That was too easy

At the beginning of the month, I applied for a couple of credit cards. A while ago, I cut up a couple of them and now I’ve got two more. But these two cards are going to be working for me rather than just taking my money. I applied for the 0% interest MasterCard from Citibank and the Dividend card from CIBC.

I applied for the Citibank Gold MasterCard because of a small little advice by John Chow. He advised that you get the credit card and make a balance transfer. The credit has a certain period where no interest will be charged. I have until December 2007 to pay off a balance transfer of $2000. So every payment that was supposed to go toward the $2000 now gets deposited into a high interest earning bank account. I have an ING Direct account that earns 3.5% interest but I’m not sure how that’s compounded. I know that every month, I get $0.07 for every $25 I have in the account. That may not sound like much but it’s a lot better than nothing.

The $2000 that will be going towards the credit card will now be sitting in my ING Direct account, gaining interest. By the time December 2007 comes, I’m estimating that the money will have gained $67 in interest just by sitting there. Most of you might be thinking, “Well, $67 isn’t that big of a deal.” But you have to think about the money that I’m saving by not having to pay a monthly minimum every month.

On a balance of $2000, the monthly minimum is close to $45/month. Since the $2000 has been transfered to a 0% interest credit card, I’ll be saving $45/month until December 2007. That would mean that I’ve saved $540 because I’m not paying anything. Add that to the interest I’ve earned from the ING Direct account would equal to an extra $607 that sitting in my pocket.

The second credit card I’ve received was the CIBC Dividend Visa. This credit card allows me to earn 1% cash back on all my purchases. Again, it may not seem like much but it adds up. On average, I would estimate that I spend $2000 on my credit card every year. I don’t see any of that money ever again. But with the dividend credit card card, it’s likely that I’ll get $20 back at the end of the year.

Maybe now you’re thinking, “But $20 isn’t that much either.” It might not be much but it’s still a lot better nothing. I could make all of my purchases on my credit card and as long as I make sure that I pay off the full balance before the due date, there won’t be any interest charged. The way the math works on this isn’t rocket science but it was a little confusing at first. The card has a few levels of rates depending on the year to date net purchases.

Tier 1: 0.25% rebate on the first $1500
Tier 2: 0.50% rebate on the next $1500
Tier 3: 1.00% rebate on any net annual purchases exceeding $3000

Before receiving the full 1% cash back, I would have to spend $6000 on my credit card by the end of the year. If I do manage to make that many transaction, my cash back will be something like this.

$1500 x 0.25% = $3.75
$1500 x 0.50% = $7.50
$3000 x 1.00% = $30.00
Total Dividend = $41.25

If I didn’t know better, I would have assumed that the 1% applies to all of my transaction. This is probably the first time that I’ve actually taken a closer look at the fine prints of a credit card agreement. Usually, I just call up the credit card company to activate my card and forget about it because of the agreements are the same.

Speaking of calling to activate, I think it was way too easy to activate my CIBC credit card. When I applied for the card online, I entered all the necessary information that they asked for. I received the card and called in to activate it. I got a computer asking me to type in the card number. The computer prompt also advised me that I may need some other information in order to activate the card. As soon as I finished entering the credit card number, the voice prompt said that my card has been activate, thanked me for choosing CIBC and then hung up.

That part made me a little worried because if someone else had gotten a hold of this card, all they had to do was call the credit card company, punch in the credit card number and they’re set. There were no procedures to verify that I was the card holder. I could have easily been someone else who’s committing fraud. Someone from their fraud department should step up security a little when it comes to credit card activations. The owners of the card will have no idea that their credit cards are in use until the monthly statements comes in. That’s a long time and a lot of damage can by done.

When I called up Citibank to activate the MasterCard, I first spoke to the computer who requested a whole bunch of information like my credit card number, my date of birth and telephone number. After that, I was on the line with an actual person who proceeded to verify some more information. Now, that’s how credit card activation should be. Well, that way minus the whole insurance selling part. I never buy into the insurance protection option because I think it’s a waste of money. I don’t have a problem paying my monthly balance and I don’t see myself needing their assistants.

So, before you apply for any credit card, make sure that there are perks involved that will benefit you. When I was in college, I practically signed up for any credit card that I could possibly get. Credit card companies loves college student. If I had known there were were such things as 0% interest cards and cash back cards, I would have applied for those cards a long time ago.