The Card For The Rest Of You

Regular readers know that I am the high priest of the Deadbeats. That is to say, I am among the strongest advocates you will ever find for always paying your balance in full and on time. That said, I am painfully aware that we deadbeats are in the minority out there. The majority of credit card users do carry a balance. Today, I would like to suggest a card for rest of you.

Forget Rewards

If you regularly carry a balance, letting go of the idea of a reward card should be the first step you take when selecting a credit card. There are two reasons you should not consider any travel rewards or even a cash back card. For one, cards that offer rewards almost always come with a higher interest rate. When carrying a balance, even a small increase in your APR will overshadow whatever reward they are offering you. When you do the math, you will find that you are spending extra dollars in interest in order to make pennies in rewards. The second reason is that earning rewards for spending is exactly the wrong incentive for someone carrying a balance. The reason you have a balance is that you spent more than you could afford to pay at the end of the month, offering your a reward for spending more is a perverse incentive. One might as well offer free drinks at an Alcoholics Anonymous meeting!

PenFed Comes Through

The Pentagon Federal Credit Union, or PenFed is offering a card that is well suited to people who carry a balance. It is called the PenFed Promise VISA Card, and it offers a spectacular 7.49% APR for the first three years. After that it floats to Prime plus 6.74% (which is currently 9.99%). There is no annual fee, but the card is only available to qualifying members of the military and others, both active and retired, as well as their families. Anyone else can pay $20 a year to join the National Military Family Association, which entitles you several benefits including an account with PenFed.

Why This Card Is Incredible

When I took a look at the summary of terms I had to do a double take. No late fees. No foreign transaction fees. No Over The Limit Fees. According to Ron Lieber at the New York Times, they will cut off your card if you pay late. Other than that, PenFed will all but pay your balance for you.

The Political Implications Of This Card

President Obama has gone on record calling for banks to offer a simple, “plain vanilla” credit card. Other have started a grass roots movement to move your money away from big banks like the ones that were behind the recent economic crisis. The PenFed card is an answer to both of those movements. By offering a low interest, no fee credit card from a respected credit union, you can enjoy a low APR while avoiding all the tricks and traps as you pay down your credit card balance.