5 Credit Card Moves To Make In A Coronavirus World
Eventually, we’ll get back to normal. Or so we’re told. The truth is that COVID-19 will change our behavior for the foreseeable future. Chances are the credit cards you hold now are due for a rethink in light of our new reality.
You could contemplate moving to a low or no-fee version of the same card family or think about cancelling a card altogether. Some tips on how to manage the downgrading process and what to consider before you make the move.
On the other hand, there are solid reasons to consider picking up a new card or two if they fit your current situation. Here are some prompts to help you think about what to add, what to keep and what to let go.
1. Consider the Upcoming Storm
The adage “saving for a rainy day” can apply to your ability to borrow as well as your savings account. California-based venture capitalist Shubhayan Mukherjee decided that now was the time to expand his credit lines.
“We applied for several cards in March around the time when the COVID-19 Stay-At-Home orders in California started because I believe access to credit will become harder in the coming months and banks will also tighten their approval process as more people start defaulting or running up large amounts of unsecured debt on their credit cards.”
Another way to sail smoothly through a storm is to consolidate your higher interest cards into a 0% interest rate card that you can pay off when business picks back up.
Mukherjee took advantage of a 12 month 0% interest offer (followed by the ongoing variable rate) for the Chase Ink Business Unlimitedâ Credit Card* that allowed his business “to transfer the credit lines from other Chase business cards [in order] to enjoy a no interest loan during this time.” He estimated that he saved thousands of dollars in interest by activating the offer.
Here are some strategies that will help you use a 0% card as a short term loan.
2. Take a Look at Where You’re Spending
With our newfound homebody status, chances are you’re doing a lot of your shopping online. In 2019 e-commerce represented 16% of our shopping; in 2020 that number is poised to skyrocket.
For many of us, that means one word: Amazon. If you’re already an Amazon Prime member (and if you aren’t, you probably will be soon), the Amazon Prime Visa Signature Card* could be a real contender for the number one spot in your wallet. If you’re a Prime member, the card has no annual fee and offers 5% cash back on Amazon and Whole Foods purchases. The cash back will add up quickly as we move even further away from brick and mortar shopping.
On the other hand, one of the perks The Platinum Card® from American Express features is $100 annual credit to Saks Fifth Avenue. Designer office wear and luxury makeup make a lot less sense if you don’t see anyone but the delivery driver and an occasional colleague on Zoom.
John H., a small business owner in New York, shared his thoughts about paying $725 (see rates and fees) for he and his wife to hold the Platinum Card: “If I can’t use the [airline] fee credits, I’m not using the Uber credits and we’re not really using the Saks credits, that’s a really, really big number to pay when the perks you pay for aren’t available.”
3. Consider Which Category Bonuses Make Sense
Another way to evaluate your credit card portfolio is to take a look at which cards are giving you extra points or cash back for purchases you already make.
A card that capitalizes on your newfound love for online shopping is the Rakuten Visa Card. Rakuten, formerly Ebates, is a cash back portal that pays you a rebate for using their site to begin your online shopping. The card pays an extra 3% cash back for online purchases made using the card when you enter through Rakuten.
Best of all, you have the choice of earning either cash back or American Express Membership Rewards points, which oddly makes a Visa card among the best ways to rack up American Express Membership Rewards. Mukherjee added a Rakuten Visa to his portfolio “because all our shopping has now become online during the Stay-At-Home order in California.”
Michael Romero, an accountant from Florida, has reevaluated his relationship with the Chase Freedom® credit card*. The card offers 5% cash back on different categories of spending each quarter (limited to $1,500 in purchases). Quarter 1 2020 included gas stations precisely when gas spending tanked.
He also realized that “I still have American Express and Chase [cash back] offers I haven’t been able to use because it requires a non-essential trip.”
The Chase Freedom Card doesn’t have an annual fee so there’s no incentive to cancel, but Romero notes that his change in spending patterns has also changed what card he goes for first.
4. Spring Clean Your Wallet
Our hands aren’t the only thing COVID-19 is reminding us to keep clean. It’s also a good time to take a good look at the credit cards you hold. What still works for you and what should go in the trash bin?
Are there any holes in your credit card portfolio that you can fill while interest rates are low? Just like our closets, your wallet probably also holds some stuff that just doesn’t fit anymore.
5. Manage Your Annual Fees
The most immediate change for Americans facing record-breaking unemployment numbers may be income loss. If that’s the case for you, credit card annual fees you didn’t think twice about paying before COVID-19 might require reconsideration.
Kathy Little is a small business owner in Mississippi who has seen significant losses due to COVID-19 and fears more losses if the situation continues for long. She puts it plainly, “We are focused on keeping the lights on, feeding the family (grandparents included since they can’t get out) and keeping a roof over our head.
There is no “extra” spending now and not foreseen for months down the road.” She has cancelled two Chase cards and plans to cancel a high fee American Express card as well, saving close to $1,000 in annual fees.
