How to sort through credit card offers

September 30, 1994|By Andrew Leckey

The most recent sign that the apocalypse is upon us: Chevy Chase Bank of Maryland recently unveiled a Rolling Stones MasterCard emblazoned with the rock group's trademark "lips-with-protruding-tongue" emblem. Cardholders earn discounts on Rolling Stones merchandise and at participating music stores.

That, along with the myriad of card offers being stuffed in your mailbox each week, should convince you that card issuers desperately want your business. It's a saturated market.

This column has always maintained that it makes more sense to find a low-rate bank card than to chase after rebates and deals. You generally pay for a rebate program through a higher rate. Nonetheless, the powerful advertising campaigns behind the most innovative cards are irresistible to many consumers. Whether you choose to sign up or not, know what they're all about.

Here are the hottest card programs:

* The heavily advertised American Express Optima's True Grace Card (1-800-4-OPTIMA, or 1-800 467-8462) permits at least 25 interest-free days on all new purchases, rather than the traditional policy of eliminating the grace period if an account isn't paid in full. A fixed promotional rate of 7.9 percent is in effect for six months. This will later change to prime rate plus 8.75 percent. There's no annual fee so long as you make three charges per year. Otherwise, there's a $25 annual fee. The card is available to anyone, not just holders of an American Express card. It does not offer rebates and has no partner companies.

"The drawback to the Optima card is the fact it is accepted at only about one-third of the places Visa and MasterCard are accepted," said Robert McKinley, president of card-tracking RAM Research Corp. in Frederick.

* AT&T Universal Card "Something Extra" MasterCard and Visa (1-800-786-3131) lets card members earn points every month whetherthey spend money on new purchases or carry a balance. It is a two-year program open to all holders of the AT&T Universal Card. Participants earn one point for every dollar of their month-end balances. For long-distance calls made with the card, 10 points are earned for every dollar. Choose from 30 different rewards, including video rentals, a reduction in the card rate or free long-distance calling. Rewards start at 10,000 points. Card members receive 1,000 bonus points for enrolling. Annual fee is $20, waived if you transfer a balance of $1,000 or more from another card. There's a 25-day grace period if you pay off your balance.

* Chase CashBuilder Visa (1-800-AT-CHASE, or 1-800-2824273) is a cash reward program with an introductory rate of prime plus 0.65 percent for purchases made through May 31, 1995. After that date, it becomes prime plus 9.4 percent. Each month you charge more than $200, including cash advances, 1 percent of your charge total gets put into the reward plan. Ten percent of finance charges paid are put in the plan. When you reach $500, you're sent a check. If you don't reach that level, you're sent a check every three years. There's no annual fee and a 30-day grace period on payment if you pay off your balance. There are no partners.

"With both the AT&T and Chase cards, you're rewarded for carrying debt, and that is a real concern to us," said Ruth Susswein, executive director of the Bankcard Holders of America in McLean, Va., who said AT&T is doing a study of that aspect of its card.

* GE Rewards MasterCard (1-800-GE-REWARD, or 1-800437-3927) offers cash rebates on annual purchases up to $10,000 and provides discount coupons that can total more than $1,000. Rate is prime plus 8.9 percent, with no annual fee and a 25-day grace period when account is paid in full. Multitiered rebates range from 0.5 percent for spending up to $2,000, ratcheting up to 2 percent for spending from $6,001 to $10,000. You can earn a maximum of $140 cash back annually, with checks mailed each July. There are 41 partners, including retail stores, travel and entertainment.

"GE's rate is high," noted Ms. Susswein. "People who benefit from these programs are those who spend a lot and pay it off."

* The fast-growing GM MasterCard (1-800-8GM-CARD, or 1-800846-2273) puts 5 percent aside from any card transaction, which can go toward purchasing any GM car or truck, excluding Saturn. The limit is $500 per year, or $3,500 over seven years. You can go above the limit if you use any of the program's partners such as Mobil, Continental Airlines, Marriott, MCI or Alamo. A new partnership with participating GM dealers enables card members to receive an extra 5 percent reward if they pay for retail parts and service using the card. Rate is prime plus 10.4 percent, with no annual fee and a 25-day grace period if balance is paid in full.

* Ford Citibank Visa and MasterCard (1-800-374-7777) lets you earn a 5 percent rebate toward any Ford, Lincoln, Mercury or Jaguar. Limit is $3,500 in five years, or $700 a year. You can go over that limit by using partners Texaco and Hertz. Rate is prime plus 9.4 percent. Annual fee is $20, waived the first year. Each time the annual fee is paid, you receive a $50 rebate bonus. Grace period is 20 to 25 days on new purchases if you pay off your balance.

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