Tag Archives: cash back

You Know This Was Coming…New PenFed Terms

Remember when I posted back in January 2012 about PenFed changing the terms on its cash back card? My concern was that once a credit card switched over to giving points instead of cash, it made it easily to devalue those points. That just recently happened. Instead of getting 5 points for gas and 3 points for the supermarket, now it is 3 points and 2 points, respectively. (Source.)

And, to top it off, PenFed is changing the terms of its Cash Back card as well. Effective October 31st, the card will pay back 3% on gas and have a $25 annual fee. If you have a qualifying product, such as a minimum of $1,000 in a money market account, then you get to keep the 5% cash back on gas without having to pay an annual fee. Both new arraignments also reduce the percentage back on all other purchases from 0.25% to 0%.

While it wouldn’t be the end of the world to add a money market account, I would prefer to buy dividend paying growth stocks with it rather than lose out to inflation eating away at the meager money market rates.

My goal is to switch my cash back card at PenFed to a PenFed card that does not have an annual fee. I’d lose the rewards aspect of it, but since Schwab’s card went away, I have no other card but PenFed that does not have a foreign transaction fee. If I ever travel abroad again, I’d use it solely for that purpose.

For my gas and grocery purchases I’d switch back to my Bank of America card on which I earn 3% on gas and 2% on groceries. Not quite the 5% that I was receiving earlier but enough for the convenience of not having to reduce my equity purchasing power by $1000.

Update (9/24/2013):

Well, I just got off the phone with Pentagon Federal Credit Union to try and switch my Cash Rewards to a card that didn’t have an annual yield. I didn’t want to cancel it entirely because it is my only card with no foreign transaction fee. For a credit card company, I never thought the customer service of Schwab’s former credit card offering could be beat. However, I believe that PenFed might do it. No hold time and super friendly (and non-accented) customer service. She told me that in order to keep my 5% cash back on gas and avoid the $25 annual fee, all I had to do was create a minimum of $25 to a Money Market Savings account.

Wow! She even helped me set it up right then and there over the phone. According to the letter I received I was under the impression that I would need to add an active checking account or a Money Market Certificate ($1000 minimum). I thought maybe I had found something new, but it turns out that the guys at FatWallet had already discussed this, though not until page 4 on the forum. This is great news because the card has a ton of benefits and the customer service can’t be beat.

Time to find a new credit card

I’ve been fortunate enough to have used the Schwab Invest First Visa credit card the last few years. (Schwab stopped offering the card and transferred its management to FIA Card Services back a little more than a year ago. Incidentally, FIA Card Services has been owned by Bank of America since 2006.) It was 2% cash back on everything with the cash being deposited, regardless of the amount, to your brokerage account each and every month. There was no talk about accumulating points or only being able to receive the cash back in increments of $25. It was perfect. I had auto-pay set up so I never had to remember to pay (just had to make sure I had enough cash to cover the balance!). As an example, if I spent $405.23 in a month, $8.10 would be automatically deposited at the end of the billing period. Sure, a little amount, but still, I’d rather have that $8.10 earning interest for me. With my old Citi 1% cash back card, that $8.10 would just sit there until it reached $50 exactly. I’d then be able to receive a check for the $50 and anything over that would accumulate until it again reached $50. However, the Citi card was great in that you actually got true cash back rather than points that you redeemed for cash. With the true cash back the company can’t suddenly say: ‘by the way, that $50 that you have…it’s now only worth $25.’ With points, however, I have a feeling that something like that could more easily happen.
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