Credit cards that offer rewards, points and miles for every dollar you spend shopping are a great way to maximize your rate of return on your every day spending expenditures. However, in order to make credit card rewards pay off it is very important to get the right rewards credit card. Finding out which reward credit card program is best takes a little bit of research. One of the most important factors in choosing the right rewards card is picking one that you will actually use both for spending and for redeeming points and miles for rewards. There is no sense in getting a Capital One Rewards credit card for free travel if you never really fly anywhere.

A top credit card rewards offer for people who don’t travel a lot is the Amazon.com Rewards Card which offers cardholders points for every dollar spent on a wide variety of purchases. Instead of redeeming points for free plane tickets, Amazon credit card users get free gift certificates to Amazon.com

Amazon.com Rewards Visa Card from Chase

The Amazon credit card rewards program comes with a lot of advantages for card holders with good credit scores. New customers looking for a credit card for people with bad credit or credit cards for people with recent bankruptcy might have to look elsewhere though.

New Amazon rewards card holders get $30 cash back with their first purchase on the Amazon Visa card.

Amazon rewards members earn points for every dollar spent on the card.

The big earnings come from shopping at Amazon.com which is not surprising. Cardholders earn 3 points for every dollar spent on amazon.com. In addition, credit card holders earn double points, or 2 points for every dollar spent at gas stations, restaurants and drug stores. All other places like grocery stores, bookstores, and clothing stores earn 1 point for every dollar spent.

Is Amazon Reward Card Worth It?

The best credit card reviews include not just the credit cards interest rate and whether or not the card has an annual fee, but also the value of the rewards offers and what is included in the credit card rewards catalog.

The Amazon.com Visa card is a great credit card to review because it is so easy to examine the card’s overall value.

The top value of Amazon Rewards Visa comes when you use the card a lot on Amazon.com.

The main item in the Amazon rewards catalog is a $25 Amazon.com gift certificate for 2,500 points. Other rewards in the rewards point chart are $50 cash back for 5,000 points. That makes the Amazon Visa a top value in credit cards issued by U.S. Banks.

If you spent all of our money on the Amazon credit card, earning 2,500 points would take spending just $833.33. That makes a best cash back value reward of $50 cash back for every $833 of purchases. The cash back percentage on the Amazon.com Visa card at this level equals 6% cash back on purchases made at Amazon.com. That is one of the highest cash back offers of any credit card. It is higher than cash back from Fidelity credit card and higher than the cash back rewards in the Citibank rewards catalog.

Of course, the cash back value declines with each dollar spent somewhere other than Amazon, but for heavy shoppers at Amazon this card is a great value.

Everyone is worried about if and when the Federal Reserve will raise interest rates, even though the Fed itself continues to say that it is not considering doing so. The personal finance strategy Catch-22 here is that as soon as the Fed drops the language in its statement saying that they plan to leave interest rates unchanged for the near future, markets will react as if the Fed actually raised rates. That is what happens when interest rates are so low (basically just above zero) that everyone knows the only way they can go is up.

Recent inflation data about the Consumer Price Index, or CPI was released suggesting that inflation remains calm if not non-existent.

Consumer prices in the U.S. fell 0.1% on a seasonally adjusted basis in April as energy, housing, auto and apparel prices declined. The core CPI — which excludes food and energy prices — was unchanged in April, lowering the year-over-year increase in core inflation to 0.9%, the lowest rate since January 1966. – MarketWatch

What is Core Inflation or Core CPI

I find it ironic that with every news story published about the CPI there comes an in text explanation of what the "Core CPI" is. The single liner typically says, as above, that the Core CPI excludes food and energy prices. The irony is that the same news story makes no effort to explain what the Consumer Price Index is in the first place, so how much sense does it make to explain what is excluded from it to derive the Core CPI?

In other words, do you what price categories are included in the CPI? How much help is it then to know that the Core CPI does not include two of the categories from the original list that you don’t have? I’m just saying.

The Bureau of Labor Statistics calculates and releases numerous price indexes. The one that the media constantly refer to as The consumer price index or CPI is actually the All Items Consumer Price Index for All Urban Consumers for the U.S. Cities Average, 1982-84=100. This is abbreviated CPI-U. As you can see, there is actually a lot that goes into the number reported as CPI.

Components of Consumer Price Index CPI

The basket of goods measured by the BLS to compute CPI is actually very large. The main categories, as reported by the BLS, are:

• FOOD AND BEVERAGES
• HOUSING
• APPAREL
• TRANSPORTATION
• MEDICAL CARE
• RECREATION
• EDUCATION AND COMMUNICATION
• OTHER GOODS AND SERVICES

As you can see, the CPI measures a lot more than just your average everyday expenses. Some categories, such as Medical Care and Education affect certain people a lot more than others.

Check out the latest on Thank You Network Citibank

The Core CPI that the media likes to report about is officially known as All items less food and energy. You can tell from its title what the BLS thinks about this particular statistic. Nonetheless, the idea is that Food and Energy prices are particularly volatile and by excluding them one gets a better idea of what the "real" inflation is. Whether that is true or not depends in large part to what extent the increase in food or energy prices are part of a long-term trend versus short-term adjustments, much like day-to-day stock market prices.

Raw CPI data is virtually worthless, which is why the Fed takes into account many more factors to put the CPI index into context when making its rate setting decisions. In other words, it is best not to get caught up in the hoopla surrounding individual CPI numbers. However, keeping an eye over time on the statistic provides a thumbnail sketch of whether prices are rising or falling.

For now, the concern is not the CPI and the CPI will not be an important factor in the Federal Reserve’s interest rate policy in the near future. Right now, the Fed’s only concern is how to withdraw the extra stimulus it has provided to the economy through its unprecedented steps in 2008 and 2009 without causing the fragile recovery to collapse. Everything else is just background noise.

With Congress passing legislation to reign in some of the worst credit card abuses, credit card companies have been scrambling to get their terms and conditions, also known as the card contract, changed to terms more favorable to them before the new rules take affect. By changing your credit card agreement before the new credit card law takes affect, these card issuers can avoid having to play fairly as dictated by the new rules. However, this can mean bad things for customers and credit card account holders. Apparently, the banks aren’t concerned about losing business, because they are modifying terms on credit accounts left and right regardless of the person’s credit score or credit history. What can the average credit card customer do to fight back? Unfortunately, not too much, but there are some things that you can do to keep the credit card companies from cheating you out of your hard earned money.

Credit Card Interest Rate Increases

Under the old law, whenever a bank wanted to increase the interest rate it charged customers, it just sent out a letter saying that they were changing raising the interest rate. Consumers had no rights to do anything about it. The only option was to pay off the full balance immediately to avoid the higher interest rate, or transfer the balance to another credit card. In fact, when credit card companies needed to improve their balance sheets they would routinely do just this. If customers paid off their balances, then the company’s outstanding credit balance decreased. If customers didn’t pay off their balances, then their interest income from those balances increased. It was a no lose situation.

The new credit card law requires banks to give customers another option. Under this option, you can notify the credit card company that you reject the new interest rate which prevents your interest rate from increasing. In exchange, the account can no longer be used for new charges, but you may continue paying off your credit card balance under the old terms of the agreement. That means that you can still make the monthly payment, whether the minimum payment or otherwise, at the normal, sane, interest rate that you agreed to when you opened and used the credit card account. Obviously, this is not advantageous to the bank, so they are raising interest rates now, as fast as they can so that they won’t have to live by the provision once the law changes.

To fight back against credit card interest rate increases, the only thing you can do is pay off or transfer your balance before the new rate takes affect. If this isn’t practical, then continue making payments and pay off the card as quickly as possible. If you don’t carry a balance, the new rate won’t affect you until you do. The best vengeance is to never carry a balance on that card, ever. Credit card companies don’t make as much money off of customers that don’t pay interest, so keep using the card and pay it off in full every month. You’ll be fighting back against the credit card issuer and costing them profits. To really make them pay, be sure to take full advantage of their credit card rewards program to cost them even more money and make the card companies pay you!

If the way the company is treating you makes you so mad you want to close the account, don’t! At least not right away. Closing the account means you lose all of your reward points or miles. Instead, make sure you redeem every single credit card miles point you have earned before closing the account. Also, be sure you understand the effect closing an account can have on your credit score.

Finally, the most important thing is to REMEMBER. Banks are counting on their customers being mindless consumer sheep who don’t take the time to properly manage personal finances. They figure if they screw you over now, you will have forgotten all about it in six months. Don’t let them win! Remember exactly who did what and either close their accounts, or use them in a manner that makes them unprofitable for the company. If enough customers fight back, maybe next time, the banks won’t be so eager to try and cheat their customers.

New credit card laws passed by Congress in 2009 are going into effect.  What you need to know about credit card laws and how they have changed won’t be a big difference from what things were before.  Credit Card companies testified in front of Congress that they would stop using their very worst tricks.  That, plus a multi-million dollar lobbying campaign made sure that the new credit card laws did not require sweeping changes to the credit companies typically sneaky and underhanded business practices.

How do these new credit card laws affect smart credit card users who take advantage of good credit card rewards programs to earn points or miles?

One of the major rule changes states that when the credit card issuer decides to unilaterally change the terms of your contract, they have to give you 45-days advance notice.  If the new terms are not acceptable to you, you can opt out.

There is a catch.  In order to opt out, you must cancel your card, and close your account.  Then, you have to pay off the whole remaining balance within a certain number of days.  Oh, yeah, and that doesn’t apply to variable rate cards.

If you pay off your credit cards every month, then this is no big deal, because you could always pay off your card account and cancel it before you were charged any interest anyway.

If you carry a big balance on your credit card, then this doesn’t really help you anyway, unless you can figure out how to pay off that credit card account in 90 days.  If you could do that, you probably wouldn’t have the large balance in the first place.

Basically, the only people this really helps are people who have small to medium sized balances on their credit cards, and people who can take advantage of balance transfers to other credit accounts.  Of course, in that case, it was always possible to do that and then cancel the card anyway.

In other words, you have to be just as sharp and aware of credit card companies tricks.

Credit Card Rules Change Used to Hide Bad Company Behavior

As we’ve come to expect from banks and credit card companies, many credit card issuers are taking advantage of all the noise around the new credit card rules to make a few not-so-favorable changes to their credit card terms as well.

American Express recently notified some customers that their rates were going up.  The new rates are a variable rate equal to PRIME plus a certain percentage.  Some card holders report getting new terms of PRIME RATE plus 12% or so.  With the Fed holding rates at all time lows (nearly zero percent) that means that the interest rate on these American Express cards will be around 15%.

That doesn’t sound too bad.  Except for two things, first, now that these customers have variable rate cards instead of fixed rate cards, the helpful rules no longer apply because different rules apply to variable rate accounts than credit card accounts with fixed rates.

Second, watch out as the economy recovers and the Fed starts to raise interest rates back to more normal levels.  PRIME interest rates of 4% are just a 1% raise in the Federal Reserve target interest rate away.  Putting the Fed Funds rate back at a still very low 3% means a PRIME rate around 6% and the American Express card interest rate rises to 18% pretty quickly.

Be careful out there.  Remember always take advantage of reward credit card programs.  Use these various credit card rewards points to offset the expenses and inconveniences of always having to watch your back to make sure the credit card companies are sticking a knife in it.

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This is part 2 of the series, the first part is: Not Time to Refinance Your Home

Future Interest Rates With Adjustable Rate Mortgages or ARM

Right about now, when you are starting to feel better, someone will throw in your face the fact that even if your rate is good, IT COULD GO UP AT ANYTIME.  That, is the second thing that is different. 

Mortgage companies and customers found that changing the interest rate every month was a hassle for everyone and only created more opportunity for errors and losses both for lenders and borrowers.  Almost every ARM adjusts on set periods.  The most common is a mortgage loan that adjusts once per year.

In other words, if our ARM started adjusting today, we would lock in a low rock-bottom 3.25% interest rate for a full year. 

What if interest rates do rise?

They will, you can count on that.  When, and how fast, is another question.  However, consider that everyone still considers the economic recovery that we seem to be having (or may not be having, no one is really sure) is very fragile.  The last thing the Fed wants to do is raise interest rates too far, too fast, and kill off the economy again.  You can expect them to be erring on the side of NOT raising rates for once.

When they do start raising rates it will be done slowly.  The first rate increase will almost certainly be 0.25%.  When that happens, mortgage rates will rise too.  If you like, you can go refinance that day.  It should be much easier to get a mortgage since that interest rate increase will come because the economy, and the banks, are doing better, so there will be less fear in lending.  Assuming the 30-year fixed rate jumps a full 0.75% on the news, compare that to what your current non-adjusted rate is.

On the 5-year note, we have, it is 5.125%, that is roughly what interest rates might be AFTER the Fed starts raising them.  So, there is really no downside even if rates do go up, and no one is expecting them to go up much soon.

Of course, you might not want to refinance even if the Fed does start raising rates.  Why?

Because most adjustable mortgages include clauses defining the maximum amount the interest rate can go up during any one adjustment period (in our case, one-year).  In our case, the rate can never change by more than 2% from the previous year.  That means that if we did get locked in at 3.25%, the highest our interest rate could possibly rise to next year would be 5.25%.  Again, compare that to what you could refinance to today with no fees and no closing costs.

In other words, we would be set from now until June 2011 without the possibility of our interest rate increasing any amount that would justify refinancing.  In fact, through June 2012, we are guaranteed to not pay anything higher than 7.25%.  That isn’t rock-bottom, but hardly sky-high either.

Refinancing will cost you a couple thousand dollars in fees most likely which means it could take years to break even once the rate you have locked in for 30 years is actually lower than would you could have by not refinancing.  Again, by way of example, if we could get something like a 5.0% 30-year fixed mortgage for just $2,000 worth of TOTAL costs including any administrative fees or charges, it would be June 2012 before we started saving any real money on our monthly payments.  It could be 2014 before we started coming out ahead.

So, while not refinancing guarantees us a low-cost mortgage through June 2011, and an average mortgage through June 2012, actually refinancing can’t even POTENTIALLY offer us any advantage until at least 2014!

Can you guarantee that your job, desired home location, family size, and lifestyle will stay the same through 2014?  Me, neither.  We won’t be refinancing.

(Just for full disclosure, the Note I’m referencing actually adjusts at the end of 2009 making this a slightly bigger gamble, but still a pretty safe bet.  No one expects rates to rise much between now an the end of 2009.)

The world of adjustable-rate mortgages isn’t very old when it comes to the general population.  Sure, the product has been around for a long time, but it wasn’t until late in the 1990s that it turned into the kind of thing your average neighbor would have.  That lack of age also means a lack of experience. 

So when media outlets start reporting about “Black Wednesday” when mortgage interest rates shot up, and then follow up it up with “news” asking if homeowners who didn’t refinance already have missed the boat and wondering if there will ever be lower interest rates again, the average person starts to worry.

Many homeowners are doing the wrong thing right now, or are up nights worrying about something they don’t need to worry about just yet, because now might just be the perfect time to NOT refinance your mortgage.

With the economic recession and collapse of the banking industry, as well as the drying up of the credit markets, the Federal Reserve Board (FED) has cut it target short-term interest rates to near zero—officially 0% to 0.25%.  Doom and gloom headlines about socializing banks, Chrysler and then GM bankruptcies and of course, plenty of stories about how bad the lending business is may have put the silver lining about your adjustable rate mortgage in your blind spot.

If you have an adjustable rate mortgage that will start adjusting it’s interest rate in the near future, you may have been waiting with dread for that date to arrive. This likely applies to you if you picked up a 5-year ARM toward the end of the real estate bubble, or a 7-year ARM or 10-year ARM earlier on.

The conventional wisdom has always been to refinance out of your ARM before the interest rate begins adjusting.  The idea is that you don’t want your mortgage interest rate behaving like a credit card interest rate and changing your mortgage payment every month.  But, two things have changed so much that the conventional wisdom might actually steer you down the wrong path.

ARMs Adjusting Interest Rate Lowest Ever

While the Fed has struggled to keep long-term interest rates on new mortgages as low as it would like, it does not have that problem in one area.  Most existing ARMs are tied to interest rate index.  Usually, the adjustable rate mortgage interest rate is equal to that index plus a specified amount.  The index your interest rate is tied to and the interest rate spread added to that rate are spelled out in your mortgage documents, or more specifically, in your “Note.”

  For example, a 5-year adjustable rate mortgage we have on a property is set based on the weekly yield on the United States Treasury securities adjusted to a constant maturity of one year.  That sounds like a nightmare, and it probably is if you actually have to calculate it buy you don’t since the Federal Reserve Board publishes that number daily.

The United States Treasury Securities Adjusted to Constant Maturity of One Year index is 0.50%.  Actually, it fluctuates daily and for the end of May was 0.49%.  It’s been lower the first few days of June, not higher.

In other words, on this particular mortgage, if our interest rate were to adjust today, our new adjustable interest rate would be 3.25%.  I dare you to find a mortgage you can refinance into with that interest rates with no closing costs or loan fees of any kind, because when it comes to a mortgage you already have, you pay zero fees, with no fine print!

What if mortgage rates go up after you decide not to refinance

Refinancing a mortgage or getting a new mortgage isn’t necessarily just about finding the lowest interest rate.  But, you definitely want to know what interest rates are in general when shopping around for a mortgage.  That way, you know who is way out of the ballpark, and who is worth looking into a little bit further.

One of the best tools around for information on current interest rates is a website called Bankrate.  Bankrate.com publishes a survey of national mortgage interest rates every Tuesday morning.  Even more useful, is a weekly expert analysis of mortgage rates.  This analysis can include everything from whether or not they think rates will be going up or down in the near future, to commentary on what happened last week and what affect it had on mortgage rates for the current week.

This information can be a simple way to get a handle on financial news that you may have missed or not fully understood from the week before.  For example, whether or not a scary unemployment number you heard about the last week affects mortgage rates or not is the kind of thing that you’ll find explained in the analysis.

Using Bankrate

No tool covers every single thing you need to know, and Bankrate is no exception.  However, when used properly, Bankrate can be the best starting place for your mortgage research.

1. Check the Weekly Mortgage Rate – There is a big blue box prominently displayed on the Mortgage page.  That is the “National Overnight Averages”.  While useful, that survey is subject to more fluctuation.  Find the Mortgage Rate Trend Index.  It will be a regular link in the “news” area.  It comes out on Thursdays, so if you are on the site on Tuesday or Wednesday it might not be on the front page anymore.
2. Read the Analysis – Don’t just look at the numbers, read the analysis.  This will give you an idea of what to expect.  Remember, this is last week’s data, so the numbers you hear this week will be different.
3. Jot Down the Rates for Your Mortgage – There will be a lot of numbers.  You don’t need them all.  If you are looking for a 30-year fixed mortgage, the rate on the 15-year mortgage is irrelevant.

The Next Step

The next step is to start shopping around.  We’ll discuss that in an upcoming post.  Subscribe to the Finance Gourmet Feed to make sure you don’t miss anything.

I was going through my stack of mail to look at (separate from the stack that has things that actually need taken care of) and came across an offer for Fidelity’s mySmart Cash Account.  Intrigued, I decided to take a look at the Fidelity checking account that they were so proud of that they included a glossy little flier to advertise it.  The result?  What the—?

Regular Bank Checking Sucks This Bad?

The Fidelity myCash account boasts exactly two features that do not count as minimum basic features for a checking account.  First, it pays interest.  How much interest?  Well, this is where Fidelity gets a little weasel-ish.  The flyer says that I will “Earn three times the national average…”  Um, OK.  How much is that?  Folks, it isn’t even in the fine print, that’s how much the rate must be worth!

A visit to Fidelity’s website reveals the depressing answer.  A balance of less than $5,000 in a myCash checking account will earn a whopping 0.20% APR.  Whoo hoo!  But wait!  Maybe if you have over $5,000 it is worthwhile?  Survey says? 0.20% again.  Yes, go through all of the steps and take the time to open a Fidelity mySmart Cash Account, and you too can earn a whole 0.20% interest.

Ironically, you can actually earn something in the neighborhood of 2% by using a money market fund, but when you are pandering to the fear of the people who can’t be bothered to read anything more than headlines by really pushing the whole FDIC insurance thing, you can’t switch gears and point out the much better rate that you can get in what is still a pretty safe account.

Oh, the other value added feature is unlimited ATM fee refunds.  That is nice, but hardly a huge deal anymore if you know what you are doing.  In other words, the Fidelity cash account is good enough, but nothing better.

This leads to the inevitable question.  Are regular bank checking accounts so bad now that this counts as a great deal, or is Fidelity just dutifully pushing another product in an effort to meet a marketing projection or to make their services more “sticky”?

Credit Union Free Checking Accounts

The reason I’ll have to do some research is that I have had my checking at my local credit union for many years, so I honestly have no idea what kind of shenanigans banks are pulling these days.  The free checking account at my credit union offers:

• FREE Online Bill Pay
• FREE Downloads into Quicken® and Microsoft® Money
• FREE Online Check Images
• UNLIMITED ATM withdrawals without any credit union fees (though they do not refund the fees charged by the ATMs)
• UNLIMITED check writing
• A FREE Visa Check Card
• No Minimum Balance
• No Monthly Fees
• No Annual Account Fees

Granted there is no interest paid on this account.  They do have an interest bearing checking account if you have a certain minimum balance.  It pays 0.15% starting at under $2,500 and by $5,000 it pays either 0.25% or 0.50% depending upon which version you have.  Guess there is no reason to try out that Fidelity cash management checking account thing after all.

Bummer.

When considering refinancing your home mortgage, the first step is to get all of the details on what you have now.  Sure, you have vague numbers in your head, but that won’t help you answer all of the loan application questions, or make a real hard-numbers based calculation about the value of refinancing.  What exactly do you need to know before you dive into looking for low interest rates and refinancing your mortgage?

Required Information Before Researching Interest Rates and Refinancing

• Current Balance of Home’s First Mortgage – Not a ballpark, an exact number according to your last statement.
• Current Balance of Home’s Second Mortgage or HELOC – Again, the number from the last statement.
• Current Interest Rate – What are you paying on your mortgage right now?
• ARM or Adjustable Interest Rate Features – When does your rate go up? (The actual date, not just the year.)  How much can it go up in the first year?  The second year?  Each year after that?  Is there a floor (minimum)?  Is there a ceiling (maximum)?
• When Did Your Mortgage Start? – What day did you close on?
• Current Home Value? – Check Zillow and Trulia to get a ballpark.  Print those pages out so you have them for reference.  Keep in mind that these values are based on public information at your county’s records office, so they won’t include any improvements you have made to the house.  Don’t worry about it too much unless it was something major.  This is just for your calculations not for the application yet.
• Credit Score? – If you don’t know, call your banks first and see if one of them will tell you what it is.  Make sure they tell you the date it is from too.  Many banks and credit unions will get your credit score on a regular basis both to keep your records up to date and to be able to offer you services you might qualify for.  So, a teller or loan officer might just be able to pull it up for you as a courtesy.  If not, put looking into a better bank on your to-do list.

Ok, now you are ready to get started with some research.  Having this information up front will not only make your research easier but also more accurate.  It is a huge let down to do a bunch of research based on “remembering” that you mortgage balance is $315,000 when it is actually $350,000, only to find out you will have to start over with the real numbers, or worse, just go with the wrong research because you don’t want to start over.

One important thing to remember is the limit for Jumbo mortgages.  Right now, this number is $415,000 in many places, but that number is adjusted based on where you live and the cost of homes there.  For example, this number will be much higher in San Francisco. It is important to know this number for your area because the rules change if you are getting a jumbo mortgage versus a regular mortgage.

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Ok, it’s time to look at refinancing the old homestead’s mortgage.  I’ve been putting it off because of holidays and the fact that rates can still go lower even though the Fed recently cut rates to zero.  Now, it’s time to take a serious look at refinancing and how it might work out for my family.  I’ll be posting a series of articles here on Finance Gourmet to help guide you through the process.  By writing these articles in “real time” with my refinance adventure, you can see the whole process from A to Z and use it as a guide for your own refinancing now, and in the future.

To make sure you don’t miss out, I recommend grabbing the RSS feed.  If you aren’t familiar with RSS or “feeds”, they are basically a way to get the article pulled from here by a RSS reader which is just software that goes and gets articles from the websites you ask it to watch.  That way, you don’t have to remember to open your bookmarks to get back here.  It is kind of like the old idea of subscribing to emails that updated you on website content, but this way, all of your articles are kept separate and your inbox does get filled up with article postings from a bunch of web sites.

If you have never used RSS feeds before and you have a Google account, you can just use Google’s feed reader.  That way, you don’t have to install any software, and if you decide to junk the whole thing, you can just delete your feed reader subscriptions and you’re done.