3 Ways to React When Your Credit Card Terms Change

by Kevin on May 16, 2011

I have long been a fan of American Express’ Blue Cash credit card. One of my first posts I wrote on this blog was how credit cards were not evil, and I talked about earning over $400 in cash back rewards with the Blue Cash card. We’ve been using it wisely for years, racking up cash back, and going on about our lives. (And don’t get me started on how credit card “victims” don’t pay for my cash back. Simply untrue.)

But recently American Express changed the terms on the Blue Cash card. My understanding is my current program is still grandfathered in, but there are two options I can choose from if I want to permanently change how rewards are earned.

Here’s a breakdown of my options:

Cash Back On...Current CardFree Upgrade OptionPremium Upgrade Option
Groceries1% up to $6,500 total spend then 5%3% on all transactions6% on all transactions
Gas Stations1% up to $6,500 total spend then 5% (at drug stores as well)2% on all transactions (at department stores as well)3% on all transactions (at department stores as well)
Everywhere Else0.5% up to $6,500 total spend then 1.25%1% on all transactions1% on all transactions
Annual Fee$0.00$0.00$75.00

As is I haven’t made any changes simply because I haven’t had a chance to sit down and really look at the options. I can say up front I would have to spend a ton of money every year to justify the annual fee. The rewards you earn would have to overcome a $75 annual fee. In fact you would have to buy $1,250 worth of extra groceries every year at 6% to overcome the $75 fee.

Maybe you’re not look me, and you are covered up in credit card debt. You get notice that the terms and conditions of the card have changed. Either way, whether a rewards or interest rate change, you need to react.

What Not to Do: Ignore Changes

The only thing you absolutely cannot do is ignore the changes. Even if they turn out to be good changes that save you money or earn you higher rewards, ignorance is not bliss. This is especially true if the changes are negative and you have a set period of time to react before it starts costing you additional money.

Not reacting is not an option.

What to Do: Analyze

At the bare minimum you should analyze the changes that have been made. In my situation I need to analyze my overall spending as well as my categorical spending. I need to know whether or not I currently hit the $6,500 mark every year, and if so, how much further above that spending limit I go. If I go well above the $6,500 cap and a majority of my spending is in the 5% rewards category, it might be in my benefit to not make any changes at all.

Then again if my habits have changed and I no longer spend a ton of money on my credit card, I might be better served to make the change to the 3% rewards on all my grocery transactions. If I don’t go over $6,500 then I’m only earning 1.5% on those purchases anyways. Making a change would double my rewards.

What to Do: Change if Necessary

Once you’ve analyzed how the changes will impact you: you’ll earn less/more rewards, you’ll pay less/more interest, and so on, make a change if it is necessary. Look at other credit card options, or look to change your account with the current credit provider.

Just like you don’t want to ignore the changes, you also don’t want to just make wholesale changes without really thinking the process through. Staying put may actually the best option for your situation.

In my situation I have shifted a big portion of my spending to rewards checking accounts and our overall credit card spending has fallen dramatically. We’ve only earned about $160 in cash back this year. I’m not complaining, that is free cash, but we’ve earned far more in interest on our new accounts. So it probably makes sense for us to change once the rewards year starts over.

{ 1 comment }

Golfing Girl May 16, 2011 at 7:47 pm

I’ve got this card as well and haven’t seen anything about the changes yet–only that you could start claiming them in $25 increments, versus getting a lump sum at the end of the year, as I’ve done in previous years.

For me, the choice is easy, we usually hit the $6500 threshold by about April, so the rest of the year, we’re at the 5% and 1.25% thresholds for 8 months of the year, and I don’t know of any other card that pays 1.25% cash back on all purchases, regardless of the category. And most of our spending is in the gas and grocery categories, so last year we averaged 2.5% cashback on ALL purchases. I don’t know of another card that can match that, with no annual fee.

5% back on gas is going to help a lot when prices keep climbing…in fact I’m wondering if that is the catalyst for the change–they’re going to be paying a lot more back because of gas prices.

Comments on this entry are closed.