Thursday, May 22, 2008

I'm shopping for a new credit card

I have been using Citibank American Airline mileage cards for a really long time. However, I just got a major reality check. Airline mileage points are not what it use to be. I tried to use the points to fly to Seattle. It was impossible to get anything reasonable. Even with anytime upgrade (which is twice the mileage points) The best they could do was fly from LA to Chicago to Seattle which added 6 extra hours to the trip. Crazy. Someway, somehow, someday I'll use up my mileage points but I'm NOT going to collect points any more and I'm not going to pay the annual fee for this credit card.

So, I'm shopping for a new credit card. Lots of sites out there

Here is my favorite. Just a simple list, continuously edited and updated by other users.

Where I found this interesting card.
Put $10K into the savings account to earn 1.4% cash back on the purchases. 1.4% cash back is very good consider most card only provide 1% so this card has 40% better rate of return. However, their savings annual interest rate is 2.75% compared to 3% in my INGDirect savings account.

I fire up MS Excel and use Goal Seek feature. I found that I need to spend $6,500 per year to break even if I move my money and use this card instead of going with another basic card that gives 1% cash back.

Savings $10,000
2.75% 3.00%
$ 275.00 $ 300.00 $ (25.00)

Cash back $6,250
1.40% 1.00%
$ 87.50 $ 62.50 $ 25.00

Is the card worth the hassle of moving my money so I can earn a highly cash back rate? Clearly not. But I'm glad that I took few minutes to run the number.

Marketer are smart. They know how to create a package to make the products more interesting. It's genius to package a savings account and a credit card together and make it sound good. However, it is up to the smart consumers to understand then undo the math to figure out the actual cost and benefit.

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