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The truth about preapproved credit cards

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Getting courted by issuers with mailboxes full of credit card offers? Their pickup lines may be anything from “You’re preapproved,” to “You’re invited to apply,” to “You’ve been prescreened.”

Whether you’re flattered or annoyed, here’s how to read between the lines of these offers — and why you’re getting so many.approved stamp

The wording makes a difference

Credit card mailings fall into two categories, explains Kevin Haney, a former sales director at a big-three credit bureau who now shares in industry insights at SavvyOnCredit.com.

“Either credit information was used to determined who got that piece of mail, or it wasn’t.”

Situation #1 — Credit information was used: These are your “preapproved,” “preselected” or “prescreened” mailings, although different wording might be used.

Before sending you these offers, the issuers have looked into your credit history, says Lisa Hronek, research analyst at marketing research firm Mintel Comperemedia.

“They want someone who is going to use the card, but also pay it responsibly,” Hronek says.

So how do issuers check your credit? They turn to the consumer credit bureaus with a list of credit-related must-haves – or must-not-haves.

“They might say, ‘we don’t want anyone who’s bankrupt, and we don’t want anyone who’s more than 90 days late today,’ and the list goes on and on,” Haney says.

Issuers look at your credit scores, too, Haney says — your FICO scores, or any of the hundreds of other custom scores out there.

The credit bureau then responds to the issuer with a list that contains only the consumers who fit the desired credit history and score profile.

“[Issuers] don’t want to spend money printing out envelopes, paper and postage, and mailing offers to people who are never going to qualify,” Haney says.

Situation # 2 — Credit information was not used: Because such offers often use the language “Invitation to apply,” the industry short-hand for them is ITA.

“The invitation to apply is a very general mailing, and the recipient’s credit file has not been looked at to determine creditworthiness,” Hronek says.

Instead of checking credit, issuers determine who gets ITAs based on things like magazine subscriptions, gift registries and club memberships (which they buy from the companies that maintain those lists). Sometimes an airline card issuer will send them to people that are part of the affiliated airline’s frequent flier program.

So which type is the offer in your inbox? Issuers can get creative with their wording, so it can be hard to tell. But one clue, Haney says, is whether the offer contains a prescreen opt-out notice – fine print that explains how you can opt out of prescreening, an option required by the Fair Credit Reporting Act (FCRA). Offers that stemmed from a credit check (No. 1 above) are required to include this notice. Offers that stemmed from other sources (No. 2 above) are not.

Here’s the prescreen opt-out notice on a recent offer that landed in my mailbox:

Prescreen opt out notice

Am I really going to get the card?

When you apply for a card, the issuer will perform a hard credit pull, which will temporarily dock your credit score. So credit card mailings are often regarded with some suspicion. After all, what if you apply only to get turned down?

What many consumers don’t know, Haney says, is that offers that stem from a credit check (ie, prescreened offers) must contain a firm offer of credit. That’s required by the FCRA, which seeks to balance the modest invasion of consumers’ privacy (which occurs when an issuer asks the bureaus to check their credit) with a tangible benefit (a firm credit offer).

Here’s the wording in the FCRA:

Fair Credit Reporting Act firm offer of credit

And here’s what “firm offer of credit” means for you: Remember those criteria the issuer sent to the credit bureau when it asked for help in finding desired consumers? When you apply, if you still meet those criteria, the issuer can’t rescind the offer.

The key phrase, though, is, “if you still meet those criteria.” That may no longer be the case if you let the offer sit for a while.

“The offer gets mailed out, it arrives in the mailbox and it might sit on the kitchen table for a month before the person responds,” Haney says. “So the consumer sends back a response, and the bank will pull a credit report to verify that nothing has changed.”

If you fail to meet the original criteria the issuer presented to the credit bureau, it can turn you down. For example, say the issuer asked the bureaus for a list of people who have no accounts that are 60 or more days late. If you’ve since become 60 days delinquent on another card, you can get turned down.

The good news: If you still meet the original criteria (and apply by the deadline in the offer letter), the issuer has to honor the offer. It still has a little wiggle room, though. Credit card offers sometimes contain ranges of APRs. When you apply for the card, that credit check will determine which one you get. And it might be higher than what you’d hoped.

“They do mention that in the fine print of the offer, and you’ll often see phrases like ‘depending on creditworthiness,’” Hronek says.

As for the invitations to apply, those never involved a credit check, so the issuer can turn you down for any reason. In fact, Haney says, most people who respond to invitations to apply are turned down. First of all, there was no creditworthiness check before the offer was extended, so large numbers of people getting the offer aren’t qualified. Second, those with credit problems are more likely to apply for new credit – because they need it.

“The more desperate they are, the more likely they are to respond and the more likely they are to have a negative credit history,” Haney says. “That’s been a well-established phenomenon in the banking world for a very long time.”credit card mailed offers

Why am I getting so many offers?

Despite the sheer number of credit card offer mailings, the number of people who respond is tiny – both Haney and Hronek estimate 1 percent or less.

“Ninety-nine percent of people get the offer and throw it in the trash, and the last that’s ever heard of them,” Haney says.

So issuers are always trying to find consumers who are not only creditworthy, but who are also likely to respond to offers. That can be difficult because, as Haney says, “usually, people with the best risk scores respond the worst, and people with the worst risk scores respond the best.”

If you’re getting mailboxes full of offers, you may be in that “sweet spot” between having good enough credit and being likely to apply for a new card.

That’s a very, very small portion of the population,” Haney says. “So the people who get preapproved offers tend to get a lot of them.”

Life events may also be a trigger for more offers. If an issuer is targeting new home owners, and a mortgage just appeared on your credit reports, that could explain why you’ve suddenly become so popular.

Of course these complex selection processes can have humorous results – you may have heard the stories of babies and dogs getting preapproved for cards.

“Pets and children sometimes do get preapproved offers,” Haney says. “The systems are not perfect, and the challenge of consolidating data from thousands of sources is far more complex than people realize. It happens very rarely, but garners lots of attention when it does.”

How do I make them stop

Perhaps you consider credit card offers junk mail. Perhaps you worry about identity theft (although both Haney and Hronek point out that no sensitive information, like Social Security numbers, are included on credit card offers). Or maybe you just don’t want issuers checking your credit. Whatever your reasons, you can opt out of offers – or certain types, anyway.

There’s not much you can do about invitations to apply. But you can stop offers of the prescreened variety. Just go to OptOutPrescreen.com, and fill out the necessary forms to prevent the credit bureaus from including you on the lists they provide issuers.

“This was offered to give consumers the option of preventing issuers from looking into their credit files,” Hronek says. “So that’s a way to cut down on those mailings if you like.”

Updated Oct. 20, 2014


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Editorial Disclosure: The editorial content on this page is not provided by any bank, credit card issuer, airline or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Why was my credit card declined?

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A few months ago, I’d just taken my brand-new travel rewards card out of its envelope. Eager to make a dent in the spending requirement for the sign-up bonus, and to get double rewards on travel, I made my first purchase – nearly $1,600 worth of tickets on Singapore Airlines.

After entering my card details and clicking “purchase,” I received a message saying my card had been declined. I had to call my bank and confirm my identity before I got my tickets.

A similar thing might have happened to you – either while shopping online or, worse, at the checkout counter. Here’s why your card might be declined – and how to minimize the chances of getting shut down.

Why was my card rejected?

Your credit card may have been rejected because you’ve maxed it out or gone delinquent. If neither is the case, it’s could just be your bank looking out for you. In its efforts to continuously watch for fraud on your accounts, it might block legitimate purchases. card declined

That may be inconvenient, but it turns out many consumers don’t get too upset about false alarms. A June 2014 survey from CreditCards.com asked consumers how they’d feel if a legitimate purchase were blocked because of suspected fraud – 28 said they’d feel “unbothered,” 25 percent said they’d be “annoyed,” 22 percent responded they’d be “relieved,” 9 percent said they’d be “embarrassed,” and just 8 percent said they’d feel “angry.”

Besides, a false alarm is better than fraud escaping notice.

“It’s all a balance between convenience and security, both for the benefit of the bank and the benefit of the customer,” says Doug Johnson, vice president of risk management policy at the American Bankers Association. “The bank is always looking at whether it has enough information to potentially inconvenience a customer because a transaction may not be normal for them. But frankly, the greatest inconvenience for a customer is when they’re inconvenienced by fraud on their account.”

If a bank suspects fraud, your card won’t necessarily be shut down completely, and you might be able to use it for other purchases. In some cases, a suspicious purchase (fraudulent or legitimate) may even be allowed to go through, and the bank will call you later to check on it. In either scenario, if the purchases turn out to be fraudulent, you can then discuss replacing your card.

What trips the wire?

That depends on the cardholder.

“What the bank is doing is continually evaluating transaction behavior,” Johnson says. “It’s essentially building the case for whether a transaction has higher levels of risk than a transaction the customer is normally doing.”

While you may have heard a lot of stories about purchases getting blocked abroad, foreign travel won’t always raise a red flag with your bank.

“They would never, for instance, flag travel for me,” Johnson says, adding jokingly, “It would be more likely that they’d say, ‘You’ve been home for three days. This is suspicious.’ It’s all very specific to the transaction behavior associated with the customer.”

That might help explain why my plane ticket purchase was blocked. The bank barely knew me, and there I was, buying tickets on a foreign airline.

“For some reason, thieves like to buy travel with other peoples’ cards,” Johnson says.

So should you be worried that, if you use your credit card all over the world for a variety of purchases, your issuer won’t even notice fraud? Johnson points out that banks’ algorithms are incredibly sophisticated, and often surprisingly so. For example, his bank once flagged some purchases of jewelry and motorcycle parts on one of his very active cards.

“I was sad to some degree because it was suggesting I wasn’t manly enough to buy motorcycle parts or that I wouldn’t give jewelry to my significant other,” he says. “It’s very interesting how sophisticated the analytics behind these things can be.”

How to prevent card shut-downs

You can’t predict what your issuer’s fraud algorithm will flag, but there are a few simple measures to take to lessen the chance a purchase gets rejected.

  • Tell the bank about your travel plans. Call in advance and tell the bank if you’re going abroad – or across the country. The point is to give your bank a heads up that “a purchase could be happening in a geographic location your cad is generally not used,” Johnson says. “And that could be in the United States, too, not just international travel.” Your bank will add your travel dates and destinations to your file.
  • Consider giving your bank a heads up about a major purchase. It can’t hurt to let your bank know if you’re making a major purchase — like expensive jewelry or electronics — with your card.
  • Make travel purchases from home. If you’re buying train tickets for half way across the world, try to buy them from a home computer, so that a strange IP address doesn’t spook your bank.

A new twist

Visa’s trying a new method of blocking fraudulent purchases (or at least making things more inconvenient for card-cloners), and you may experience it at the gas pump. pump at Shell gas station

Visa Transaction Advisor (VTA) allows each gas station owner to choose a risk threshold (on a scale from 01 to 99). When someone swipes a card at the pump, Visa runs a less-than-1-millisecond analysis of hundreds elements to determine the risk score. If it falls over the station’s chosen comfort zone, the display screen tells the cardholder to see the attendant inside. Legitimate consumers will likely do so. Fraudsters, who are likely trying to test out a counterfeit card at an unattended pump, will probably flee, says Mark Nelsen, vice president of risk products and business intelligence for Visa.

“We’ve had this out in the market for six months,” Nelsen says. “We’ve been analyzing those consumers who were triggered for high risk, and it does appear that the criminals are leaving. Genuine consumers are likely to go inside.”

Flagged transactions result in a notification to the merchant as well as the issuing bank, so it can confirm the transaction with the cardholder.

VTA went through a pilot test at 300 stations in January and February 2014 and has now rolled out at 25,000 stations. Don’t expect to get sent inside to complete many of your fuel purchases, though.

“In terms of overall population, less than one-tenth of 1 percent of transactions would actually ever hit the risk threshold,” Nelsen says. “So it’s a very small portion of the highest-risk transactions that would get trigged for that high risk alert.”

So what triggers that alert? There are 500 elements factored into the risk score, culled from fraud activity reports from around the world and assembled to create “a profile of fraud and what it looks like,” Nelsen says. Location could be a factor, as could purchase amount and whether the card was involved in a data compromise. If a station is in an area plagued by fraud, it can set the risk threshold lower, thus possibly catching more transactions in the net.

Gas stations were a logical place to start with VTA, Nelsen says, because they’re unattended and more expensive to upgrade to EMV. But Nelsen says Visa is looking for new environments.

“E-commerce is one environment, as well as kiosks,” he says. “There are kiosks now that are selling some really expensive items.”


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Editorial Disclosure: The editorial content on this page is not provided by any bank, credit card issuer, airline or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

These cards let you earn elite status faster

Posted by CreditCardGuru on

The traditional way to elite status with a travel rewards program is to … well, travel. That’s because elite status is usually determined by how many flights or hotel stays you complete within a year.

If you don’t want to spend all that time sitting in airplane seats or sleeping in strange beds to get elite status and the benefits that come with it, there’s a possible shortcut – getting a credit card that fast-tracks your status (see table below).

The value of the fast track

Airlines and hotels require loyalty before they let you into the elite club. The requirements usually involve racking up a certain number of miles or flights, or a certain number of nights in a hotel. Those thresholds are usually high enough that only business travelers can hope to reach them. Cards that give credit toward some of those flights or stays, however, can put elite status within the reach of infrequent or budget traveler.

Terms to know

Airline and hotel elite programs vary, but they all work in similar ways. If you’re new to chasing after elite status, these terms will help you find your way. elite access airline privileges

Elite-qualifying miles: These apply to airline elite programs and might also go by name specific to the airline (such as “Medallion Qualifying Miles” for Delta). These are not the regular miles you earn by spending on the card. You have to earn them by sitting in a plane seat (unless you have one of the cards below), and how many you earn will be based on the fare paid or distance flown, depending on the airline.

If you earn a certain number of elite-qualifying miles in a year, you get elite status.

Qualifying nights or stays: These apply to hotel elite programs. Often, elite qualification thresholds are written, for example, as “10 qualifying stays, or 25 qualifying nights.” The actual numbers will vary by program. A “stay” refers to a stretch of consecutive nights in a hotel, while a “night” refers to a night you spend in a hotel bed. Whether you hit the “stays” threshold or “nights” threshold first, you get elite status.

Elite status tiers: Elite status often comes in a variety of tiers. The more flights, stays or nights you collect, the higher the tier. And the higher the tier, the richer the benefits. Tier names vary widely throughout the industry. One program’s “Platinum” might be another program’s “Silver.” So check the details.

Common elite benefits

The benefits you get for your elite tier vary widely, so check the fine print. The chart below lists some program benefits, but only scratches the surface.

In general, airline elite status gets you priority boarding, check-in and security screenings, as well as complimentary seat upgrades in the upper tiers. Hotel elite status often gets you late check-out, room upgrades and freebies like in-room Internet.

What to watch out for

Airlines and hotels tout the luxurious benefits of their elite programs, and that can make cards that accelerate your status quite tempting.

However, not all cards get you straight to elite. In fact, some airline programs get you only about half way to the lowest elite tier. When you consider that the airline cards that fast-track you tend to have rather high annual fees, it should become clear that this benefit alone isn’t enough reason to sign up for a particular card.

Hotel rewards credit cards, on the other hand, will often get you automatic elite status (and will sometimes catapult you straight into one of the upper tiers). They also tend to have more modest annual fees.

Check out our chart below for a roundup of some of the airline and hotel credit cards that speed up your progress toward the elite perks that road warriors covet.

Credit cards that accelerate your path to elite status
CardFast-track elite benefitsElite tiers & requirements (per year)Elite status perksAnnual fee
Airline
Citi Executive AAdvantage 10,000 Elite Qualifying Miles every year you spend $40,000 Gold: 25,000 EQMs


Sapphire: 50,000 EQMs


Emerald: 100,000 EQMs
Seat upgrades, companion upgrades, mileage bonus, special service desk, priority check-in, priority boarding lane and more. Depends on elite level reached.$450
Platinum Delta SkyMiles American Express (a CreditCardForum advertising partner)5,000 Medallion Qualification Miles after spending $1,000 in the first three months


10,000 MQMs every year you spend $25,000 in a year; 10,000 more MQMs after you spend $50,000 miles
Silver: 25,000 MQMs


Gold: 50,000 MQMs


Platinum: 75,000 MQMs


Diamond: 124 MQMs
Seat upgrades, companion upgrades, mileage bonus, special service desk, priority check-in, priority boarding lane and more. Depends on Medallion level reached.$195
Delta Reserve American Express10,000 MQMs after first purchase


15,000 MQMs after spending $30,000 in a year; 15,000 more MQMs after you spend $60,000 in a year
$450
Southwest Airlines Rapid Rewards Premier1,500 Tier-Qualifying Points for every $10,000 in purchases (up to 15,000 TQPs per year)



A-List: 35,000 TQPs


A-List Preferred: 70,000 TQPs
Priority check-in, priority security (where available), dedicated phone line, bonus point earnings, standby priority. Depends on which A-List level reached. $99
Virgin America Premium card15,000 status points for every $10,000 in spending, up to 15,000 points per year.


Can roll over extra points into next year.
Elevate Silver: 20,000 status points


Elevate Gold: 50,000 status points
Seat upgrades, lounge passes, priority check-in, priority security, priority boarding, priority baggage handling, free checked bags. Benefits depend on which level you've reached.$149
Hotel
Starwood Preferred Guest card 5 nights and 2 stays credit toward SPG elite status each yearGold: 10 stays or 25 nights


Platinum: 25 stays or 50 nights
Late check-out, bonus point earnings, room upgrades when available, dedicated phone line, in-room Internet, club access and more. Perks depend on availability and level reached.$65 (waived first year)
Hilton HHonors Surpass Automatic Gold status as long as card is openSilver: 4 stays or 10 nights
Gold: 20 stays or 40 nights


Diamond: 30 stays or 60 nights
Late check-out, club access, complimentary water bottles at some properties, waived double occupancy charges, point earnings bonus. Perks depend on availability and level reached.$75
Hilton HHonors Reserve$95
Hyatt Credit CardAutomatic Platinum status as long as card is openGold: automatic with enrollment


Platinum: 5 stays or 15 nights


Diamond: 25 stays or 50 nights
Point earnings bonus, in-room Internet, room upgrades, dedicated phone line, expedited check-in, late check-out and more. Perks depend on availability and level reached.$75 (waived first year)
Marriott Rewards Premier15 elite credits upon account approval and each year at account anniversarySilver: 10 nights


Gold: 50 nights


Platinum: 75 nights
Point earnings bonus, late check-out, weekend discounts, room upgrades, in-room internet, dedicated phone line and more. Perks depend on availability and level reached.$85 (waived first year)
IHG Rewards Club cardAutomatic Platinum status as long as card is openGold: 15 nights


Platinum: 50 nights
Priority check-in, point earning bonus, upgrades, dedicated phone line, free Internet and more. Perks depend on availability and level reached.$49 (waived first year)
Club Carlson Premier RewardsAutomatic Gold status upon first use. If you've already reached or surpassed Gold status, you'll get 15 qualifying nights.Silver: 15 nights or 10 stays


Gold: 35 nights or 20 stays


Concierge: 75 nights or 30 stays
Food discounts, free Internet, upgrades, rollover nights, early check-in, late check-out, welcome gift and more. Perks depend on availability and level reached.$75 annual fee
Club Carlson RewardsAutomatic Silver status upon first use. If you've already reached or surpassed Silver status, you'll get 10 qualifying nights.$50
Other
Citi Expedia+ cardAutomatic +silver membership for as long as card remains open


Plus, earn 1 elite-qualifying night toward +gold status for every $2,500 in purchases you make on the card each calendar year.
+silver: $5,000 in spending or 7 nights


+gold: $10,000 in spending or 15 nights
Hotel upgrades at certain properties, exclusive offers, point earnings bonuses, dedicated customer service lines and more. Perks depend on availability and level reached.$0
Citi Expedia+ VoyagerAutomatic +gold membership for as long as card remains open$95


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Editorial Disclosure: The editorial content on this page is not provided by any bank, credit card issuer, airline or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Review: Is Diners Club back in the game with its new cards?

Posted by CreditCardGuru on

As the first independent credit card company, Diners Club has a long history. But many may consider Diners Club to be history: after being dwarfed by the competition over the years and being acquired by Citi and then later by Discover, Diners Club has become a minor player, with just a handful of corporate and professional charge and credit cards to its name (albeit ones that cater to frequent, high-income travelers).

In Sept. 2014, however, it launched two new consumer credit card products on the MasterCard network: The Diners Club Card Premier and the Diners Club Card Elite. Unlike some of the other cards in the Diners Club portfolio, these are credit cards, not charge cards.

Do these cards herald a Diners Club comeback? And do they stack up with similar cards on the market? Read on to find out.

Compare the Diners Club 'Premier' and 'Elite' cards
Diners Club Card PremierDiners Club Card Elite
Annual fee$95$300
Rewards1 point/dollar3 points/dollar on gas, groceries and drugstore purchases


1 point/dollar elsewhere
EMV chip?YESYES
Personal concierge?YESYES
Lounge access?YESYES
Rental car perksComplimentary Avis Preferred status, 25% off Avis rentals, complimentary Fastbreak status with Budget, 25% off Budget rentals


PRIMARY rental car coverage
Lost/damaged luggage coverageYES (up to $3,000)
Baggage delay insuranceYESYES
Travel accident insuranceYESYES
Trip cancellation/interruption insurance?NOYES
Purchase assuranceYES (within 90 days)
Extended warrantyYES (up to 1 additional year on warranties of 1 year or less)
Roadside assistanceYES, but you must pay for the services you receive.

As you can see, despite the discrepancy in annual fees, the cards offer similar benefits. The major differences are:

  • Rewards: With the Elite card, you’ll earn 3 points per dollar on gas, groceries and drugstore purchases.
  • Trip cancellation/interruption coverage: This is a useful benefit to have if your travel plans go awry. The Elite offers it, but the Premier does not.

How much are your points worth?

This is a vital question to ask with all rewards cards. Otherwise, you might find yourself racking up points only to find they’re not worth much.

Both of these cards enroll you in the “Club Rewards” program — the same rewards program tied to Diners Club’s professional cards. You can redeem your points for:

Merchandise: On the Club Rewards website, you’ll find everything from a mug for 3,000 points to a backpack for 12,000 points, to bikes for 32,000 points and more. To find the point value, simply find the item on another website and do the math. With the backpack, for example (a SwissGear computer backpack that’s $65 on Amazon.com), you’ll get a value of one-half cent per point. Expect value to vary with merchandise redemptions.

Cash: Cash out your points to be used against a statement credit or card fees. You get a value of 1 cent per point when redeeming for card fees and 0.66 cents per point when redeeming for a statement credit.
Diners club cash redemption


Gift certificates and eGift certificates:
There’s a selection of retail, dining and travel gift cards and eGift cards. The redemption value is a steady 1 cent per point for all the currently posted options.

Airfare, car rentals, vacation packages and cruise booking discounts: Redeem for a discount off your booking on certain airlines, cruise lines, custom vacations (that you book with the help of a customer service rep) as well as pre-packaged vacations. The various options posted on the website all have a value of 1 cent per point (10,000 points for a $100 vacation package discount, for example), but expect your value to vary when you get to the more customized trips.

vacation package redemption diners club

Real frequent flier miles and loyalty points with various programs: Turn your points into real loyalty points with a variety of hotel and airline programs. Currently, transfer partners and their transfer rates (Diners Club Rewards Points needed : Loyalty points obtained) include:

Aeroplan: 1:1
Alaska Airlines: 1:1
Amtrak: 1:1
Best Western: 1:2.64
British Airways: 1:1
Thai Airways: 1:1
Hawaiian Airlines: 1:1
Choice Privileges: 1:1.92
Delta SkyMiles: 1:1
El Al Airlines: 50:1
EVA Airways: 1:1
Frontier: 1:1
Hilton HHonors: 1:1.6
Hyatt: 1.67:1
Icelandair: 1:1
IHG: 1:1.2
Marriott: 1:1.2
SAS EuroBonus: 1:1
South African Airways: 1:1
Southwest: 1.25:1
Starwood Preferred Guest: 1.67:1
Virgin Atlantic: 1:1

The numbers in the list above are the transfer ratios. Most partners allow you to transfer at a 1-for-1 ratio. Others are better, others are worse. The actual value of your points will vary, depending on how wisely you redeem them after the transfer. Airline frequent flier miles, for example, can be worth well over 1 cent each.

A good value? In some areas (such as the loyalty-point transfers and redemptions toward card fees), you’ll get a competitive value for your points. Yet there are other options (such as statement credits) where your points are worth less than 1 cent each. You’ll have to determine which redemption options are most important to you and decide if you’re willing to take a cut in value in other areas.

Noteworthy benefits

Some of these cards’ benefits are easy to come by, while others are more rare. These are the four benefits that make the new Diners Club cards stand out:

  1. Lounge access: This is usually the domain of airline-specific cards or general-purpose travel cards that cost $400+ per year. Diners Club has a network of more than 500 lounges worldwide (and in 14 U.S. cities). Guest fees, and access rules vary by property.
  2. Primary car rental insurance: Most credit cards offer what’s called secondary coverage. That means you have to file a claim with your primary auto insurance company before the card’s coverage kicks in. Primary insurance kicks in right away, so you can avoid the claim with your primary insurer — and it’s a rare perk. Currently the only other cards offering it are the United MileagePlus card and the Chase Sapphire Preferred.
  3. Car rental discounts and status: Complimentary status with Avis and Budget means you won’t have to wait at the counter — and a 25 percent discount is a nice perk for travelers who frequently use those companies.
  4. Point transfer: The ability to transfer points into airline and hotel loyalty programs is a powerful and versatile tool. Not only can you top off your balance in other programs as you see fit, but you can get a lot of value out of your transferred points if you redeem for first-class airfares and pricey rooms. Other cards also give you this power. The Chase Sapphire Preferred, cards in the Membership Rewards Program from American Express (a CreditCardForum advertising partner) and the Starwood Preferred Guest card all let you transfer points. Diners Club has some transfer partners the others don’t have and vice versa. So make sure the card you choose partners with your favorite travel programs.

Are the Diners Club consumer cards a good choice?

When comparing these cards with each other, the Premier card (with the lower annual fee) likely packs more value. The only tangible extra perks you’re getting for the $300-per-year Elite card are extra rewards on category purchases, as well as trip cancellation coverage. While the Diners Club professional Carte Blanche charge card (also $300 per year) throws in international cellphone rental and private jet access, the Elite credit card does not. Meanwhile, the Premier has all of the four benefits that make these cards unique (listed above) — for just $95 a year.

So, how do the cards compare with others in the market? If lounge access and travel benefits are what you’re after, and you’re willing to pay a rather high annual fee, the American Express Platinum (which gives you access to Priority Pass Select lounges, the Delta Sky Club, Airspace lounges and AmEx’s own Centurion Lounges) might be a good fit. It throws in reimbursement for TSA PreCheck, Global Entry, refunds you up to $200 in airline fees per year and gives you four free roadside assistance service calls per year.

If you’re eying the Premier card, it’s a solid choice. Yet if you’re not interest in lounge access and more interested in earning extra rewards, consider the Chase Sapphire Preferred. It offers no lounge access benefits, but does offer primary rental car insurance, the ability to transfer points to travel loyalty programs and double points for dining and travel.


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Editorial Disclosure: The editorial content on this page is not provided by any bank, credit card issuer, airline or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

EMV and NFC: Keeping these technologies straight

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You’ve probably heard the terms “EMV” and “NFC” with increasing frequency over the past couple years, whether it’s your issuer explaining why your card now has a chip on the front, or Apple touting its new mobile payment solution.

Philip Andreae of Oberthur Technologies takes our NFC and EMV questions.

Philip Andreae of Oberthur Technologies takes our NFC and EMV questions.


So how do EMV and NFC differ – and how will they fit together as mobile wallets take off?

We posed those questions to Philip Andreae, vice president of field marketing for Oberthur Technologies. Back in 1993, while working for Europay International, he was part of the team that created EMV (Europay is the ‘E’ in that acronym, while MasterCard and Visa represent the ‘M’ and ‘V’). He helped lead the launch of EMV in Canada (while working for Visa) in 2003. And, as a consultant, he’s helped businesses adapt to emerging technologies, including contactless and mobile payments.

EMV? NFC?

If those are your first questions, here’s a primer:

chip and pin on cardEMV: Many people understand EMV as the technology behind the little gold or silver chip that’s appearing on more of their credit cards as an alternative to magnetic (mag) stripe. It’s really a payment protocol that uses dynamic, one-use data generated for each transaction, which makes information stolen by a hacker useless for cloning cards. For EMV to take hold, issuers must upgrade their cards, and merchants have to upgrade their terminals to receive those upgraded cards.

EMV is being rolled out in the U.S. thanks to the liability shift which will occur in October 2015. Currently, the card networks (Visa, MasterCard, American Express and Discover) hold issuers (not merchants) liable for fraudulent transactions. After October 2015, whichever party hasn’t upgraded to EMV (merchant or issuer) will be held responsible.

NFC symbolNFC: NFC, meanwhile, is often understood as the technology that allows you to make purchases with your phone – or a watch, a contactless card or another sort of dongle. NFC stands for near field communication, and Softcard (formerly Isis), Google Wallet and Apple Pay all use it to enable mobile wave-and-pay phone payments at the register. NFC allows two devices to communicate via radio waves when they’re close to each other, and it’s a means of communications capable of supporting more than just payments.

Do EMV and NFC compete? Or do they work together?

So are EMV and NFC competitors or allies?

As Andreae explains it, NFC enables two devices, a master device (a payment terminal, for example) and a slave device (a phone, for example) to communicate at a short distance — 4 centimeters to be precise. EMV, meanwhile, “defines how the master communicates with the slave and how the slave will respond to the master,” Andreae says.

Let’s take a closer look: EMV is a standardized set of rules (divided into
13 “books”, which are NOT light reading) that define the electrical, physical and security aspects of payment transactions.

Those rules apply to contact EMV (when you insert your EMV chip card into the slot on the payment terminal) and contactless EMV (when you wave a dongle, card or phone in front of a payment terminal). NFC transactions that follow these standards can therefore also be called contactless EMV.

While the action of paying may look quite different (inserting a card vs. waving a payment device), contact and contactless EMV both utilize a tool honed by secret agents: cryptography. The payment credentials traditionally stored on the magnetic stripe (account number, expiration date, etc.) will undergo cryptographic processes to make them extremely difficult to clone.

The bottom line: Put simply (and perhaps over-simply), NFC is a vehicle for payments. Assuming that vehicle follows the EMV rules of the road, and the merchant has upgraded its interface to the payment systems to allow EMV, you’re making an EMV payment when you use a mobile wallet. EMV chip cards, meanwhile, are simply other vehicles that follow the same EMV road rules.

Can I use a non-EMV card in an NFC mobile wallet?

Let’s say your issuer hasn’t given you a card with an EMV chip yet, but you want to add that magnetic-stripe card to an NFC mobile wallet like Apple Pay. How will your magnetic-stripe card within the mobile wallet be processed?

“It will become an EMV transaction,” Andreae says.

When you add a card to your wallet, Apple gets a token (a string of 15 or 16 numbers that is NOT your actual card number) from the card’s network to represent that card in the phone’s secure element. During that process, “They will load into the Apple Pay secure element the right stuff to do an EMV transaction,” Andreae says.

There’s one possible caveat though, and that lies within the merchant’s equipment.

“If you look at a point-of-sale device, there are two sides to it,” Andreae says. “There’s the side that faces the payment credentials carried in a card or mobile device. And there’s the side that faces the network. The important part is the side that faces the network and the banks.”

Some terminals haven’t been upgraded on that network side to transmit EMV-compliant data when they reach out to the issuer to request authorization. The consumer-facing side will communicate with your phone just fine, and your account will be charged. Your payment just won’t go through as an EMV transaction from start to finish. Apple has been saying that more than 200,000 merchants have terminals that can accept contactless NFC payments, but many of those, Andreae says, currently won’t process them as true EMV transactions from end to end. Those merchants would be held liable under the liability shift, but consumers’ data will be almost as secure as it would be in true EMV transaction.

“Basically, your card or phone knows how to talk EMV, but does the terminal? That’s the question,” Andreae says.

Merchants upgrading their terminals for EMV means that more of them will accept NFC payments, right?

Photo courtesy of Verifone

Photo courtesy of Verifone

Possibly.

The EMV liability shift certainly gives merchants a financial impetus to upgrade their point of sale equipment. And it’s likely that their new terminals will have contact-EMV and contactless (NFC) capabilities.

“If you buy a terminal today, it is extremely likely that by default, the manufacturer has installed the hardware for contact and installed the hardware for contactless,” Andreae says.

That said, merchants who upgrade their terminals to accept contact EMV payments (using cards with chips) may not always turn on the contactless EMV capability – meaning you won’t be able to pay with an NFC-based mobile wallet.

Why? Take Wal-Mart for example. You may have noticed that many if not all of its terminals already accept EMV chip cards. However, Wal-Mart has firmly and publicly said no to NFC. That’s because it, along with several dozen other businesses, has formed CurrentC, a competing mobile payment option that relies not on NFC, but on scanned barcodes.

So, while Wal-Mart and other CurrentC merchants may have terminals that would allow NFC-based transactions, they have “turned off the switch” for NFC, Andreae says.

“You need a piece of software that wants to talk to that antenna,” Andreae says. “But Wal-Mart told the software designer, ‘Turn off that switch. Don’t talk to that antenna because we don’t want to.’ ”

CurrentC aside, allowing NFC payments can be pricey for merchants. Software that allows a payment terminal to read magnetic stripes only is less expensive than software that does mag stripe and contact EMV – which, in turn, is less expensive than software that does mag stripe, contact EMV and contactless EMV (NFC).

“Each merchant will develop a business plan to decide if it’s worth turning on NFC,” Andreae says. “It’s like when you buy a new car. Do you want navigation or not?”

I’ve heard EMV called ‘chip and PIN’ or ‘chip and signature.’ Does that mean I’m going to have to sign or enter a PIN for my mobile wallet payments?

If you saw Apple’s latest product announcement, you may remember the blink-and-you’ll-miss-it video demonstrating how paying with Apple Pay requires no more than a wave and a finger tap (so that Touch ID can read your fingerprint).

Softcard and Google Wallet have similarly touted speed when advertising their wallets. But what happens after the EMV liability shift? EMV is often referred to as “chip and PIN” and “chip and signature,” and those very names suggest there might be more steps involved.

PIN and signature are two of the types of cardholder verification methods (CVMs) supported by EMV. Other parts of the world have mostly gone PIN. The U.S., meanwhile, is going “chip and choice,” with issuers choosing either PIN or signature. Most of them are choosing signature so far, though, and Andreae sites the difficulties of memorizing PINs for all the cards in our wallets (a “consumer nightmare”) and the challenge of building an infrastructure that would allow consumers to change their PINs (an “expensive nightmare”) as possible reasons.

In any case, chip-and-signature EMV will likely be the norm when EMV rolls out here, but that demo video didn’t show the consumer signing anything.

That’s because many everyday mobile wallet transactions will not require a signature, even after EMV rolls out. You already don’t sign for card purchases under a certain amount. That threshold is set by the card networks and varies by merchant (it’ll probably be higher at a high-end clothing store than at a coffee shop, for example). As long as you don’t exceed that amount, no signature is required.

The same goes for the contactless EMV payments you’ll make with mobile wallets and the contact EMV transactions you make with a chip card. EMV supports a third CVM for small-dollar transactions called “No CVM,” which is exactly what it sounds like – if the transaction is below the amount set by the card network for that merchant, no CVM (PIN or signature) is required. You will need to use the verification measures required by the wallet itself (Touch ID for Apple Pay and passcodes for Google Wallet and Softcard), but the merchant won’t ask for anything more unless the transaction is large.

“Let’s say you’re buying a really expensive bottle of wine,” Andreae says. “That merchant is probably going to want you to sign that transaction no matter what you do. Or he’s going to want you to enter a PIN, no matter what you do.”


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Editorial Disclosure: The editorial content on this page is not provided by any bank, credit card issuer, airline or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.