Thursday, November 13, 2008

Travel Credit Cards in Today’s World

With the current financial situation, we’re suddenly seeing changes in many different areas of consumer credit. Yesterday we received a notice that our American Express card’s foreign-exchange fee would raise from 2% to 2.7% (pretty close to the Visa/MasterCard standard of 3%). We have a Washington Mutual Visa that has offered 1% forex fees, but who knows what that card’s future is now that Chase has bought WaMu (we don’t have a lot of hope that 1% will survive). We do hope that Capital One stays ahead of the crowd, and continues to differentiate itself with its 0% forex fees. But nothing’s sacred today.

We are also just as concerned about airline frequent flyer miles, and the credit cards that accrue them. Travel writer Peter Greenberg has jumped on the “dump your miles” bandwagon, feeling that United is most at risk of going under. Which makes us suggest even more strongly than we have in the past that you forgo any airline miles credit cards, and especially any that charge annual fees. This is an environment for cash-back or (maybe) travel-reward or hotel-points credit cards. (Note that one of the somewhat-better travel-reward cards was the Merrill+ Visa. Merrill Lynch has been absorbed by Bank of America, and that card’s future is unknown.)

We get change-in-terms notices weekly – many are announcing higher interest rates, higher late-payment penalties, etc. In the past, we (like most folks) just dumped these notices in the trash. Now we’re reading them. So as of now, our thoughts for your best bets in this changing environment are Capital One for foreign travel; a good cash-back card for your general rewards (we like the Chase Freedom); and maybe even the JCB credit card – 1% forex fees; 1% rebate; and backed by a non-U.S. (Japanese) bank.

And, as always, ignore all the reward cards if you carry a balance. Simply go for the absolute lowest APR you can find.