Your Credit Cards Guide

While summer doesn’t begin until late June, it already feels like it here in Texas. I don’t know about you, but I’m already dreaming of my summer vacation. It’s not planned yet, but I’m not too stressed out about it. I’ve been saving for a trip little by little every week, and have enough Continental OnePass miles to get me a round-trip ticket to pretty much anywhere the airline flies.

I don’t fly more than a few times a year. I have been accumulating the miles from traveling with Continental for years, but part of why I have so many miles is because I frequently use the Chase Continental MasterCard. I get a point for each dollar I spend, and double the points for each dollar I spend when buying a Continental flight.

I often use the card for regular purchases to get the miles and then pay off the balance right away. Like most airline cards, the issuer has partnered with vendors in every industry and gives you miles when you use the card to shop with them.

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The nomination of the director of the Consumer Financial Protection Bureau has turned into an existential question on the role of government in the private sector and drawn the sort of sharp words usually reserved for Medicare, immigration and social issues that are less, well, boring. This week has seen the most acrimonious debate yet.

Senate Republicans lobbed the first grenade in a letter to President Obama threatening to hold up all of his Senate nominations unless the CFPB’s governing structure changes. When the president and Democrats floated the idea of a recess appointment to bypass Senate confirmation, Republicans responded with a constitutionally and logistically shaky plan to prevent the Senate from going into recess. This, in turn, spurred more Democrats to call for a recess appointment.

Three House bills would fundamentally change the bureau’s structure. The first, sponsored by Rep. Spe

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Personal debt and bankruptcies often just affect one family. Business bankruptcies can affect anywhere from a handful to thousands of workers. But can you imagine how many millions of people will be impacted if the federal government defaults on its loans and maxes out its figurative credit cards?

The United States government just hit its debt ceiling this Monday, May 16. This means we have hit the limit for how much we are legally allowed to borrow, even from within government branches. For now, the government is using accounting gimmickry to stay at the ceiling without going over it, but Treasury Secretary Timothy Geithner says those tricks will only work until August.

The debt ceiling is a concept that doesn’t exist in other countries, which imply how much they’ll borrow by passing a budget that estimates how much they’ll receive in taxes and how much they’ll spend.

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Full disclosure: I am not the most objective observer when it comes to REI. They won my heart long ago, and while you can surely get cheaper outdoor gear elsewhere (steepandcheap.com has 50-90% off flash deals on outdoor gear), none of them has REI’s unparalleled return policy, they don’t have REI’s membership discounts, and their staff won’t ask you, months later, how that backpack they sold you worked out. While we usually don’t recommend store credit cards, the REI credit card is above and beyond: not only do you get member dividends, but the REI Visa gives an additional 5% back at REI plus 1% back elsewhere. And if you apply in May, you’ll get a $50 REI gift card. This is why they have such loyal customers.

REI memberships: don’t think, just get one

If you shop for outdoor gear with anything resembling regularity, REI is just about the best place to buy. It’s famous for its unconditional, no-questions-asked return policy: you can return your hiking boots a year later, and they’ll take it with a smile. Their staff is friendly, knowledgeable and approachable, and offers gear and clothing for almost every outdoor sport. I tried to return a painfully small (and painfully expensive) pair of shoes to a competitor who will remain nameless, only to be told, “This isn’t REI.” Lesson learned.

An REI membership earns 10% back on all purchases, for a start. Every March, members receive a dividend worth 10% of everything they bought from REI in past year, including sale items. You can spend the dividend at REI, or exchange it for cash after June. Members also get free shipping on online orders over $75 (through June 6^th, free shipping over $25). My favorite perk: many stores offer a members-only sale, once a month or quarter, where they sell returned items at a discount. If you can find gear that’s cosmetically damaged but otherwise fine, you’ll have saved a chunk of change.

Membership requires a $20 one-time fee. With the 10% dividend, you’ll break even if you spend $200 over the course of your lifetime (in REI terms, that’s nine-tenths of a climbing rope, a really good sleeping bag, or one downhill ski). Family members can also mooch off your membership too, free of charge. If you’re planning on buying even one big-ticket REI item, a membership is worth it.

The REI credit card: best for REI purchases and pretty good otherwise

Most of the time, we don’t recommend department store cards. They tend to have high APRs, sometimes don’t earn as many rewards as getting, say, the Chase Freedom or Discover Escape and shopping at the rewards-bearing Ultimate Rewards Mall or ShopDiscover, respectively. However, Chase offers only 3% rewards on REI.com buys, and ShopDiscover doesn’t offer rewards at all.

REI offers a pretty good rewards program, particularly because it still pays dividends on online and REI Outlet buys. On top of the 10% member discount, the REI Visa shells out 5% on store purchases and 1% everywhere else. Our one complaint is that rewards are paid out once a year, along with the member dividend. If you get your card in May, and make a purchase before June 30^th, you’ll receive a $50 REI gift card.

Another concern we have with department store cards is that they’re a hit to your credit score, and they’re often marketed to those with lower FICO scores. The REI Visa Signature and Platinum, on the other hand, are available only to those with higher scores for whom another application and another card aren’t an issue. This means, of course, that cardholders get the benefits of a Visa Signature or Platinum, with no annual fee. The interest rates on department cards are often unusually high, around 22% or 23%, but REI’s is a relatively low 10.99% to 20.99%. Of course, if you run a balance you should avoid rewards credit cards, but REI’s concern is touching.

On top of all that, the REI Visa cards are premium credit cards. The REI Visa Signature gives concierge service and some special offers (right now, 2-for-1 Fandango tickets on Friday nights), while both give travel benefits including travel accident insurance (up to $250k for the Platinum and $1 million for the Signature) and auto rental accident insurance. The Signature’s benefits are more extensive than the Platinum, and come at no extra charge, so you should go with the former if your credit score qualifies. If you’re rejected for the Signature, you’re automatically considered for the Platinum.

Finally, US Bank, which issues and approves applicants for the REI credit card, donates money to REI-approved nonprofit organizations. Last year, US Bank gave $10k to the Student Conservation Corps. The bank and store also allow you to use your dividends for charitable donations.

A cartoon from “The New Yorker” caught my eye back in 2000, when I was fairly new to writing and editing personal finance stories.

In the cartoon, dad’s sitting on the couch with his son, as mom stands in the background, fear in her eyes. A computer is in the other room. “It’s very important that you try very, very hard,” dad says to his son, “to remember where you electronically transferred Mommy and Daddy’s assets.”

Eleven years of electronic progress later, many of us are carrying around smartphones and tablet devices. With them come new and even easier ways for our children to drain our bank accounts — accidentally, through games aimed at an audience that lacks a firm grasp on the difference between real and imaginary money.

My colleague Matt Schulz got a lesson recently how a 4-year-old’s little fingers can poke a big hole in your savings.

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The new Chase AARP Visa kicked up its rewards program considerably, offering 3% back on travel and 5% on purchases made in the first six months of holding the card. The revamped card also features a 0% intro APR on purchases and balance transfers in the first year.

Now, in honor of Older Americans Month, Chase will also up its philanthropy efforts by supporting the Drive to End Hunger, an effort spearheaded by the AARP to end senior hunger. In 2011 and 2012, the bank will donate $0.03 for every purchase made with the AARP credit card, plus $1 for every new account opened, up to $2 million a year.

Chase has actively promoted charity in its credit cards. In addition to the AARP initiative, Chase enabled its Sapphire, Ink and Freedom customers to donate their Ultimate Rewards points to the Red Cross in Japan. JPMorgan Chase also donated $5 million of its own cash to help in the recovery.

To encourage cardholders to give generously at year end, Chase is offering bonus charity rewards on the Chase Freedom.

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