Q: Is there such thing as a 3% cash back credit card? I think I remember seeing some years ago?

A: Thanks for your email Paul. Over the past fifteen or so years, we have seen a surge in the popularity (and variety) of cash back credit cards. This is no surprise – after all, we might as well get a little something back on the money we spend, right But can you really get as high as 3% cash back?

3% cash back on regular purchases?
There is no card on the market that gives a 3% rebate on all purchases. If credit cards did they, they would actually be losing money. You see the credit card transaction fee paid by the merchant hovers around 2% to 2.5% of the total amount. That amount is then split with the payment network (either Visa, MasterCard, Discover, American Express) and the bank the issues the card (Bank of America, Citi, Chase, etc).

So the bank that issues the card may only be getting around half of that transaction fee (around 1%). Since they are the ones that are responsible for creating rewards programs and paying them out, you can see why it would be impossible for them to pay out 3% cash back if they are only making around 1% on your purchase.

However, since Discover and American Express operate as both the bank that issues the card as well as the payment network, they have the ability to be more generous in their rewards (we’ll talk more about this in a moment).

3% cash back on certain categories?
Now you mentioned that you recall seeing cards with a 3% rebate in the past. What you must be referring to are those credit cards that give a higher reward for certain categories of spending. At the early part of last decade (around ’00 to ’05) there was more than one 3% cash back credit card available; they would give 3% (sometimes even 5%) on categories like gas, groceries, and drugstores.

Chase and Citi each had cards that did this. Although they were losing money on the 3%, they counted on the fact that those categories would only be a portion of your total spending – so they could make the money back on your regular purchases, as well as any interest you may be paying.

Those 3% cash back credit cards were great but unfortunately, since they were issued by Chase and Citi, it ended up not being profitable for them. Since they also had to pay Visa/MasterCard to process the transactions, what was left simply wasn’t enough to warrant paying out such high cash back. So those cards were either discontinued completely, or their reward structures were changed to give only average rebates instead.

How to get a 5% cash back credit card? (sponsored)
As mentioned, the secret it to get a Discover/AmEx card. Since they are both the issuer and payment processor, they make more money on each transaction – so they can afford to pay out high rewards. Between these two companies, by far the best one is the Discover More – there’s no annual fee and they give 5% cash back on over a dozen categories! Check out my Discover More review to learn more.

February 22nd… the day George Washington was born, the day Florida became a state, the day Dolly the cloned sheep was debuted to the world – and equally important – the day Credit Card Accountability Responsibility and Disclosure (CARD) Act went into full effect

If you’re a regular reader of Credit Card Forum, then you already know we have talked about this extensively over the past few months, but here’s a quick summary of the highlights:

Interest Rates
From this day forward it will be much more difficult for credit card companies to raise interest rates on existing balances. This includes promotional interest rates.

Payments
Now your payments will be applied towards the balances with higher APRs first. Grace periods must be at least 21 days. Due dates can no longer fall on days the mail is not delivered

College Credit Cards
The days of free pizzas and T-shirts for college students that fill out a credit card application are over. If they’re under the age of 21, they either need to have a co-signer or a verifiable job to pay the bill themselves.

To find out all the details, you can use the search function on the right side of this page to see our previous posts.

Rep. Carolyn Maloney first introduced her bill for reform three years ago. Here’s a recent interview where she discussed how shocking it is that they were able to pass the reform without loopholes…

New small business credit cards? Here’s why you’ll want to think twice from this point forward…

• Credit Card Reform Not Applicable
  The fact that we finally got credit card reform in this country is a major win for consumers. Although most banks have already became compliant over the past few months, next Monday the reform will officially go into effect. While this is great news for your personal cards, it’s bad news for old and new small business credit cards. Why? Because they aren’t included in the reform. That means they can still pull the ol’ interest rate bate ‘n switch on a small business credit card.
  
  
• Small Businesses Are Categorized As Riskier
  Thanks to all the economic turmoil over the past couple years, new small businesses are being scrutinized more than ever when it comes to giving them credit. If you are a sole proprietor or recently formed an LLC or corporation, it’s considered to be an especially risky proposition. However there’s good reason for creditors being skittish. Take Advanta… they were the second largest issuer of small business credit cards in the United States. However in 2009, a staggering 1 out of every 5 accounts were in default, now the company is bankrupt. All of the other small business creditors suffered brutal losses on these accounts too.

• Lower Credit Limits Than Personal Credit Cards
  Due to the extreme risk associated with small businesses, even if you can get approved, the odds are that the credit limit will be dismal. This is especially the case for new small business credit card applicants, since new companies are considered to be an even higher risk.

• Interest Rates Are Much Higher Than Before
  In the past when times were good, some small business credit cards actually had interest rates that were lower than what was available on most personal cards. Advanta (as discussed above) was notorious for doing this, however now that they’re bankrupt, that train has left the station. I have several American Express cards – one of them a small business card I’ve had several years – and even with my perfect credit and zero debt, my interest rate more than doubled on it! So it doesn’t matter how good your credit is… we are all being affected.

• You Will Need To Personally Guarantee The Credit
  Unless you have an established corporation or business entity that has successfully been using credit for years, you will have to make a personal guarantee to get a new small business credit card.  That means it will be under your Social Security number – just like a personal card is. However unlike a personal card, since it’s still technically a “business” credit card so you will not be protected by the recent credit card reform.

Are there any alternatives to new small business credit cards?
For now your best bet is to probably use a personal card. If the purchases are for your new small business, you can still write them off. What I decided to do was open a personal card and use it exclusively for my business, that way I don’t have to sort the transactions.

For this purpose, right now I highly recommend the AmEx Blue Sky card. Sure, I do advertise AmEx cards on this site, but take a look for yourself at this card and you’ll see why it’s an honest recommendation. Myself and others have had great luck with getting high credit limits and the rewards can be beat with it. There’s no annual fee either. For a special promo signup offer, check out my personal review of the American Express Blue Sky.

Q: Is adding an authorized user to a credit card a good idea?

A: Thanks for your question Lynn. Most credit cards (almost all) will allow the account holder to add on authorized users. For those that choose to add a user, they usually add only one. However there are some credit cards that let you add multiple users if you so choose. But whether it’s one or five, is this a smart move? Let’s take a closer look…

Why Add An Authorized User?
Perhaps you are a parent who wants your son or daughter to have a card. Maybe you run a small business and would like one of your employees to have their own credit card for convenience. But most often, it seems to be that the new card is issued to their spouse – whether that be a husband or wife, boyfriend or girlfriend.

The Pros

• Adding a user is a convenient way to give someone access to your line of credit for purchases
• The places the authorized user spent money will be listed on your monthly statement
• It can be a way to help build credit for the authorized user, if their Social Security number is provided. In September 2007, FICO took away this “piggyback” privilege, but they reverted back in July 2008 and decided to count authorized users once again.

The Cons

• If there’s one piece of advice you get from this post, it is that adding an authorized user to a credit card is almost always a bad idea when it comes to boyfriends/girlfriends. I can’t even begin to tell you how many horror stories I’ve heard. They thought because they were together for years it would be okay to do. Lo and behold, the relationship would go sour and the authorized user would rake up excessive amounts in charges. Unfortunately, the main cardholder would have no recourse since the other person was authorized to do that. So essentially, you are handing someone a blank check when you do this.
• Parents like the idea that they can see where their kids are spending money, but the truth of the matter is that kids are crafty these days. They will buy a pack of smokes or bottle of booze at the grocery store so it looks like a food purchase. I’ve even heard of them going to a grocery or drugstore to buy a gift card (they usually offer them for dozens of different places). So the idea that the parent knows what their kid is buying is really an illusion.
• Authorized users also have a tendency to spend more  than if they were responsible for the charges, since it’s OPM (other people’s money).

Conclusion
Just make sure you think long and hard before adding anauthorized user to a credit card. If you want your kid that’s 18 years or older to have the benefits of a credit card, but without the temptation to overspend, then you may want to consider the new AmEx Zync Card. It’s a charge card, so the balance cannot be carried from month to month. It’s also geared towards college students and people trying to establish their credit. Check out our American Express Zync Card review to find out more.

Q: Is there an American Express student credit card?

A: First of all, thanks for your message and compliments about the site Molly. Whether someone is a college student, a retiree, or at any stage in-between… an American Express credit card is always considered to be the cream of the crop. In fact, this isn’t the first message I’ve received asking about American Express for students.

Unfortunately, the company has very strict lending practices, so not everyone qualifies. This is especially true if you’re younger and have limited or no credit history. An American Express student credit card is hard, but not impossible to get. I’ll share with you the secrets of how I pulled it off when I was only eighteen and the best way to go about it in today’s tightened lending environment.

Why an American Express?
While it’s true American Express is a very prestigious card to carry, there are actual real reasons why they’re the best. First of all, saying they have outstanding benefits would be an understatement. There’s so many perks that come with their cards, many of their cardholders don’t even know about all of them!

For example, did you know that with AmEx charge cards, your purchases are protected for 90 days against theft or accidental damage? That’s right- if you buy something and it gets damaged a month later, or stolen, you’re covered for up to $1,000 per incident for free? There are many more benefits like free extended warranties and more… so many useful benefits you won’t get with any other credit card.

How I got an American Express credit card at the age of eighteen?
As soon as I turned eighteen I applied for a crappy credit card from my bank – it was some entry level Visa card with a $400 limit. The only reason I opened it up was because I knew I had to start somewhere. I would use it for a few months to establish a credit record and then apply for something better as soon as I got the chance. So I would put a couple purchases on it each month (always paying off the balance in full) and did that for about seven months. Then it was time to start applying for something better…

At the time, there wasn’t an American Express student credit card specifically, but their Blue card had just came out. It was an entry level credit card. I though it was still a bit too early to get approved for that, but I decided to apply and give it a shot… much to my surprise not only was I approved, but I was also given a $2,000 credit limit! That’s not too shabby for an eighteen year old that wasn’t even a college student yet.

After the credit crisis, is this still possible to do?
The Blue Card still exists, but my experience would never happen today. Back then the economy was flying high and practically a pulse was all that was needed to get credit. Today, getting an American Express student credit card is no longer easy to accomplish. However, I do have good news…

I applied right around the time the Blue card came onto the market. Although I have no proof of this, I suspect they were probably being more lenient on credit requirements since it was a new card (companies always try extra hard to make their new products a hit). So although that was years ago, coincidently there’s a similar scenario unfolding right now…

They just launched the Zync charge card a few weeks ago. Although it’s not specifically an American Express student card, it is a card that is geared towards younger individuals – their target demographic is for people in their 20’s. I also called up customer service to see if there is an income requirement (like other AmEx cards have) and there isn’t any official requirement on this one. Their age requirement is only eighteen. If there’s any AmEx you can get approved for, I would say this is definitely the best American Express for students such as yourself. Find out the details in my American Express Zync card review.

Nowadays, they take credit card for everything. In fact, if you’re like me, you probably get frustrated at those dry cleaners and shady convenience store that won’t accept plastic for payment. But one Michigan man allegedly got himself into hot water when he tried to purchase his crack cocaine using – believe it or not – a credit card!

What happened?
Although I don’t live in Michigan, I was born and raised there, so I try to stay on top of their news somewhat regularly. I was checking today, and low and behold I see a bulletin from the Associated Press about a man that allegedly told police he was robbed after he attempted to pay for his crack with a credit card. If that’s not bizarre enough, the story gets weirder…

According to the Flint Police, the suspect reported his 2003 Chevy Malibu was stolen last Thursday. That’s understandable why he would report that, right? Well, not quite… considering that the car was previously reported stolen in Lapeer, MI which is about fifty miles away. So allegedly, he reported this car as being stolen from him, when he had stolen it from someone else in the first place! The suspect also reportedly told police that he was simply trying to buy coke with his credit card when this gunpoint robbery occurred.

Geez Louise… now that story is a perfect example of how drugs will mess you up big time!

Q: How do you get Discover 5% cash back travel promotion?

A: Over the past four weeks, Discover credit cards have been running a number of commercials which discuss their 5% cash back on travel. However, they fail to mention on the commercial which card(s) exactly qualify for the offer. So you really want to know how to get Discover 5% cashback on travel? Well, here’s your answer…

Discover Credit Cards…
Their cards are known for having no annual fee, great customer service, and above-average rewards. In fact, that’s why this site has elected to be an advertising partner with this company… we believe in their cards. Over the past five years, the other guys that gave 5% rebates reduced their rewards big time to only 2 or 3%. Fortunately, Discover is still going strong and gives their 5%.

Discover More Card…
Their most popular is the Discover More card. It’s been out for a few years and offers incredible cash back opportunities throughout the year – up to a 5% Cashback Bonus on gas, hotels, movies, fashion, home improvement, restaurants, drug stores, and travel. Typically, these categories rotate about four times a year and at any given time, there are usually two or three categories which earn the 5%. From January through March, you can get up to 5% cashback on travel.

So if you want to get the travel 5% cash back bonus, it’s pretty simple. All you need to do is get yourself the no annual fee Discover More card and signup for the discounts. Learn more about the details and benefits in our Discover More card review.