October 2, 2022

Low Rate Credit Cards That Make Sense

Good Deal

Good Deal

Make Your Credit Card Work For You

Many consumers with impeccable credit have seen huge rate and fee increases imposed on them recently by the major credit card companies – see Pay Back Time For Credit Card Companies.

There are many well run, lesser known card issuers who lent responsibly and do not have to charge exorbitant rates to cover large credit losses.   Many of these card issuers have tougher underwriting standards but their rates reflect the lower credit risk of customers that they approve.    Many of these card issuers also offer substantial benefits to their customers in the form of cash rebates or travel miles.

If you have great credit and are annoyed by the manner in which your current card issuer has treated you, it is certainly worth the effort to see what the competition is offering.  The new credit card legislation restricts some of the more obnoxious tactics employed by many large card issuers but does not do much to restrict the interest rate or fees  charged to A+ customers who deserve better treatment.

The Credit Card Good Guys

Many smaller banks and credit unions are offering some of the better deals in the credit card industry.  Since credit cards are a basic necessity for most of us, it’s worth shopping around for the best deals.  Here’s a sampling, courtesy of Kiplinger.

Credit Cards You’ll Love

Pentagon Federal Credit Union’s Visa Platinum Rewards card. There is no annual fee, and you get a 5% rebate on gas, 2% on groceries and 1.25% on everything else.

Visa Classic card from Pulaski Bank & Trust (soon to be known as Iberia Bank), in Little Rock, Ark. The 0% balance-transfer offer is good for six billing cycles, and there is no transfer fee.

The BP Visa gas card earns a 5% rebate on gas, 2% on travel and dining, and 1% on everything else. Plus, you get double rebates for the first 60 days. We also like the Simmons First Visa Platinum Travel Reward card. You earn one point for each dollar spent; it takes 22,000 points for a plane ticket anywhere in the 48 contiguous states.

Despite a $35 annual fee, for a low rate it’s tough to beat Iberia’s Visa Classic cards, with a purchase rate fixed at 6.5%, compared with a national average of about 13%. Farm Bureau Bank’s no-fee Platinum MasterCard currently carries a low, 5.24% variable rate.

For each $2,500 you charge on your Wells Fargo Home Rebate card, the bank applies 1% of that amount to the principal of your Wells Fargo mortgage. Fidelity Retirement Rewards American Express card gives Fidelity account holders a 2% rebate that can be deposited in any Fidelity-managed individual retirement account. The Schwab Bank Invest First Visa card sweeps a 2% rebate into your Schwab IRA or brokerage account.

The new Upromise World MasterCard deposits a 1% rebate on all purchases in your Upromise college-savings account, then adds another 10% rebate on spendng at drugstores and groceries.  Fidelity’s 529 College Rewards American Express card earns a 2% rebate that can go into any Fidelity-managed 529 account.

Rampant Corruption Symbol Of Empire’s Decline

Illinois Governor A National Disgrace

The latest example of horrendous corruption in government was the arrest of Illinois Gov. Rod Blagojevich.   Among the many charges brought against him by Federal prosecutors was that the Governor was attempting to sell a senate vacancy to the highest bidder.   Given the level of corruption we have witnessed in this country lately, I think it would be more appropriate for a vacant seat to be filled by an election rather than appointment.  The temptation by politicians to profit from their positions of power is obviously too great a temptation for many of them.

This latest brazen example of an elected public official betraying the power of his office and the trust of his employers (the voters) is all too common.  Even when captured with indisputable video and audio proof of their crimes, these criminal politicians have the audacity to deny their guilt and then attempt to continue in office as if nothing had happened.  The Illinois Governor is symptomatic of a society that has lost its moral compass.  Respect for the law is what makes a society civil.  When our highest elected officials commit criminal acts as a matter of routine it sets an example too easily followed by others.

Not Just An Isolated Example – Connecticut Governor Rowland Sent To Jail

Former Gov. John G. Rowland was sentenced to a year in prison and four months of house arrest Friday for selling his office in a corruption scandal.

Rowland, 47, pleaded guilty in December to a corruption charge, admitting that he sold his office for more than $100,000 in chartered trips to Las Vegas, vacations in Vermont and Florida, and improvements at his lakeside cottage. He resigned last summer amid a gathering drive to impeach him.

Through it all, Rowland maintained that he never did anything wrong and predicted the corruption investigation would never touch him.Rowland will become one of more than a dozen former governors to serve prison time and only the second in New England. The first was former Rhode Island Gov. Edward D. DiPrete, who was sentenced to a year in prison in 1998 for bribery, extortion and racketeering.

Rowland will become one of more than a dozen former governors to serve prison time and only the second in New England. The first was former Rhode Island Gov. Edward D. DiPrete, who was sentenced to a year in prison in 1998 for bribery, extortion and racketeering.

The real injustice here is that the Governor was subsequently let out of jail after serving only 10 months and then proceeded to get a high paying job with no difficulty.  Those without political connections have served far more time for far less crimes.  Obtaining a high paying job straight out of prison would seem to indicate that the Governor can still command a high price for his connections and past favors to various interest groups.

New York Governor Elliot Spitzer Resigns After Prostitution Charges

The former crime fighting district attorney, ex Governor later had the charges dropped.  Apparently the Governor still has friends in the law enforcement community.

Alaska Senator Ted Stevens Guilty On 7 Felony Counts- Senator Maintains His Innocence

Sen. Ted Stevens of Alaska, one of Congress’s most powerful Republicans, was convicted yesterday of lying on financial disclosure forms to conceal his receipt of gifts and expensive renovations to his house, just eight days before he faces voters in a tight reelection contest.

The 84-year-old lawmaker, the first sitting U.S. senator to go on trial in more than two decades, sat quietly as a jury foreman in federal court read the verdict after less than a day of deliberations: guilty on seven felony counts, each with a maximum penalty of five years in prison. The senator, who probably will face a less severe penalty under federal sentencing guidelines, left the courtroom without answering reporters’ questions.

In a statement issued by his office, Stevens maintained his innocence, accused Justice Department lawyers of “repeated instances of prosecutorial misconduct” and vowed to fight for reelection to a seventh full term.

This country’s pattern of civil and fiscal decline echoes the warnings issued by David Walker, of the Peterson Foundation, an organization that has been trying to educate America about the fiscal emergency we face due to reckless borrowing.

Walker compares our nation’s fiscal morass to the one that helped topple the Roman Empire. In one speech he argued, “Rome fell for at least four reasons, and please listen carefully: A decline in moral values and political civility at home, an overconfident and overextended military, fiscal irresponsibility by the central government and inability to control one’s borders. Does that sound familiar?”

Is this democracy at its worst with a betrayal by our elected leaders, or is it a failure equally shared by both the voters and its elected leaders?

American Express – A Single Digit Stock?

Despite the horrendous 72% sell off in American Express this year, I would still not be a buyer at the recent price of $19 for the following reasons.

From my personal experience in the mortgage business, I have seen many people turn to their credit cards once the home equity cash out loans were no longer available to them.  The credit cards were used to maintain a now unsustainable life style or to bridge the gap between income and living expenses.  Now that credit card lines are being reduced or simply maxed out, the last option for many people is now closed.  Since AXP gets around half of their revenue from the fee charged to merchants when a credit card is used, this income is obviously going to see a reduction.

Moody’s recently cut AXP’s investment grade by one notch to A2 (still very respectable) but the trend is clear.  Moody’s is expecting the recent earnings decline at AXP to continue, especially in view of the broad economic weakness and overleveraged consumer.

The fact that AXP decided to request $3.5 billion in capital from the Treasury’s TARP fund also raises many red flags – if AXP wasn’t expecting further problems in its basic business they would not be requesting theses funds.  In any event, AXP needs to refinance approximately $24 billion of debt over the next year; if the credit card securitization window remains closed, AXP may be back in line very soon for another TARP injection.

AXP expanded its business during the peak of the credit boom, expanding their credit card loans by some $26 billion over the past 4 years – an increase of 68%.  Timing is everything and they definitely got this one wrong, possibly by assuming that an overextended credit card customer would simply pay off his unmanageable credit card debt with his next cash out mortgage refinance.  Unfortunately for AXP, the days of constantly borrowing more money to pay off past borrowings has come to a halt.

Also, extremely unfortunate for AXP is the consumer attitude that debt that cannot be easily paid off should be easily forgiven, either by the company that lent the money or the bankruptcy courts.  If AXP needs proof of this, they can check out the Bank of America, Citibank, JP Morgan etc loan modification programs for mortgages.  At a time when collarteralized debt is being forgiven, unsecured credit card debt will be easily walked away from as well, as evidenced by the 100,000 plus (and increasing) personal bankruptcy filings each month.  Overleveraged consumers forced to borrow for years to bridge the gap between incomes and expenses will no doubt have no trouble being approved for a Chapter 7 debt liquidation instead of the Chapter 13 payment workout resulting in zero recoveries for AXP on outstanding credit card debt.

If you apply conventional, historical valuation metrics to American Express, the stock looks ridiculously cheap.   Unfortunately, I don’t thinkthe present economic disaster is going to end anytime soon and if that is the case, AXP will be facing a bleak future not only in its future earnings but also in its ability to refinance their 6/1 leveraged balance sheet.