Sunday, July 22, 2012

Upgrading Legacy Credit Cards

Legacy cards can be annoying: you don't use them often because they're not as good as your primary card(s), bit you still have to use them some to keep the accounts open for the sake of average account age. Make the best of it and upgrade them to the best available cards from those banks. Just make sure you confirm that your actual account will remain unchanged, even if you get a new credit card number!

I've had my Capital One MasterCard since pretty much the beginning of time, and for that reason, I should never cancel it. Average account age plays a substantial role in your credit score, so closing your oldest accounts is generally not a good idea. However, you also should not just leave the card in a drawer, because if you go long enough without using it, then the bank will close the account on its own. I lost a Discover card account that I'd opened in 2000 to this phenomenon several years ago. I think I had a notion that the account would get closed if I didn't use it, but I didn't realize that 12 years later, I would really want another account that had been open the whole time for the beneficial effect on my credit score.

My Capital One card started life as a Plain Jane ("standard") MasterCard with a $1,000 credit limit some time late in high school. Over the years, it moved up the spectrum to a Platinum card with a larger limit (I requested the Platinum upgrade; the credit limit decisions were all the bank's and happened without me asking). I was smart enough to realize the Platinum card offered some benefits I didn't receive with the regular card, but it still took me a while to realize that I should be using a rewards card.

That led me first to the Discover Card, then later to the MBNA Platinum Plus VISA with WorldPoints (which then became a Bank of America card). Discover was not accepted at enough places to be my primary card, and in college I wasn't interested in juggling cards. I liked the Discover card, but it just didn't meet my needs at the time. I wanted one card that I could use everywhere and earn rewards.

The WorldPoints card earned one point per dollar spent, which is not bad. However, the redemptions were terrible: you have to redeem 25,000 points to get 1 cent per point of value in a $250 check. You can only redeem in 2,500 point increments. Worse, if you redeem a smaller amount of points like 2,500 points, you get just $12.50 or half a cent per point. My strategy was just to wait until I had accumulated 25,000 points and cash out for $250, but that took a long time, and the maximum of one cent per point is really the minimum anyone should be getting now for rewards or cash back value. Nevertheless, it was a good choice at the time, and I used it until two years ago as my primary card.

My fiancĂ©e had been touting American Express for years (she's been a fan since 2001), and in 2010, I got a Zync card. I've since moved up the AMEX food chain, but I'll cover that in another post. I mention it here because that was what caused me to put my Bank of America card in a drawer along with the Capital One card. I now had two legacy cards that I didn't actually want to use for spending because that would have given me poor value relative to my newer points-earning card. However, I couldn't leave  them entirely disused because then my two oldest accounts would get closed.

For the last two years, I used them enough to keep them open (my goal to use each card at least every other month) but not beyond that. It bothered me that I wasn't earning useful rewards on either card, but not enough to make me do anything about it. I was too busy with life and too excited about the other points-earning cards I had found to pay much attention to my legacy cards. However, in June, as I was upgrading to a new AMEX card, I realized I should look into upgrading my legacy cards. It was a smart move, but one I should have made much earlier.

I would have been happy moving to anything better than what I had, but the cards to which I was able to upgrade are actually pretty good, at least for some kinds of spending. It was also surprisingly easy to do. I spoke with competent, friendly reps at both Capital One and Bank of America. I was particularly surprised at how good the CSRs at Capital One were, as they have been terrible in my previous experiences with them. I have never experienced the deceptive practices for which they were just fined by the CFPB, but I know people who have been pressured alone those lines. Nevertheless, the reps from both companies were great with me for these upgrades.

Since neither Capital One nor Bank of America offers a card that would be part of my (admittedly evolving) long-term points earning strategy, I decided to go for cash rewards. Since these are never going to be cards that get a large chunk of my spending, flexible cash rewards made the most sense. I was able to upgrade my existing cards to a Capital One Cash Rewards World MasterCard and a BankAmericard WWF Cash Rewards Visa Signature.

The new MasterCard will give me 1% back on all purchases across the board, with a 50% bonus on all rewards earned that is paid out once a year on the card anniversary date. That makes the effective rewards rate 1.5%, with no annual fee or foreign transaction fee. That is good enough to be a contender for spending that would earn 1X on my primary cards, and it will be my go-to card for any foreign purchases that do not accept AMEX.

The new VISA earns 3% at gas stations, 2% on groceries, and 1% on everything else. That beats the 2% I get at gas stations with my BlueCash Everyday and Amazon Visa, and will earn my gas spending as soon as I meet the signup bonus minimum spend on the BlueCash. There are cards that earn more on gas, but none that I have right now. It also donates .25% of all purchases to World Wildlife Fund. It does not have an annual fee, but it does have a 3% foreign transaction fee so this is not a card I will use overseas.

There you have it - I was able to take two cards that were useful only for average account age and make them not only better, but sufficiently useful to contend for some of my regular spending.

I have no relationship with any credit card company beyond just being a card customer. The links above are all public links, and I receive no commission from them. 

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