I just got a letter regarding a class-action lawsuit claiming that “Visa, MasterCard, their member banks, and Diners Club conspired to set and conceal markups and fees, typically of 1-3%, on foreign transactions.” I guess the companies settled, and “those persons who made a foreign transaction using a Visa-, MasterCard-, or Diners Club- branded credit, charge or debit card between February 1, 1996 and November 8, 2006 are members of the Settlement Damages Class.”

Don’t hold your breath for these settlement claims. They can take years to process. Just file a claim and hope for a nice surprise somewhere down the line.

I spent over a thousand dollars this year on foreign transactions, but I used my Capital One card, which didn’t charge me any exchange fees at all. See more in my post about the Best ATM or Credit Card For Foreign Travel?

This is a follow-up to my series on How To Make Money From 0% APR Balance Transfers, where I discuss borrowing from credit cards for over a $1,000 in profit last year. (If you’re curious about this, I highly recommend reading it first – It’s all carefully laid out, step-by-step.) Now, several people have already done this and were wondering what to do after the initial 0% period is up – Do you cancel the old card? Apply for another one right away? How do you keep the gravy train running?

First of all, do not cancel your existing cards. Why not?

Canceling won’t help your credit score, and can even hurt it. Once you’ve opened the account, closing it will not help. You could have 100 credit cards and still have a top credit score if you use them responsibly. I have over 15 cards and my scores are just fine.

The only time I ever cancel a card is when I reach the maximum amount of cards per issuer. (Added: I also cancel when faced with an annual fee that can’t be waived.) For example, Citibank allows three or four cards per person. If you want to open another one, they will make you close an existing account.

Your card has a credit line attached to it, which can hopefully be moved to another card. Let’s work from the examples I’ve already talked about in the previous steps. Let’s say you already have the Citi® Platinum Select® Visa Card®, you’ve made your money, paid it off, and the intro period is now over. Now it’s just a $10,000 line of credit just sitting there.

Now, you can close the Platinum card if they ask. It may hurt your score a bit, but the trade-off of getting a new card may be worth it.

You could also try for an automatic credit limit increase on your old line first before moving the lines over.

You could keep the card for it’s rewards perks. For example, the Discover More Card (another no fee 0% APR card) also has a rewards program where it offer 5% cash back on a specific category every quarter. Right now it has 5% back on hotels, airline tickets, and car rentals. Even though you might not have gotten this card for that reason alone, since you have it, why not use it?

Same thing with the Citi Professional Card with ThankYou Network, I got it for the bonus and 0% APR period, but I now use it for 3% back a restaurants. I even put a little sticker on it that says “Restaurants” so I remember.

You could be offered another 0% APR period later on. Sometimes if a card issuer notices inactivity on your card, they might try to lure you back with another low-rate offer.

When should you start applying for new cards? This depends on how your credit score is doing. The problem with credit scores is that they are a complex formula (hidden intentionally by FICO so you’ll buy their scores) and different people’s score react differently to the same event. But as very general rule of thumb, if you have more than your gross income level of credit card debt, it is going to be difficult to be approved for another card. For example, if you make $50k a year and have $50k of credit card debt, even if it is at 0% APR and you have it socked away safely in a savings account, it will be tough to get another card.

My suggestion? Wait until most or all of your current cards are paid off for a couple of months. Then, your low debt levels will be reflected in your credit report and your score will rebound. Then you can re-apply for more cards and start up again. If this is your first time around, you can use this period to confirm for yourself that all this stuff only hurts your credit score temporarily.

You may notice that I only have about $30,000 borrowed for profit. This is mainly on purpose, because at this level my credit score is still good enough to be approved for new cards (like this one). Others prefer to go all out, apply for a ton of cards, put off all new applications for a while, wait, and then go all out again. I have nothing against that, but I prefer my way because I am holding a steady but reasonable amount of debt with respect to income, and it doesn’t necessarily raise any big flags with card companies. To them, I’m just another consumer with some credit card debt. I like to keep this a low-stress activity. Once I start making more income, I’ll probably borrow more.

What if I run out of good cards to apply for?
You can have 3 or 4 Citi Cards and you can have 3 or 4 Discover Cards at at time. If you reach the max, just follow the example in the main post and move your limit to the new card, and close the old card. If the card is already at a low limit, just close it out and then apply. That’s 6-8 cards at a time, I’m pretty sure that’s enough for most people.

You can find several options with both no fees and 0% APR at my best no-fee balance transfer offers list, please refer back there for an updated rundown.

Finally, I know that at least Citibank let’s you have multiples of the same card. If you have a high enough limits, a 3% fee capped at $50 or $75 really isn’t that bad.

Armed with discipline and information, you should be able to consistently increase your credit limits and make money from credit card companies for many years to come. 😀

Skip To Another Part
I. Introduction and Warnings About 0% Balance Transfer Offers
II. Scouting For 0% Balance Transfer Offers
III. Application Tips and Getting Cash From 0% Balance Transfers
IV. Setup And Management of 0% APR Balance Transfers
V. Best Pre-Screened No Fee 0% APR Balance Transfer Offers

Back in my post Why You Shouldn?t Settle For a 1% Cashback Credit Card, commenter TW raised a good question:

Isn?t the best ?return? on credit card use found using a 0% on purchases card and put the money you would use to pay it off in an interest account (5.5% E-Loan account, etc.) instead of trying to use the best rewards bonus card where you?d need to pay off the monthly balance to avoid fees?

On one side, we have the interest earned off of “borrowing” at 0%. On the other side, you have plain cashback rebates. Which is better? This is a question I asked myself a couple of years ago, but due to the low interest rates back then it definitely wasn’t worth it. Now that ELoan Savings is offering 5.5% APY and other banks are close to that, I think I need to run the numbers again.

Calculations For Using 0% APR Purchases Card
First of all, you’ll need to find a new credit card with an introductory rate of 0% APR on purchases. To get an average picture, let’s say you spend an even $1,000 every month on it, or $12,000 annually (although this example would work for any dollar amount). Instead of paying the balance in full at the end of the month, you put it into an interest-bearing account. Let’s use 5.50% APY, although rates may rise (or fall) in the coming year.

Instead of nitpicking with grace periods and minimum payments, let’s say the bank interest earned is the same as taking the average, $6,000, for 12 months at 5.50% APY. This will give you a rough estimate of ~$330 in interest at the end of the year. Now, you have to pay taxes. Let’s use a 25% marginal rate.

$330 x 75% = $247.50

$247.50 earned on $12,000 of spending is 2.06% cash back.

Ok, 2%, not bad. If you spend more early on you’ll do better, if you spend more late in the year you’ll do worse.

This is the part I forgot initially – If you can get a card that gives you 0% APR on purchases and cashback, that rebate percentage can be stacked on top. Remember, cashback rebates are not taxable. So let’s say you get a card with 1% flat back on purchases, that would give you something in the neighborhood of 3% cash back.

Some other things that came to mind:

1. You need a high enough credit limit fully take advantage of your spending. If you spend $500 a month you’ll need a $6,000 limit, otherwise you’ll need another card.
2. Some people just don’t have the discipline to put away that money into a savings account every month. Don’t do this if this means you!
3. You’ll need to get a new 0% card every 12 months to keep this up. Given the fast-changing nature of credit card rewards programs anyways these days, I personally don’t really care.

Conclusion
Look like TW was right. Although you get 5%/6% back on certain cards in specific categories, if you are only using one card, you really can’t beat 3% back on all purchases. Finally, if you find a card with some introductory bonus cashback offers you can do even better.

Here are some cards that would work well with this idea:
Chase PerfectCard MasterCard – No annual fee, 0% APR on purchases for 12 months, 6% cashback on gas for first 90 days, 3% on gas after that, and 1% back on everything else. Rebates credit monthly directly to statement.

Discover Open Road Card – No annual fee, 0% APR on purchases for 12 months, 2% back on gas.

Chase Home Improvement Visa – No annual fee, 0% APR on purchases for 12 months, 3% back on home improvement purchases, 1% back on everything else. Free laser level with first purchase.

I am leaving out cards that have no-fee balance transfer offers, as it would be more profitable to max those out for the full 12 months via balance transfers.

If you have an MBNA credit card, you may have noticed that the credit card site is no more. When you try to log in, it says that your cards should be at BankofAmerica.com. But if you have certain co-branded cards like Fidelity ones, you can only access them at IBSNetAccess.com. My other MBNA cards were automatically merged into my BofA Online Banking.

There are a variety of reasons to get higher credit card limits, including improving your credit score by using a lower percentage of your available credit, and also the ability to get more free money from credit cards, and thus make more interest. Some people say there are disadvantages too, but it’s really easier to decrease your credit limits if somehow you need to.

Sometimes your issuer will automatically increase your limits without asking, like Citibank and MBNA. But many times you need to ask and it often involves a credit check. To be honest, I haven’t very aggressive recently in getting my credit limits as high as they could be. The only thing that I do, because it literally takes 5 seconds to do, is to occasionally request an instant credit limit increase online with Citibank. It doesn’t even hit you with a hard credit pull! Here’s how:
[Read more…]

Although I still like my Fidelity 529 College Rewards Card and its 2% back towards a 529 account, there are some hurdles like having to set up recurring deposits and dealing with potential tax issues. But that doesn’t mean you should settle for any of those 1% cashback cards everyone else is offering! The similar Fidelity Investments Rewards Card offers you the equivalent of 1.5% cash back on virtually everything with minimal hassle.

You get one point for each dollar you spend, and 5,000 points is the same as $75 payment deposit into an eligible Fidelity account, including taxable brokerage accounts and IRAs. The beauty is that Fidelity accounts have no annual maintenance fees, so if you don’t already have an account you can just keep the balance at $0 and transfer the money immediately back into your own bank account.

The only catch is that you need to open the account initially with at least $2,500, which you can withdraw right afterwards. But, if you have $10,000 available, you can get a separate $100 bonus for opening a taxable brokerage account (IRAs don’t count). You get the $100 in about 7 days after your deposit clears according to the terms, and then you can take all $10,100 back out.

Even if you already use another card that gives you higher than 1.5% – like the Citi Driver’s Edge Card (mentioned previously) or the HSBC Rewards Card that give you 5-6% back on gas, groceries, and drugstores, if you use them together (one card for gas/groc/drugs, this for everything else), you’ll have a great 1-2 combo.

There is a 0% APR offer attached to the card as well, but it has a 3% balance transfer fee with no cap, so you can easily do better elsewhere.