So for the last two Sundays, I've had the privilege of speaking to young adults at church about managing finances. Last week, I focused my talk on credit cards since a lot of people run into troubles with them. I highlighted that if you build up a good credit score, then you can gain access to credit cards which have amazing features. I was ranting and raving about the Visa card that I had, but unfortunately no one in the room could apply for it because it's exclusive to the Royal Bank of Canada. I realize that I was being an unsatisfactory tease for doing that. As a result, I did some research on American credit cards and I'm going to suggest a few cards that I came across. It's a convenient time for me to write this since I'm looking into ditching my awful American secured credit card, so I'm in the market for a new card anyways. A number of folks have been asking for suggestions on credit cards, so here goes.
The first card I'm seriously considering is the
Citi Forward Visa.
Overview
| Card | Citi Forward Visa |
| Interest Rate | 12.99%-19.99% |
| Annual Fee | $0.00 |
| Rewards | 5 points per $1 spent on dining, books, movies and music;
1 point for other purchases. |
| Credit Score | Good |
| Balance Transfer | 0% for 12 months |
Here's all the disclaimers about all the
fees and how much balance transfers will cost.
Points Value
The first thing I always look at is how much the points are worth in real dollars. I went to their rewards site, and found that you can trade in your points for flights, movies, dvds, gift certificates, cash back, etc. To measure real dollars, I looked at the cash back reward. They say
8,000 points gives you
$50 cash.
So lets do the math, $50 / 8000 points = $0.00625/point.
If I spend $1 on dining, books, movies, or music, that gives me 5 points. $0.00625 X 5 = 0.03125. That's equivalent to
3.125% cash back. That's not bad at all.
However, for all other expenses, $0.00625 X 1 = 0.00625. That's equivalent to
0.625% cash back which is lower than the average reward.
The biggest expense I have is actually eating out, and movies, so if I spend all my entertainment dollars on this card, then it's worth it. For all my other expenses, I would use my other card because I get the equivalent of 1% cash back on that card.
Assume I spend $400/month dining, and $100/month on movies/books, then that's $500/month X 5 points X 12 months/year X $0.00625/point =
$187.50/year cash back.
Bonus Points
The Citi Forward Visa offers a couple of bonus point offers:
- 6,000 Points after you make $250 in purchases within the first 3 months
- 2,500 Points when you sign up for Paperless Statements within 3 months of account opening
- 100 Points each billing period when you pay on time and stay under your credit line
Lets assume that you can meet all of these criteria, lets do some math.
6,000 points + 2,500 points + 12 months X 100 points = 9700 points X $0.00625/point =
$60.62. This means in your first year, you get that much cash for free if you fulfill their bonus points offer.
I really like that this card rewards you for paying your credit card bill on time every month.
Rewarding Fiscal Responsibility
There's two rewards that this card offers which rewards fiscal responsibility, which makes me feel this is a great card for young adults. The first was already covered above, you get 100 points for every month you pay your bill on time, and stay under your credit limit.
For every 3 month period that you pay your bill on time, and stay under your credit limit,
Citi will lower your credit card's interest rate by 0.25% (maximum 8 times, or -2% total). If you don't carry a balance on the credit card, then this isn't really a benefit. However, for those who do carry a balance, this could be a nice way to gradually save some money since debt gets a little less expensive.
Card Benefits
Here are some additional benefits with the card:
- $0 liability on unauthorized charges (ie fraud)
- Cellular Telephone Protection -
If you pay your monthly cell phone bills with your Citi Forward Card and your cell phone is damaged or stolen, you have supplemental insurance coverage that reimburses you for a replacement phone - Extended Warranty -
The terms of the original manufacturers' U.S. warranties (of one year or less) may be extended up to one additional year on most items purchased on your card - Auto Rental Insurance -
You're automatically covered when you reserve and rent a covered vehicle with your Citi card and decline the car rental company's collision loss/damage waiver insurance. - Retail Purchase Protection -
Most items purchased with your card are eligible for protection against accidental damage or theft up to 90 days from the date of purchase - Travel & Emergency Assistance -
You're protected when you’re traveling in the U.S. and abroad. Travel & Emergency Assistance services include medical and legal referrals, lost luggage assistance, emergency transportation, translation services and more
Conclusion
I think if your biggest expenses every month is dining, books, movies and music, then this card is right for you since it offers a generous 3.125% cash back (equivalent). I've seen other cards that offer 5% cash back, but it's isolated to a narrow class of expenses, such as only for gas. You know your spending habits, so you'll have to calculate how much money you might make off this card, and if this is the best for you.
I really like how this card also has features that reward good fiscal responsibility, it has no annual fees, and has a whole whack of extra benefits. The benefits I use most would be the cell phone insurance, the extended warranty, and the rental car collision insurance.
(*) Next week I'm going to go over a credit card that caters to investment-minded people.
Disclaimer
Credit cards are a two-edged weapon. It can bring amazing benefits, and it can bring amazing destruction. Credit cards are not for everyone, and I only recommend this card if you're financially responsible. All these benefits the card brings are instantly negated if you're paying 19.99% interest.
This does not constitute financial advice. Please consult a financial advisor for professional advice.
Full disclosure: I do not own shares of Citi or Visa at the time of writing this article.
