
If the merchant has a special deal in place with a card issuer, perhaps based on a volume or exclusivity agreement, they’ll be able to secure lower pricing.
Take a look at these figures below, provided by TrueCostofCredit.com to get a better understanding of what credit really costs:
But even if you elect to pay with cash, more often than not the price already reflects the option to pay with plastic, unless you work out a deal specifically with the merchant.
The use of credit is already priced in, so it’s wise to get your hands on a rewards credit card, like the American Express Blue Cash, which offers cash rebates of up to 1.25% - 5% on all purchases.
Tip: Watch out for merchants that try to pass the “transaction fee” onto you directly.
This post was written on January 20, 2010
All of the major credit card companies have announced they will not charge the usual transaction fees for certain donations made toward relief efforts in Haiti.
Visa, MasterCard, American Express, and Discover have all separately announced the waiving of interchange fees, typically between one to three percent of a given transaction.
So instead of charities like the American Red Cross and Doctors Without Borders losing out on a piece of each donation, they’ll get to keep that money and ideally use more of it to help those in need.
Visa said it wouldn’t apply interchange fees through February for select charities yet to be named; MasterCard is waiving interchange fees on relief donations made to American Red Cross, AmeriCares, Unicef, Save the Children and CARE U.S.A.
American Express will rebate transaction fees for charitable donations made on its card for nonprofit organizations listed on the Agency for International Development’s website.
Discover is also waiving fees, but didn’t make clear which organizations would be included.
It’s believed credit card companies and banks make around $250 million a year on fees tied just to charitable donations; they make billions annually for all transactions.
They’ve only waived their fees once in the past, after the 2004 Indian Ocean tsunami.
This post was written on January 20, 2010
Your income may become a more important factor in determining whether you’ll be approved for a credit card, according to a post in the WSJ.
The paper said beginning in February, credit card companies will be required (Credit Card Bill of Rights) to consider an applicant’s income or assets/current debt before extending credit to ensure consumers have the ability to repay.
In preparing for the change, the credit bureaus have already gotten in on the income estimation business, with Experian reportedly nailing down income to the nearest thousand.
They came up with their estimates by matching credit reports with wages, interest, and investment income, along with total credit lines and related payments.
These income estimates will help credit card issuers approve or decline applicants, and may also be utilized to increase or decrease an existing credit line.
In the past, credit card issuers simply asked consumers to enter their gross annual income in a box on the application form, but soon you could be required to provide pay stubs, tax returns, or be asked to fill out a form 4506, which allows the IRS to release your tax filings to lenders (so no fudging the numbers).
What the changes really communicate is that credit scoring has proven to be unreliable, at least as a standalone determinant of capacity to repay debts.
Of course, the income estimates are just ballpark figures when it comes down it, which is why the credit bureaus’ contracts prohibit card issuers from turning down customers based solely on the information.
See: why credit card regulations are worthless.
This post was written on January 13, 2010
I like American Express a lot, I don’t hide that fact. Their customer service is stellar, it’s easy to dispute fraudulent/bogus charges, and the rewards tend to be the best in the industry.
Their credit cards also look cool, and who doesn’t like to look cool?
At the same time, a number of American Express credit cards come with some hefty annual fees, which I’m not a fan of.
I’ve never embraced the idea of paying a fee to use a credit card, it just doesn’t sit well with me.
Fortunately, American Express has a number of credit cards with no annual fee, good ones at that.
So check out the following “American Express cards with no annual fee”:
Blue from American Express®
0% Intro APR for 6 Months on Purchases, “No Annual Fee,” Point-based Rewards Program, Instant Approval in Under 60 seconds
Blue Cash® from American Express (my personal favorite)
0% Intro APR for 6 Months on Purchases, “No Annual Fee,” Cash-Back Rewards Program, Instant Approval in Under 60 seconds
Up to 5% cash back at supermarkets, gas stations, and drugstores. Up to 1.25% everywhere else.
Blue Sky from American Express®
0% Intro APR for 6 Months on Purchases, “No Annual Fee,” Point-based Rewards Program, Instant Approval in Under 60 seconds
No Blackout Dates or Travel Restrictions, Use Points on Any Airline, Hotel, Car Rental, and More
So there it is, the Blue Family of credit cards from American Express, all fee-free, the way it should be.
This post was written on January 8, 2010
The problem with imposing new rules on credit card issuers is their ability to quickly circumvent them and come up with new ways to make money.
It’s quite evident if you look at what First Premier Bank, a subprime credit card issuer, has done recently to skirt the impending rule changes set to take effect on February 21, 2010 (Credit Card Bill of Rights).
The First Premier credit card typically comes with a minimum of $256 in fees during the first year for a $250 credit line, but because the new laws limit fees at 25 percent of a credit card’s total limit, it will be lowered.
Going forward, the bank will charge a $75 annual fee for a $300 credit line, but to make up for that lost profit, they’ve raised the APR from 9.9 percent to 79.9 percent.
That’s not a typo, it’s the highest APR tied to any credit card currently on the market, according to an industry analyst.
For cardholders with a $300 balance on the credit card, it equates to about $20 in monthly finance charges; assuming you pay $20 per month, you’d be looking at $315 in fees annually for a $300 credit line. Not a bad haul, eh?
First Premier is reportedly testing the new set-up to see how it works for them and their customers; the ultra-high APR is priced according to the “risk associated with this market.”
Even if they don’t stick to it, look out for similar tricks employed by credit card issuers to make up for any lost profit as a result of the rule changes.
Remember, the credit card issuers always win.
This post was written on December 22, 2009
By now, you’ve probably heard about credit card issuers paying customers to close their accounts in the wake of one of the worst credit collapses in history.
But the latest move by card issuers is quite the opposite; some are charging customers inactivity fees for dormant credit card accounts.
That’s right, if you fail to use your credit card for a certain period of time, you may be slapped with a fee (in the ballpark of $20) to keep it open.
Of course, it hardly seems worth paying it, given the fact that most credit card issuers do not charge inactivity fees.
However, some consumers have been led to believe that closing a credit card will do serious damage to their credit score, so they may hold off.
And though your credit score could fall as a result of a closed account, it probably won’t mean a whole lot if it’s a card you seldom use.
Additionally, there’s no reason you should pay a fee to keep your credit card open, regardless of the credit scoring impact.
If you feel you must keep it open, consider using the dormant card to pay a recurring monthly bill such as your gym membership or cell phone bill to avoid the inactivity fee.
Remember, the older the card account, the more value it has in terms of credit scoring, so don’t fret about closing a newer credit card.
And if you’ve got plenty of solid credit history, the “damage” to your score will likely be minimal if at all negative (Should I close my credit card account?).
Tip: Keep an eye out for changes to your credit card terms as issuers look to charge new fees to offset the impact of the recently passed Credit Card Bills of Rights.
This post was written on December 15, 2009
Consumer credit question: “Are credit cards bad?”
Well, an article in the Baltimore Sun pointed out that consumers who use credit cards instead of cash spend more.
Specifically, the paper highlighted a recent study of fast-food restaurants, which revealed that customers using credit cards spent 50-100% more than those paying with cash.
While the general idea isn’t a huge surprise, it did make me think about the far-reaching implications of credit card use.
I’ll admit I never thought I’d eat more when paying by credit card, but if the study says it’s true, it must be…so yes, credit cards can contribute to your weight problem.
When you pay with cash, you scrutinize the price of whatever it is you’re interested in buying.
There’s also the off chance you won’t have enough money to make the aforementioned purchase, so that could be a limiting factor as well (in a good way).
When you use a credit card, often times you just ballpark the amount and make the purchase with much less thought; you also don’t have much of a spending limit, assuming you’re not out there charging up thousands of dollars in one sitting.
Conversely, when you actually see the cash leaving your person, it can be a little more profound, to the point where you might hold back.
Along the whole fast-food line, I also got to thinking about nights out, where the drinks seem to pile up.
If you use a credit card instead of cash, there’s probably a good chance you’ll consume a few more beverages, which would not only cost more money, but could come with unintended consequences.
So I will concede that spending (and bad decisions) may go up with credit card use, which could lead to weight gain or worse, financial ruin, but I would hesitate to refer to them as inherently “bad,” assuming you’re a responsible consumer.
Personally, I still appreciate credit cards for their convenience, safety, cash rewards, credit-building capability, flexibility, and nowadays, necessity.
This post was written on December 7, 2009
Another sign of the times folks…
This year, the Salvation Army red kettles, often situated outside of department stores and supermarkets during the holiday season, will accept credit cards as a form of payment.
No longer can you use the excuse, “I don’t have any cash on me, just my credit cards.”
Many of the signature red collection kettles will now be outfitted with credit card machines that give donors the option to specify an amount and receive a paper receipt in return.
That’s handy for keeping track of donations for tax purposes, and it may even lead to more money for the charitable organization.
The Salvation Army’s marketing director said the average credit card donation was a staggering $14, compared to just $2 for cash donations.
What a difference plastic makes…
Credit card issuers that receive interchange fees are also likely to profit from the increased use of credit cards, which now seem to be accepted nearly everywhere, from parking meters to valet and beyond.
The Salvation Army said the credit card transactions are being handled by a reputable third-party company and are completely safe.
It’s unclear if both American Express and Discover, as well as Visa/MasterCard-branded credit cards are accepted.
(photo: justinlai)
This post was written on November 30, 2009
