Finance Archives

May 15, 2007

American Express TrueEarnings (TruEarnings) Card


Received invitation to TureEarnings Card from Costco and American Express from Jud Linville (President, Consumer Cards, American Express):

  1. The pitch
    1. 5% annual rebate on automobile gas at Costco Gasoline and stand-alone gas stations
    2. 3% cash back on any restaurant (including takeout and delivery)
    3. 2% cash back for traveling (airline tickets, hotel statys, car rentals, cruises)
    4. 1% everywhere else, including at Costco
    5. No annual fee
  2. The fine print
    1. Balance transfer APR 16.74%
    2. Cash advance APR: 23.24%
    3. Default APR: 30.25%
    4. If the Default APR is applied (if minimum payments not timely paid two or more times), it will apply for a minimum of 12 consecutive billing periods beginning with the current billing period.
    5. Any promotional APR will terminate if you fail to pay any Minimum Amount Due by its Payment Due Date, or upon any condition that causes a default or other penalty rate to apply to your Account (emphasis mine)
    6. Variable rate for balance transfers is determined each billing period by adding 8.49% to Prime Rate, for cash advances +14.99%, for dfaulted accounts is 21.99%
    7. "We may apply payments and credits first to your balances with lower APRs before balances with higher APRs."
    8. Late Payment Fee: "Subject to applicable law," $15 on balances less than $400 and $35 on balances $400 or greater
    9. Overlimit fee: $29
    10. Rebates awarded every February in the form of an in-store coupon redeemable for merchandise or cash at any U.S. Costco warehouse
    11. To receive the rebate your account must be open and you must present the coupon at Costco prior to the coupon expiration date (emphasis mine)

How does this compare with the original American Express Costco Cash Rebate Credit Card? According to Frugal, "AMEX Costco Cash Rebate and Blue Cash have tiered structure, and you will need to spend $11000 and $13000 a year separately to beat a flat 1% cash rebate card." Also visit wresnick's epinion review:

Costco accepts American Express as its only credit card. The advantage of the original card was that it gave a cash rebate, but the rebate was tiered. The new card gives a one percent cash back bonus at Costco, and on most eligible purchases. However, travel expenses earn a 2% rebate, and restaurants expenses earn a 3% rebate. The old card gave back .25% on the first $2000, .5% on the next $3000, and 1.5% on amounts above that, if you paid in full each month. So if you charged $2000 per year, you got a $5 rebate. The rebate went up by .5% for those who carry a balance, but that's not really cash back so much as a factor to be considered in conjunction with the interest rate, which is more than .5% higher than some other cards.

Assuming that you don't use the card at restaurants or for travel, you would have to charge $11,000 per year on the old card to break even with the 1% rebate on the new card. The break even point is even higher if you would use the new card for restaurants and travel, and would depend on your spending habits. For example, if you eat out at restaurants twice a month on average, and spend $50 for an average meal, then the break even point would be $15,800. For some users, the original card may be a better deal. But considering the extent to which American Express is accepted, and considering the rebates on other types of cards, it may not be the best option to use American Express for some purchases.

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