The sales pitch for American Express has always been that their cardholders are wealthy and thus big spenders, which in turn justifies their above-average transaction fees charged to merchants. The theory is a merchant won’t mind paying more in fees if it is offset by higher average receipts (and thus profits). This is why Tiffany & Co takes AmEx and my favorite Indian food truck does not.

However, this recent Bloomberg article suggests that American Express is losing their millionaires because they are actually doing the math on their credit card rewards and finding the perks are better elsewhere. The title in the Businessweek magazine version is “Even Millionaires Count Their Miles“. To which I say, of course they do!

As less-affluent consumers cut spending during the recession and a 2009 law known as the CARD Act limited lenders’ ability to raise interest rates and charge late fees, banks revved up their pursuit of customers with top credit scores who pay their bills on time.

The article quotes hedge fund manager Whitney Tilson, who switched from using American Express for 30 years over to the new Barclaycard Arrival Plus World Elite MasterCard (my review). He states:

The difference between getting 1 percent and 2 percent cash back is thousands of dollars and for that amount of money, Barclaycard has a better offer […]

(I should mention that Tilson is well-known as a disciple of the Graham-Dodd-Buffett-Munger school of value investing. You would think value investors would know a good deal. 🙂 Of course, you could also flip that as the largest shareholder of American Express is… Berkshire Hathaway.)

The problem is that the American Express Platinum used to be “the” card for affluent travelers because it got you into any of the airport lounges from all major carriers. But now if you want access to all American lounges, you need the premium Citi co-branded credit card. To get access to United lounges, you need the premium co-branded Chase card. And so on. AmEx even started building their own airport lounges, but so far there are only four of them. Nowadays, unless you redeem Membership Rewards for frequent flier miles and use them wisely, it is hard to get even 1 cent of cash for 1 MR point these days. Even a plain-vanilla rewards card will pay you 1% cash back and more importantly their direct competitor Chase Ultimate Rewards will get you 1 cent back or 1.25 cents towards travel.

Here’s the Bloomberg graphic of credit cards that cater to “affluent consumers”:

I want to point out that the graphic is misleading because the AmEx gives a $200 travel credit every year while the Barclaycard $400 statement credit is one-time only. I do agree the Barclaycard at 2.2% back towards travel is good if you have travel charges that you redeem against, and the $400 upfront bonus counters the $89 annual fee.

Not mentioned in the article are two cards that I think are solid no-brainer cards for anyone. Both earn double the cash back from ordinary 1% cards and have no annual fee. Unless you are redeeming frequent flier miles for business class tickets or hotel points for luxury stays (which I try to do with part of my credit card rewards), it is unlikely you are getting more than 2 cents a point.

• Citi® Double Cash Card Review
• Fidelity Investment Rewards American Express Card Review

If you charged $100,000 a year, getting 2% instead of 1% would be an extra $1,000 a year back. Even if you charged $10,000 a year, that is an extra 100 bucks. You don’t need to be wealthy to appreciate simple cold, hard cash. Because there is no annual fee, I think everyone, including millionaires, should have one of these in their wallet.

Bonus improved from 40k to 50k miles for limited time. American Airlines and US Airways have announced new details about their upcoming merger. As expected, the two frequent flier programs will merge and all the miles will become American AAdvantage miles in 2015. (US Airways Dividend miles will convert at a 1:1 ratio.) Along with that, they have updated both the Citi American Airlines card and Barclaycard US Airways card slightly.

Here are the updated features of the US Airways Premier World MasterCard®. I got the bonus myself (unfortunately at only 40k miles) and have posted details on that below as well.

• Earn 50,000 bonus miles after your first purchase and payment of the $89 annual fee
• First checked bag free on eligible bags for you and up to four companions on domestic US Airways operated flights only.
• One companion certificate good for up to 2 guests to travel with you on a US Airways operated flight at $99 each, plus taxes and fees.
• Priority boarding Zone 2 on US Airways operated flights only.
• Redeem miles for award travel on US Airways and American Airlines booked through usairways.com or US Airways Reservations
• Earn miles on every purchase with 2 miles for every $1 you spend on US Airways and American Airlines purchases and 1 mile for every $1 on purchases everywhere else
• New! Receive a 25% savings on eligible US Airways and American Airlines in-flight purchases
• Please see terms and conditions for complete details

Again, the unique thing about this card is that American Airlines and US Airways are merging and these bonus miles will become American miles. You can already book reward flights on American with US Airways miles. That also means this Barclaycard-issued card will no longer be accepting applications and you won’t be able to get its sign-up bonus or other unique perks ever again. It is reported that this card will eventually convert essentially into a Barclaycard American Airlines card. So these are miles I didn’t want to leave on the table.

Note that 50,000 mile bonus does not require any minimum purchase amount and that there is an $89 annual fee that is not waived for the first year. 50,000 miles for example is more than enough for a roundtrip from the US to Hawaii or even two roundtrips within the continental US, so that is worth it for me. The US Airways companion certificate is also a unique feature which would be awesome if it eventually applied to American flights (though it probably won’t).

My bonus experience. Applied on 7/14. Approved on 7/21. First statement closed on 8/12, in which I charged $10 and also paid the $89 annual fee. I read some stories about other people making only a single purchase (the minimum technically required) but having to call in about the bonus. Thus, I put on another 4 small charges during the second statement period which ended 9/12 totaling about $49. My 40,000 bonus miles posted 9/13, one day after the closing of my second statement period. Here is a screenshot:

The card is issued by Barclaycard, which means you also get a free FICO score every couple months.

The October 2014 issue of Money Magazine features their annual rankings of the “Best Credit Cards”. Here’s a condensed list of their top picks for various categories. I’ve written about most of them, and in those cases I’m linking to that post which provides more details. Otherwise, I’m linking directly to the card page and including a few highlights about the card.

Best for Balance Transfers (Low, long introductory APR)

• Chase Slate Card. 0% on purchases and balance transfers for 15 months. No balance transfer fee if you transfer within the first 2 months. No annual fee.

Best for Regular Balance Carriers (Low ongoing APR)

• Lake Michigan Credit Union Prime Platinum Visa. 6% to 14% APR on balance transfers, starting at Prime + 3% for those with excellent credit. No balance transfer fee. No annual fee.

Best Flat-Rate Cash Back Rewards (Tie)

• Citi® Double Cash Card. 1% flat back when you swipe, 1% flat when you pay your bill. No limits or tiers. If you redeem rewards via check that is 2% flat cash back, if you redeem via statement credit then it is actually technically 1.99% cash back. Spend $2,000 a month on this Mastercard and get back $480 a year without changing your spending patterns. No annual fee.
• Fidelity American Express. 2% back with no limit or tiers. Rewards must be deposited into a Fidelity account.

Best For Cash Back on Essentials

• American Express Blue Cash Preferred. 6% back on groceries on up to $6,000 in purchases a year. 3% back on gas. $75 annual fee.

Best 5% Cash Back Cards (Tie)

• US Bank Cash Plus. 5% back on two categories from 12 possible choices, on $2,000 in purchases per quarter. No annual fee. Must apply in physical branch, application is not available online.
• Chase Freedom. 5% in categories that rotate quarterly, on up to $1,500 in purchases per quarter. $100 sign-up bonus. No annual fee.

Best For Travel Rewards / Traveling Abroad.

• Barclaycard Arrival Plus(TM) World Elite MasterCard®. Big upfront sign-up bonus, 2% back towards any travel with no limit plus a 10% rebate on redemptions.  $0 annual fee first year, then $89.

Best For Miles Hounds / Best Sign-Up Bonus.

• Chase Sapphire Preferred. Big upfront sign-up bonus, 2x points on Dining and Travel, Ultimate Rewards points offer flexible transfers to miles, cash, or travel credit.  $0 annual fee first year, then $95.

Best For Hotel Perks.

• American Express Starwood Preferred Guest. Decent sign-up bonus, SPG points offer redemptions towards free hotel nights or miles.  $0 annual fee first year, then $65.

Best For Small Business Rewards.

• Chase Ink Cash. Decent sign-up bonus, 5% cash back on up to $25,000 in combined purchases at office supply stores and on cellular phone, landline, internet, and cable TV services. No annual fee.

Best For Small Business Borrowing.

• US Bank Business Edge Platinum. 0% on purchases and balance transfers for 12 months, 10% to 18% after that. This is the lowest APR among no annual fee small biz cards. No annual fee.

Best First Card For a College Kid

• Northwest Federal Credit Union FirstCard. No annual fee. Reports to credit bureaus. Must be a credit union member to apply (can be done for $10).

Best Card For Online Shopping

• Discover It Card. The ShopDiscover portal offers cash back bonuses of 5% to 20% at select online retailers, which can be redeemed as statement credit. Also has 5% rotating categories. No annual fee.

Discover It and Discover More cardholders may be able to get 5% cashback at your choice of one of the following stores: Applebee’s, Bed Bath & Beyond, Lowe’s, Olive Garden, Shell, or Walgreens from now until November 30th, 2014. Subject to a cap of $1,000 in purchases. Valid both in-store and online. I think the best options for most would be Lowe’s (home improvement or wide selection of gift cards to Amazon, etc), Shell (gasoline), or Walgreens (coupon book items, expensive meds, or gift cards). I was able to get the promo by doing the following:

1. First, log into your existing online account at Discover.com.
2. Then, come back here and click on this link from the same browser.

You should see this page (click to enlarge):

This is in addition to the standard 5% back categories on the Discover it card, currently 5% back on up to $1,500 in purchases at Online Shopping and Department Stores and movies for 4th quarter of 2014. Selected fine print:

*Sign up to earn 5% Cashback Bonus on up to $1000 in total purchases made at your choice of one of the following stores: Applebee’s, Bed Bath & Beyond, Lowe’s, Olive Garden, Shell, or Walgreens from 10/1/14 (or the date you sign up, whichever is later) through 11/30/14. Once you sign up, no changes can be made to your selection. Purchases made using virtual wallets or third party payment providers will not be eligible. Purchases made outside of the U.S. will not be eligible. Rewards are added to your Cashback Bonus account within 2 billing periods. See Cashback Bonus Program Terms and Conditions for further details.

Home Depot has admitted they were recently hacked and customer information was compromised and stolen. If you have shopped at any Home Depot store after April 1, 2014, you are eligible for one free year of identity protection and credit monitoring at homedepot.allclearid.com (press release).

If you need identity repair assistance during the next 12 months, starting on September 8, 2014, we have a team of dedicated fraud resolution investigators available to assist you. They will do the work to recover financial losses, restore your credit, and make sure your identity is returned to its proper condition.

For additional protection, we are also making available at no cost to you a service that includes credit monitoring, identity monitoring, and an identity theft insurance policy.

It appears you get AllClear Secure identity repair service and a 12-month AllClear PRO subscription (retail price of $14.95 a month, though I’d never actually pay that). Call 1-855-252-0908 for identity repair assistance. You’ll have to provide them with your Social Security number. Keep in mind that with all major credit card issuers, you have zero liability for any unauthorized charges as long as you report them in a timely manner.

Reminder: Everyone can get free daily credit monitoring from all three major credit bureaus through the following sites: Credit Sesame for Experian, Credit Karma for TransUnion, and Quizzle for Equifax (I got offered this last one, but it may be targeted).

A couple of readers have asked me about the BankAmericard Better Balance Rewards credit card. It definitely has a unique rewards structure

• Earn a $25 cash reward for each calendar quarter in which all of your monthly payments are received on or before the due date and are more than the minimum payment due. Your account must remain open and you must have a payment due in each of the monthly cycles of the calendar quarter to be eligible for the quarterly cash reward; a zero balance or a credit balance does not qualify.
• Earn an additional $5 cash reward per quarter if you have a Bank of America checking or savings account.
• Cash back is automatically credited to your card balance, unless otherwise directed into your BofA bank account.
• No annual fee.

The draw is that you could charge just $5 to the card every month, wait for the statement to close, and then pay off that $5 every month, and end up with $100 a year in rewards (or $120 a year with BofA account). It would take $5,000 of total purchases at a theoretical 2% cashback rate to get to $100 in rewards.

The first catch is that you need to maintain this every single month. If you skip just one month and have a zero balance, or somehow a refund has you end up with a negative balance, or you don’t pay the minimum due on time, then you forfeit the entire $25 for that quarter. Remember that by default the $25 reward is applied to your credit card balance, so even that could put you negative in a month. You have to pay attention to this card.

The second catch is that there is no other rewards structure, not even a flat 1% cash back. There is no incentive to put any significant purchases on this card, as you won’t get any additional cash back.

In the end, this card would work best for:

1. People who naturally charge very little on their cards, but at least something every month. Maybe you’ll miss out on a quarter here and there, but with small total purchase amounts it would still be more than you’d get from a normal rewards card.
2. Detail-oriented folks who are willing to jump through the hoops to get that $100 to $120 per year by charging small amounts and paying them off every month. (Then put all your other charges on a 1%/5% or flat 2% cashback card or other better card.) You could try and automate this somehow with a scheduled $5 monthly charitable contribution, put Netflix bill on auto-pay, or something similar. I can’t recall if BofA lets you also automate the payment.

I think the best play here is to try and convert an existing Bank of America credit card that you don’t use anymore (cash out the rewards completely first!). Ideally you’ll get access to the benefits without an additional credit check. Otherwise, in the current environment, it is quite easy to get $500 or more value upfront out of a new credit card application. A credit pull is valuable and I’d rather have a big bonus now instead of having to jump through hoops for 4-5 years. If/when the bonuses start to drop, then this card would start to look better.

Amazon just announced Local Register, which allows small businesses to accept credit cards on their smartphone or tablet much like Square, Paypal, etc. The special thing is their initial promotional rate of 1.75% until the end of 2015 if you sign up by October 31st, 2014. Their standard rate is 2.5%. Square’s standard rate is 2.75%, PayPal is 2.7%. So this is a decent savings of at least 30% on your credit card processing fees. No minimum amounts or monthly fees. Via NYT Bits.

To swipe cards, you have to buy the dongle for $10 with free 2-day shipping, but it also includes $10 in free processing fees. They just don’t want people ordering it and leaving it in their desk drawer (like I did with my Square reader). The lower rates apply to swiped cards only, manually entered numbers cost 2.75%. Compatible with iPhone 4 and newer, Samsung Galaxy S3 and newer, Kindle Fire HD and newer, and all iPads.

I’ve been seeing more Square-type readers at farmer’s markets and smaller retail kiosks. If you have higher volume, you may get a better deal via Costco or other traditional merchant accounts.

CreditKarma.com just announced that they will now provide members a full copy of their TransUnion credit report, free of charge and updated once a week if you log in that frequently. You should see a pop-up once you log in, otherwise navigate to My Finances > Full Credit Report (Beta).

Here’s a summary of their offering now:

• Free TransUnion New Account credit score. Updated once a week. Not a FICO-branded score, but can still be use to track relative changes over time.
• Free 24/7 credit monitoring of your TransUnion report. Will alert you if there are any changes, in case you’re like me and don’t really need a weekly update of your credit score. This is handy for tracking the location and timing of credit inquiries.
• Free full credit report of your TransUnion data. Updated once a week. Nice to be able to track any changes down the smallest detail if needed.

Everything is still free with no trials and no credit card required. Either Credit Karma is making some decent money off their website advertising, or the cost of credit reports and scores continues to drop. I think the latter is definitely an overall trend.

Don’t forget the other major bureaus to get your complete credit picture. Get free non-FICO scores and 24/7 credit monitoring from all three credit bureaus (Equifax, Experian, and TransUnion) here. I track and compare all of my free credit scores here.