Credit Card Debt Management

For most of us, the holidays mean travel. Don’t be a grumbling grinch about it. Use your credit card travel rewards to make the most out of that 300-mile trip to see Great-Aunt Bertha. Jason Giacchino has several tips on how to spend wisely during the holidays, one of which is to “develop a buying strategy.”

It’s a great idea. Gas purchases and hotel stays can rack up rewards to help you enjoy a little post-holiday stress release. Check out Mr. Credit Card’s post on Kiplinger’s recommended list of credit cards for various categories.

The Capital One Platinum Plus MasterCard came out on top in the travel card category, according to Kiplinger’s. Mr. Credit Card agreed with this choice, as well as the magazine’s choice on best gas card, the BP Rewards Visa. That card offers 5% rebates on BP purchases and 2% on other travel and dining expenses. But Mr. Credit Card makes a good point - not everyone uses BP to fill up. I certainly don’t; I think their gas tends to cost more than competitors.

For non-BP users, Mr. Credit Card recommends the American Express Simply Cash Card. It is a business credit card that pays 5% rebates on gasoline and certain types of business expenses. The site mentions that a person can obtain a business credit card without actually owning a business; they will simply be treated as a sole proprietor. It’s worth a try!

For those who will need to fly instead of drive, Kiplinger’s has a recommendation on that too. Here’s what Mr. Credit Card had to say about the magazine’s choice, the Citi Premierpass Card Elite Level.

While this is a very good card, I think there are just too many types of travel reward cards to simply pick one. What they failed to mention is that this card will only suit those who travel a lot because you can earn points from the dollars you spend and also from the miles you fly. For those of us who are not really frequent flyers, then this card may not be suitable. Plus, Citi’s ThankYou Network airline reward system could get complicated as they have “fixed options” and “flexible options” for redeeming points for airline tickets. Check out our review of Citi’s Rewards for more details.

Something else to keep in mind is that the Platinum Plus MC (best travel card) is for consumers with “excellent credit,” according to MasterCard’s web site. If you can get it, go for it - and happy traveling!

Interesting trend here. UK-based HSBC, having recently dropped all subprime mortgage lending because that division of its American business is “no longer sustainable,” has decided the American subprime market is still worthy of credit cards. Lots and lots of credit cards. Subprimers are statistically more likely to make minimum monthly payments and rack up late payment fees, analysts say.

According to the Sept. 4 edition of The Boston Globe, credit card issuers like Capital One have in recent months drastically ramped up their credit card mailings wooing subprime borrowers. Leading the charge? HSBC, with subprime credit card mailings in the first half of 2007 that more than doubled the number sent out in the same timeframe a year ago.

Meanwhile, Washington Mutual, whose web site boasts an effort “to be a leader in the subprime mortgage industry,” is also scrambling to downsize its subprime mortgage marketing efforts. That company has also increased subprime credit card mailings, by about 35 percent.

At least Washington Mutual claims to be targeting the upper end of the subprime market, consumers with credit scores of 600 or above. Perhaps this is what the company meant when it told the Associated Press earlier this month that it has been “anticipating and preparing” for the subprime mortgage fallout for the last 18 months. The company claimed to have taken “strategic actions” to “weather this market” and “take advantage of growth opportunities.”

Let them all have credit cards! How generous. While credit card companies have been trying so hard to hand out more debt opportunities to subprime consumers, the number of credit card offers they’ve mailed out to those with good credit has decreased significantly, according to the Globe. Makes perfect sense. Washington Mutual, HSBC, they’re all bloodsuckers. You’d think they would have learned their lesson, but there is currently no way for subprime consumers (or subprime lenders) to benefit from mortgage refinancing so credit cards have become a cash cow.

This goes back to what I said in a former post: Never assume that because credit card companies are mailing you offers again, your credit score is improving. There is always an agenda, and consumers must be savvy enough to identify it.

The Associated Press had an interesting article about how the credit industry has been affected by the Federal Reserve’s recent decision to lower the federal funds rate to 4.75 percent. The federal funds rate is essentially the interest rate banks charge each other for loaning money to each other through the Federal Reserve. The new rate is a welcome relief after a steady climb over the last year, and it no doubt has financial institutions and lenders clicking their heels in delight.

According to the Associated Press, the lower federal funds rate is expected to be “reflected immediately” when commercial banks pass their savings on to consumers through lower prime lending rates.

The credit card companies have enjoyed seeing their stocks climb, largely as a result of the Fed’s decision.

American Express Co. saw a 5.1-percent climb.

Mastercard Inc. saw a 6.7-percent increase.

Capital One saw a 5.3-percent increase.

Discover Financial Services saw a 7-percent climb.

Of even greater interest is the fact that American Express is exiting the international banking business to focus on its core product, credit cards. The times, they are a-changin’. It will be interesting to see how the credit card companies will join in the interest rate free-fall, if they do so at all.