Therefore, it makes perfect sense to participate in this exciting activity. But unfortunately, most people still think, and this is nothing more than a perception, that if you like shopping online, you have to have a credit card in order to do that.

Moreover, some people who have a credit card already are scared to give out their credit card information over the net. I think those people may have never read their credit card’s terms and conditions.

And here is why I think so. These days, all credit cards issuers offer unconditional protection against unauthorized charges. You are simply not responsible in any way if this happens to you.

Knowing about credit card unauthorized charge protection, most people assume that in order to be protected, you have to get a credit card.

As you might guess, this is not true. Actually, it was true ten years ago. However, now we have so many ways to shop online without any worries about losing our money.

Let’s take a look at online payment companies such as PayPal, and a comparatively young Google service called Google Check Out.

Both services use your checking account to provide your payments over the Internet.

And both services guarantee your account against unauthorized charges and account hijacking. You might want to take a look at Google Checkout and PayPal policies for your information.

But, the simplest and I think the most reliable way is to use your checking account Visa card. Yes, you’ve got it right. Most of the banks give their customers a check card with a Visa or MasterCard logo on it.

For the merchant accepting a card, whether it is online or offline, this card is considered a regular credit card.

The question is, what happens if someone makes an unauthorized transaction or simply transfers all your money from your checking account?

The only way to figure it out is to talk to your bank representative and get an account agreement from them.

For instance, my bank account agreement states that “… you are generally protected from all liability for unauthorized use of any of your Check Cards … (including purchases made over the phone or online).” This agreement clause is called “Zero Liability for All Transactions.”

Therefore, all my check card online transactions are protected the same way as any other Visa or MasterCard credit card.

And if you still feel uneasy using your checking account card, you might want to open another free checking account and deposit a small amount of money that you are comfortable risking for online transactions.

And my point is: The absence of a credit card should not prevent you from taking advantage of online shopping.

You can use online payment companies or checking account cards, enjoying all the benefits of credit card customer liability protection.

And finally the Federal Reserve Board, in a joint effort with the National Credit Union Administration and the Office of Thrift Supervision, has come up with rules on unfair credit card practices. As Federal Reserve Chairman Ben S. Bernanke said in a statement, “The revised rules represent the most comprehensive and sweeping reforms ever adopted by the Board for credit card accounts.”

Let’s take a brief look at how “sweeping” those reforms really are.

“Time to Make Payments. The final rule prohibits banks from treating a payment
as late for any purpose unless the bank provides a reasonable amount of time for
the consumer to make that payment. The rule provides a safe harbor for banks
that send periodic statements at least 21 days prior to the payment due date.”

I have not heard of any credit card holder who has been late with their payment because the account statement was received too late. Late payments usually happen because of procrastination or a bank’s prolonged period of applying payments to the balance.

“Allocation of Payments. When different annual percentage rates (APRs) apply to
different balances on a credit card account (for example, purchases, balance
transfers, cash advances), the final rule requires banks to allocate payments
exceeding the minimum payment to the balance with the highest rate first or pro
rata among all of the balances.”

This seems to be a good one, but looking more attentively you can see that it works in favor of the credit card industry. Why would they allocate only the amount exceeding the minimum payment to the balance with the highest rate? Why not the whole payment? And, why “pro rata” among all the balances? Buy the way, “pro rata” means “proportionally.”

“Increasing Interest Rates. The final rule requires banks to disclose at account
opening all interest rates that will apply to the account and prohibits increases in
those rates, except in certain circumstances. First, if a rate disclosed at account
opening expires after a specified period of time, banks may apply an increased
rate that was also disclosed at account opening. Second, banks may increase a
rate due to the operation of an index (in other words, the rate is a variable rate).
Third, after the first year, banks may increase a rate for new transactions only
after complying with the 45-day advance notice requirement in Regulation Z.
Fourth, banks may increase a rate if the minimum payment is received more than
30 days after the due date.”

This is the most progressive clause in all of the regulation. It still allows banks to increase their interest rates for any reason, but at least they can’t do it for the whole card balance, and they have to give you 45-days advance notice. At least you can find more attractive financing during that period.

“Two-Cycle Billing. The final rule prohibits banks from calculating interest using
a method referred to as “two-cycle billing.” Under this method, when a consumer
pays the entire account balance one month, but does not do so the following
month, the bank calculates interest for the second month using the account
balance for days in the previous billing cycle as well as the current cycle.”

This one looks good, but it does not prohibit banks from inventing another calculating method that probably would be even more customer discriminatory. And an eighteen month period before the rules will be implemented is more than enough time to invent something better.

The rest of the new rules are describing regulations on format and content of credit card applications and solicitations, including account opening and periodic statement disclosures. This would definitely make the customer a better informed person; however, there is nothing really revolutionary there.

What looks really ironic to me is an effective APR clause. Here it is:

“Effective APR. The requirement to disclose an “effective annual
percentage rate” is eliminated due to the lack of consumer understanding
of this term. New requirements to disclose interest and fee totals for the
month and year-to-date should more effectively inform consumers of the
total cost of credit.”

Does that mean as customers we are not intelligent enough to understand this term, or does it simply not look good for the banks’ advertisements to disclose this term? I think the second is true.

The new card rules also briefly touched the problem of the “universal default,” but it seems it did not make it to the actual rules. I think that is because of the existence of The Universal Default Prohibition Act of 2007, which is addressing this issue already but seems to be not really enforced.

In my opinion new credit card rules, while they make banks be more open and “user friendly,” barely scratch the surface of the problem. The main problem, I think, is that we pay banks ten to twenty times more for the right to use financial resources they are getting way cheaper. What are we actually paying for? Are we paying for the piece of plastic or for the imaginatively necessary service?

And even these half-way rules make banks really upset. They are projected to lose several billion dollars due to the implication of the new rules, which means that we – the customers – should compensate from our pocket, becoming the subject of new schemes, maybe higher rates, and possibly additional difficulties in getting a credit card.

How Gift Credit Cards Work

Gift cards are actually prepaid credit cards by their financial nature. The only small difference is that most visa debit cards or prepaid cards allow you to add additional dollar amounts when your balance is spent. But the gift cards usually have an expiration date, or they expire as soon as the card’s balance is exhausted.

Gift credit cards look just like any regular credit card. They carry the Visa, MasterCard, or Discover logo and are accepted everywhere regular credit cards are accepted. The only thing you have to remember to tell your gift recipient is that these cards do not work when the merchant puts a “hold” on the estimated amount of your purchase.

That simply means that you can’t use a visa gift card to rent a car, make a hotel reservation, or make a purchase of an airfare. If you would like to use your card for these purchases, you can start by booking with your regular credit card and make the final payment with your gift card.

Most Popular Gift Credit Cards and How to Get Them

I would say the most popular gift credit cards are DeluxeCard Visa Gift Card, Visa Gift Card, American Express Gift Card, MasterCard Gift Card, Discover Gift Card, and Compass Gift Cards.

It is easy to get the card because it doesn’t require going through the approval or credit check process. Most cards can be simply purchased from the designated retail locations, online, or by phone. Your card recipient has to activate the card as soon as it’s received.

A Word of Caution

And if you decide to give the perfect gift in the form of a visa gift card, please make sure you understand how it works and what costs and liabilities are involved.

On top of the charge for the card purchase, most gift card issuers will charge you numerous fees such as a processing fee, a monthly maintenance fee, a card closing or replacement fee, a customer service phone call fee, etc.

Therefore, to avoid your gift recipient’s disappointment, make sure you have purchased the card for the gift amount plus all applicable fees; otherwise, she/he doesn’t get the face value of the card.

And now that you’ve learned about little gift cards pitfalls, you are ready to go to the card issuer website, check the card’s terms and conditions, and make someone a little happier.

There are numerous prepaid credit card brands on the market. Let me mention some of them here: Account Now Prepaid Visa Card, Exact Prepaid MasterCard, SilverCard Prepaid MasterCard, All-Access Prepaid Visa and MasterCard. The list goes on and on.

Why Would I Use a Reloadable Credit Card?

In spite of being a strong opponent of credit card use, I am trying to be objective in presenting the characteristics of credit card products. So, what would justify the use of a visa reloadable prepaid card?

Because prepaid credit cards can be used everywhere regular credit cards are accepted; it is safer to carry plastic than cash; it is faster and more convenient paying by credit card over the phone or over the Internet; there is a much wider selection of what you can get with a credit card than what you’d be able to get paying cash, etc.

All these are great benefits; however, for me – if I would not be able to use a regular bank account – I would value the following features most:

• no liability for unauthorized transactions
• purchase warranty extensions
• ability to charge back if necessary
• no credit check to get a card

How the Prepaid Card Works

Any reloadable prepaid credit card looks just like a regular Visa or MasterCard and is accepted at any place where regular credit cards are accepted, including online and over the phone transactions. Before paying with the card, you have to load money onto it. And it can be done by adding cash, using direct deposit, or transferring money from your checking account.

Where You Can Get a Reloadable Card

Some prepaid credit cards can simply be bought at retail locations, but most of the credit card issuers would require you to go through the application process online or using the bank’s toll free phone number.

Here are some online places where you can get the card:

Exact Prepaid MasterCard
AccountNow Prepaid Visa Card

What to Pay Attention to When You Sign Up

As you may guess, most of the cards have numerous fees, including an activation fee, a cancellation fee, a transaction fee, a cash advance fee, a statement copy fee, the list goes on and on.

Therefore, the first goal would be to eliminate those fees. And it can be done by choosing the cards that offer zero fees if you use direct deposit to load you card. Direct deposit simply means you ask your employer to transfer your wages to the card over an electronic transfer.

Personally, I have used direct deposit for years to transfer my wages to my checking account, and you can do it too with your cash card.

Make sure the card has no overdraft fees, no late fees, and no liability for unauthorized transactions or for a lost or stolen card.

And if you search more, you may even find cards that offer a loan option and an ability to use the card to build or rebuild your credit history.

Overall, a reloadable card can be a good financial tool if you understand how it works and make an educated decision in choosing the right card for your particular situation.

Another important thing to keep in mind is the way banks calculate your balance on the card. There are several computational methods, and banks usually use those that are not in the debtor’s favor.

Here are the most popular ones:

Average Daily Balances Including New Transactions
Using this method, banks add up your balance from each day and then divide the total by the number of days in the billing period. They deduct payments and credits and include new transactions into the calculation.

This method is the most common and you can safely accept it if all other requirements for the card are what you are looking for.

Two-Cycle Average Daily Balance Including New Transactions
This method would be applied by some banks if you did not pay your previous balance in full. Two-cycle average simply means that the bank will add the previous billing cycle financial charges to the current billing cycle charges, which will increase the average daily balance.

I would recommend avoiding a card which implements this method, even if it offers a very attractive APR.

Adjusted Balance
This method takes your balance at the beginning of the billing period and subtracts all credits and payments. The interest is charged on the remaining balance. New transactions are usually not included.

This would be the most preferable calculation method for the cardholder but unfortunately is seen very rarely these days.

I know it is boring, but that is what we have to know to take advantage of the cards rather than becoming a victim of them.

Now let me show you how to calculate your real or effective APR on your current credit card. By saying “real” or “effective,” I mean the annual percentage rate you are actually paying for the credit, not that advertised APR you see when you get a credit card offer.

How To Calculate Your Current Card APR

This is pretty easy. Get your last statement in front of you and do the following:

Financial Charge / New Balance * 12 * 100 = Effective APR
For example, your financial charge is $12.50, and your new balance is $1956.12.

$12.50 / $1956.12 * 12 * 100 = 7.67% is your effective credit card APR.

How To Calculate Your Credit Card Pre-approved Offer APR

Pre-approved credit card offers can be very enticing; however, my advice is not to let anyone convert you into an impulsive buyer, especially with finance-related long term products. If you decide that you need a card and you want to evaluate an offer, make sure you read the terms and conditions first, including the card’s fine print.

It is kind of funny or may be even unethical, but the most important information is in the fine print. Anyway, to calculate an APR, we need to clearly see and write down all card fees. These can include an annual fee, a card member fee, a balance transfer fee, a minimum finance charge, etc.

After you’ve found out all the credit card fees and charges, it is time to evaluate them according to your plans for this particular card.

Let’s say you are looking for a card with 0% APR on balance transfers to get your $3,000 balance off the high interest credit card. In this case, a direct question related to the APR is: What balance transfer fee is this card charging, if any? Usually it is around 3%, without a maximum restriction.

Let’s make our calculations.

1. Balance Transfer Fee + All Other Charges * 12 Months = Total Fees
2. Total Fees * 100 / Balance Amount = Effective APR

Balance Transfer Fee = $3,000 * 3% = $90
Minimum Finance Charge = $0.50

1. $90 + $0.50 * 12 months = $96
2. $96 * 100 / $3000 = 3.2%

As you can see, your effective APR in this case is 3.2%, not what you might think when you’ve seen a big 0% APR printed on the offer.

It is not rocket science to calculate your credit card APR, and it requires almost no effort to evaluate a credit card offer. If you do it the proper way, you will get the best card for your needs without any surprises in the future.

Your Effective APR

The first important thing to know about a credit card APR is that the advertised APR you see on a card’s pre-approved offer is always lower than the actual percentage rate you have to pay. And here is why.

All credit card issuers always give us APR (annual percentage rate) information, and it is usually calculated without taking into account what is called compound interest. That means the actual interest paid will be larger than the bank is proposing.

If banks would be completely honest with customers, they should be talking about APY  (annual percentage yield), not APR. That is what we actually pay to the bank when we use credit card money. We pay compound interest, which brings extra cost to us and extra profit to the banks.

Grace Period

This is the amount of time you have after your first purchase to pay your balance off without paying any interest on the credit amount. The banks usually offer a grace period of 20 to 30 days, but shorter ones are becoming more and more common these days. Some banks are generous enough to give a grace period on all new purchases, but others will include your new purchases into the balance immediately.

Your credit card grace period and effective APR are both very important points to look at when you are evaluating a credit card offer, or if you decide to look at where you stand with your current credit card.

Another important thing you should not overlook is how the banks calculate your balance and how to verify what your effective APR actually is.

Read on …

All of the cards provide pretty much same service and benefits, including the ability to pay your account online, no annual fee, $0 liability on unauthorized charges, and the ability to use the credit card after hours customer service.

I’d say that these cards are pretty regular cards that you see a lot on the market. The only one that may be of interest to us is the Phillips 66-Conoco-76 MasterCard.

The main benefit of the card is that it allows you to earn 4% rebates on Phillips 66, Conoco, and 76 station purchases. Of course to get those rebates you have to buy Phillips, Conoco, and 76 branded gasolines only. You won’t be able to redeem your rebates to get cash, but instead all your rebates will be automatically credited to your future Phillips 66, Conoco, and 76 purchases.

Keep in mind that your total monthly rebate amount can’t be more than $50, which greatly restricts your ability to save.

Another benefit of the card is a 0% APR balance transfer for 6 months from the date of the first balance transfer.

The other options of the card are not impressive at all. In terms of APR for purchases there are two options available. They are 11.99% variable APR for Platinum, and 15.99% variable for the regular Phillips 66 card.  Cash advance and default APRs are 19.99% and 27.99% respectfully.

There is also a late fee of $39 and an over limit fee of $35 applicable to the account.

How would I approach the question of whether or not I should get this card?
First, I’d determine how crucial it is for me to have a 4% gas discount and what actual dollar amount I would save, as well as if there are nearby gas stations that sell Phillips – Conoco brands. If this was a positive answer, I’d get the card and use it purely for my Phillips 66, Conoco, and 76 brand purchases.

I’d never carry a balance on the card. Why? The answer is obvious. If I carried a balance, the APR I’d have to pay would effectively eliminate most of my gas savings on the card. And of course I’d avoid being late with my payment by any means, because if I was late, I’d be purchasing even more expensive gas than I would have without the card.

The point I am trying to make is this: you should carefully read the terms and conditions of the card, clearly understand your financial goals, and calculate what benefits this particular card can bring to you. As soon as you see the clear picture, you will be ready to make an educated decision on the card and be effective in using it to your benefit.

We spent a great chunk of our time watching all of the machine’s features, which were very sophisticated, and listening to a very long  speech from the salesman about the life that can’t be lived without having this machine in your home.

After two or three hours, all members of the group who did not own the machine bought it in spite of the outrageous several thousand dollar price tag.

My problem was, though I admired all the machine’s features, I did not have any plans to buy it. So, the salesman directed all his power at me and my wife. When all his arguments were exhausted, he decided to use one of the most powerful and very offensive ones as his last resort.

Looking right in my eyes he said: Don’t you think that any man who loves his wife would buy it?

Whenever you are receiving a letter from the bank you have no knowledge about which says: You are pre-approved – you are in the same situation as I was at that presentation. You have no plans to get another credit card. You did not ask the unknown bank to pre-approve you. You did not ask them to dig through your credit history.

But they desperately want you to sign up for their credit card. They want to convert you into a rushed, impulsive buying mood. That is what all salesmen are always trying to – get the sale.

When you are in an impulsive buying mood, you can’t clearly see what you are getting into. Is it good to have 0% APR for next nine months? Maybe … It depends. To know for sure, you would need to evaluate the card terms and conditions. And even if it looks really good, it does not mean that there is no better card on the market at this time.

What I am trying to convey is if you decided to get a new credit card you, and only you, should be the initiator of a credit card search, and only you should make the decision whether to apply or reject, not the bank.

Just like you would choose whether to buy any other important thing for yourself: a car, furniture, a dishwasher, or refrigerator, you owe it to yourself to use this same approach when applying for a credit card.

I think the most important thing in the card searching process is to clearly understand what the future purpose for the card is. Are you going to consolidate several of your high interest credit cards? Are you looking for a rewards card with the highest possible air miles or the highest cash rewards? Are you looking for ways to save on gas? Maybe for the most possible travel benefits or lowest APR for your everyday shopping?

Now you can see why I was not sure whether 0% APR for the first nine months would be good for you. That’s because if you are looking for the highest air mile rewards, then 0% APR on balance transfers doesn’t mean anything for you.

Please, never use one card for many different purposes. Always have a separate card for each particular financial goal you’ve decided to reach.

In my next several postings I am going to explain how to evaluate credit card offers for different purposes, how to choose a balance transfer card or a rewards card, and how to calculate whether any particular card is worthy of your effort in getting it.

P.S. I did not buy the vacuum machine, though …

The program is based on bonus points where you can earn cash back rewards for every dollar you spend. You can redeem your express rewards program bonus points many different ways. It can be cash, merchandise from participating partners, air miles, a special certificate, or a hotel package.

You can transfer your reward program account points to any of 12 frequent flyer programs including US Airways, Delta Air Lines, and Continental Airlines; or to 5 frequent guest programs represented by Hilton, Priority Club, and Starwood. The merchant program partners are FTD.com, Gap, The Sharper Image, etc. Your points can be redeemed for car rental with companies such as Avis, Hertz, and Budget.

If you’d like to exchange your american express card points for cash, you can get $100 for 20,000 points.  In other words, you have to spend $20,000 to get a return of 0.5% on the amount.

The positive side is your points have no expiration date, but the negative is you will stop accruing points if you are late with your payment. However, your forfeited points can be reinstalled for the symbolic fee of $29.

If for some reason the american express points are desperately needed, you can purchase them at the rate of $25 per 1000 points.

Most credit cards participating in the membership rewards program offer no pre-set spending limit and no interest rate on the card, meaning you have to pay in full each month. The annual fee on cards such as the Platinum Card, Preferred Rewards Gold Card, and Preferred Rewards Green Card range from $45 to $450. Yes, you’ve got it right; it is a $450 annual fee on the American Express Platinum Card.

Personally, I’d never use a card with a $450 annual fee; however, for some people the perks this card offers may be irresistible. Among these are lost or damaged baggage coverage, guaranteed room reservation, 24/7 roadside assistance, and a dedicated team of travel consultants.

There are conditions for the membership, though. To enroll in the program, your card account must be in good standing and be opened in one of the American Express operation centers.

In the case of regular apr credit needed, you can be approved in less than 60 seconds for the Blue American Express with no annual fee and 0% apr for the first 12 months. After 12 months, a regular apr of 11.49%, 13.49%, 16.49%, or 18.49% will apply, depending on the review of your credit history.

The regular APRs are subject to change as they are calculated monthly by adding 6.99% - 13.99% to the prime rate, based on your credit history evaluation.

There is also an over limit fee of up to $38 and a late fee of $35 attached to the card.

My impression is that most of the cards underwritten by amex offer above average APR and fees attached to the card. The membership rewards program is attractive at first glance, but may not be as advantageous as it seems.

However, every financial situation is different and your requirements of the card may be completely different than those I’ve based my opinion on. Therefore, take the time to carefully read the terms and conditions, get more information about the membership program, and use your calculator to make sure you are taking advantage of the card, and not vice versa.

I would say there are four major types: prepaid rechargeable gas cards, gas gift cards, regular gas credit cards, and discounted prepaid gas cards.

The most desirable card is obviously the discounted prepaid gas card. And it is understandable, since this desire purely reflects our wish to pay less and get more. Unfortunately, it seems that discounted gas cards are non-existent. At least legitimate ones.

Several companies that have offered discounted gas cards recently have turned out to be a scam. And they did not have a shortage of clients. Currently, you can find many companies that offer discounted prepaid cards with a membership, claiming that you can save 40% or 20% on gas.

Personally, I don’t like spending time figuring out whether these offers are legitimate; however, simple logic and common sense make me think that this business model can not be profitable. Take into account that these companies are also trying to convert their members into company distributors, promising them more recession proof business. I’d stay away from the discounted gas they offer.

Most of the famous companies such as Arco, BP/Amoco, Chevron, Citgo, Exxon/Mobil, Shell, Speedway/SuperAmerica, and Sunoco offer a wide variety of gas gift cards. Usually, there is no gas discount on these cards, and moreover, if you buy a lower card denomination, your cost is even higher than if you had just paid cash at the gas station.

Some companies offer a Visa prepaid gas card, which by its nature is very close to a gas gift card, and the only difference is you can reload the card with more money every time your balance is exhausted. There is no savings on gas with these cards either.

OK, it is sad, but there is no free gas or even decent discounts on those prepaid cards. However, you still can save on gas if you go with a regular credit card that offers a discount from 3% to 10% on gas purchases. Some examples of such cards are Chase Perfect MasterCard, Chevron and Texaco Visa card, or Capital One No Hassle Points.

Those cards can be really helpful on your gas savings, and the only thing that can’t be overemphasized enough is to make sure you clearly understand what the fine print says and use the card according to its purpose.