topic Re: PenFed Cash Rewards. New annual fee..... in Credit Cards

PenFed Cash Rewards. New annual fee.....

RockinRay — Thu, 05 Sep 2013 11:38:48 GMT

Looks like PenFed is going to charge a $25 yearly fee on the cash rewards Visa.

HOW YOU CAN AVOID THESES CHANGES
To avoid an annual fee, you can obtain a qualifying PenFed product:
Active checking account with direct deposit ($250 min.)
Money Market Certificate or IRA Certificate
Mortgage
Installment loan*
Equity Loan or Equity Line of Credit with a balance

This came to me via email over night.

While it bothers me that they are making this change, I am going to suck it up and pay it as I make much more then that with the 5% on gas...

Sorry if this has been posted already.

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Thu, 05 Sep 2013 12:21:42 GMT

@RockinRay wrote:
Looks like PenFed is going to charge a $25 yearly fee on the cash rewards Visa.

HOW YOU CAN AVOID THESES CHANGES
To avoid an annual fee, you can obtain a qualifying PenFed product:
Active checking account with direct deposit ($250 min.)
Money Market Certificate or IRA Certificate
Mortgage
Installment loan*
Equity Loan or Equity Line of Credit with a balance

This came to me via email over night.

While it bothers me that they are making this change, I am going to suck it up and pay it as I make much more then that with the 5% on gas...

Sorry if this has been posted already.

Interesting. Looks like something they had briefly on the Sig Rewards card as a way to get the 5/3/1 structure each month.

Is this fee in addition to the reward reduction (to 3% after Oct)?

Re: PenFed Cash Rewards. New annual fee.....

Ron1 — Thu, 05 Sep 2013 14:29:42 GMT

@RockinRay wrote:
Looks like PenFed is going to charge a $25 yearly fee on the cash rewards Visa.

HOW YOU CAN AVOID THESES CHANGES
To avoid an annual fee, you can obtain a qualifying PenFed product:
Active checking account with direct deposit ($250 min.)
Money Market Certificate or IRA Certificate
Mortgage
Installment loan*
Equity Loan or Equity Line of Credit with a balance

This came to me via email over night.

While it bothers me that they are making this change, I am going to suck it up and pay it as I make much more then that with the 5% on gas...

Sorry if this has been posted already.

Ray,

Sorry to hear. I just checked my emai. I haven't gotten the notice yet. I heard from other forum. Some people also got the AF email. Do you have any checking with them? What are you going to do? Are you going to change into Penfed Rewards Visa?

Ron.

Re: PenFed Cash Rewards. New annual fee.....

resilient — Thu, 05 Sep 2013 17:41:57 GMT

darnit PenFed......well, I could always set an allotment for the $250 since I spend about $200 in gas a month anyway. But not looking good...a rewards card with an AF....

Re: PenFed Cash Rewards. New annual fee.....

yellowcake — Thu, 05 Sep 2013 19:41:57 GMT

Didn't get the email, may be because I already have an auto loan with them. I don't like where Penfed is going...Do you guys think it's because people are abusing the rewards?

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Thu, 05 Sep 2013 20:39:22 GMT

@yellowcake wrote:
Didn't get the email, may be because I already have an auto loan with them. I don't like where Penfed is going...Do you guys think it's because people are abusing the rewards?

I have the 5/3/1 Platinum Rewards card, and have been following this situation.

I expect that people are abusing the rewards. However, if an issuer offers a card with a 5/0.25 reward structure, then it's fair to say that people are being pointed very strongly in a particular direction -- use the card for gas only. Since the merchant fee on Visa is around 2%, I would think that this setup almost guarantees a loss for Penfed. If a person has the gas card already, and puts $1000 into a CD to keep the 5% rate grandfathered, then I'm not sure this will help the situation.

The BCP also pays out generously, but the supermarket rewards are capped, and there's a $75 fee, and both of these things tend to slow people down. It seems like Amex is shrewd about these kinds of issues.

I also think that Penfed has set up a bit of a high-wire act with their credit cards, and it's not sustainable. For example, if a person gets the new 3/2/1 Signature card, and the points are worth 5/6 of a cent, then the card is no longer competitive. This is especially so given that the underwriting requirements are so strict.

I wish that Penfed would lighten up just a tad and try to offer a more balanced package of products and services.

Re: PenFed Cash Rewards. New annual fee.....

takeshi74 — Thu, 05 Sep 2013 22:43:34 GMT

@RockinRay wrote:
Sorry if this has been posted already.

I haven't seen this posted or received an email from PenFed yet. Thanks for posting.

@yellowcake wrote:
Do you guys think it's because people are abusing the rewards?

How are people abusing 5% on gas (at the pump) and 0.25% on everything else?

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Fri, 06 Sep 2013 00:52:09 GMT

@takeshi74 wrote:
@RockinRay wrote:
Sorry if this has been posted already.
I haven't seen this posted or received an email from PenFed yet. Thanks for posting.

@yellowcake wrote:
Do you guys think it's because people are abusing the rewards?
How are people abusing 5% on gas (at the pump) and 0.25% on everything else?

This certainly doesn't sound like a card that is easy to "abuse" (scare quotes because one person's abuse is another's reward maximization).

Because it uses the automated fuel dispensor MCC, you can't do things like buy gift cards at 5% at a gas station with this card (well,one person on FT says that they did, but others are skeptical)

Probably just too many people buying too much gas (and boat/plane gas is meant to be only 1%). As has been noted, the structure of the rewards almost forces it to be unprofitable, almost no-one will use the "other" category at 0.25%

So my guess is that it is unprofitable for Penfed with just normal use.

Re: PenFed Cash Rewards. New annual fee.....

-Wade- — Fri, 06 Sep 2013 01:20:31 GMT

PenFed Platinum Cash Rewards Visa® Card

Re: PenFed Cash Rewards. New annual fee.....

Travis-84 — Fri, 06 Sep 2013 03:03:14 GMT

Its very said. I think its the end of an era as far as great rewards credit cards go. For those interested, penfed has 584,423 people who have their credit cards. They have a liabilty of 1.559 billion, or an average of 2,668. (data as of June 30th.) I wonder how many people are going to abandon ship in the next year or so. I don't think the number of cards will decrease too much, since a lot of people will just use it less and not cancel, but I bet the liabilites will go down if people start using the card a lot less.

Re: PenFed Cash Rewards. New annual fee.....

drew11 — Fri, 06 Sep 2013 05:18:40 GMT

This was my very first card and closing it would really hurt my AAoA. I wouldn't mind paying the $25 if I kept getting 5% back on gas but now that's changed too.

I'm not sure what I should do and was wondering if you guys could offer some advice. I understand that you could continue to get 5% on gas if you sign up for one of the following:

-active checking account with direct deposit ($250 min.)

-money market cerrtificate or IRA certificate

-mortgage

-installment loan

-equity loan or equity line of credit with a balance

I already have direct deposit and a good checking account system set up with Chase and really don't want to change that. I also do not need a mortgage at this time.

However, I'm not too familiar with the rest of the options (only knowledgeable about credit cards at the moment haha). Would I be able to obtain one of the other options without really losing any money? I wouldn't mind setting aside some money for an option as long as I wouldn't lose money/have to pay interest in the long run.

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Fri, 06 Sep 2013 05:23:22 GMT

My understanding is that satisfying one of those conditions allows you to avoid the AF, but the change to 3% is unavoidable for charges incurred after the October statement cuts. They are just downgrading the reward for everybody, and collecting an AF from their less profitable relationships.

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Fri, 06 Sep 2013 05:31:48 GMT

@drew11 wrote:
This was my very first card and closing it would really hurt my AAoA. I wouldn't mind paying the $25 if I kept getting 5% back on gas but now that's changed too.

I'm not sure what I should do and was wondering if you guys could offer some advice. I understand that you could continue to get 5% on gas if you sign up for one of the following:

-active checking account with direct deposit ($250 min.)
-money market cerrtificate or IRA certificate
-mortgage
-installment loan
-equity loan or equity line of credit with a balance

I already have direct deposit and a good checking account system set up with Chase and really don't want to change that. I also do not need a mortgage at this time.

However, I'm not too familiar with the rest of the options (only knowledgeable about credit cards at the moment haha). Would I be able to obtain one of the other options without really losing any money? I wouldn't mind setting aside some money for an option as long as I wouldn't lose money/have to pay interest in the long run.

Closing it MIGHT hurt you in 10 years time. Closed cards continue to report for about 10 years. So not an issue in the short/medium term, and in the long term your credit situation will be different (hopefully even better!).

The thing about taking those options: It's not at all clear that you can keep 5% with those options (this was briefly the case with Platinum Sig, but that changed). Doesn't the email state that that is the way to avoid the AF only?

Edit: Elcid89 beat me on the second point. Things are subject to change with Penfed it seems. Some people opened CDs to get the 5% with the Plat Sig, but then the policy changed so that there is no way to avoid the downgrade, leaving people with unwanted CDs. I guess people are less likely to do that merely to avoid a $25 AF.

Re: PenFed Cash Rewards. New annual fee.....

drew11 — Fri, 06 Sep 2013 05:33:58 GMT

Received a letter in the mail today explaining that there will be an annual fee of $25 starting October 26 and that gas will be 3%. On the back side of the letter it says "How you can continue to earn 5% on gas purchases" and states exactly what I posted before.

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Fri, 06 Sep 2013 05:35:16 GMT

The idea behind 5%/.25% card was dumb as others pointed out. Pretty much guarantees it is a money losing card for them. Their best bet would have been to convert all the cards to VISA Sig to get higher swipe fees (I bet most/all existing cards meet 5k minimum) and then change card to 5%/1.25% or 5%/1.5% card. I bet they would have made more money. Probably get swipe fees to 3% or so and then get a bunch more non gas swipes.

Re: PenFed Cash Rewards. New annual fee.....

drew11 — Fri, 06 Sep 2013 05:35:33 GMT

Even has a table at the bottom saying in one column "without qualifying products" and that you would be getting 3% for gas, 0% for all other purchases, $25 annual fee and no foreign fee. Then another column for "with qualifying product" containing 5% for gas, 0% for everything else, no annual fee and foreign fee.

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Fri, 06 Sep 2013 05:37:28 GMT

Not to sound testy, but if you already knew the answer, why did you ask us the question?

Re: PenFed Cash Rewards. New annual fee.....

drew11 — Fri, 06 Sep 2013 05:40:19 GMT

I asked for clarification on the options not on whether the options would work. I'm young and have only dealt/learnt about credit cards. I understand one user spoke of opening a 7-year savings certificate but I wasn't sure if that would work or if that was one of the options they had listed.

Basically I want to know if there is any way of being able to gain the 5% back without losing any money, that's all!? (I wouldn't mind putting aside some money for a period of time to gain the rewards)

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Fri, 06 Sep 2013 05:47:37 GMT

@drew11 wrote:
I asked for clarification on the options not on whether the options would work. I'm young and have only dealt/learnt about credit cards. I understand one user spoke of opening a 7-year savings certificate but I wasn't sure if that would work or if that was one of the options they had listed.

Basically I want to know if there is any way of being able to gain the 5% back without losing any money, that's all!? (I wouldn't mind putting aside some money for a period of time to gain the rewards)

Their rates aren't high enough to justify (IMO) locking up cash in perpetuity just to get a reward on a credit card. You could earn pretty close to their certificate rate at an online FSB like Amex (currently 0.85% and you aren't locking up the cash beyond access).

If you honestly are determined to keep the additional 2%, I'd look into direct depositing the absolute minimum ($250) into a Penfed deposit product. Some employers will allow you to split DD to multiple institutions. I'm just not sure that the additional 2% you gain by jumping through these hoops will outweigh the gains that could be earned elsewhere with the capital.

They are trying to motivate you to move your banking relationship to Penfed, IMO.

Re: PenFed Cash Rewards. New annual fee.....

Anonymous — Fri, 06 Sep 2013 05:48:47 GMT

@drew11 wrote:
I asked for clarification on the options not on whether the options would work. I'm young and have only dealt/learnt about credit cards. I understand one user spoke of opening a 7-year savings certificate but I wasn't sure if that would work or if that was one of the options they had listed.

Basically I want to know if there is any way of being able to gain the 5% back without losing any money, that's all!? (I wouldn't mind putting aside some money for a period of time to gain the rewards)

It depends what you mean by losing money. You can open a 6 month or longer CD with them, and the rates are OK. (You can get higher elsewhere but if you weren't planning on getting a CD before, maybe that doesn't matter). The longer the period of the CD, the higher the rate, and you will get 5% only if the CD is still "active" (so a 6-month CD would give you the 5% for 6 months, for example).

But since they kept changing the conditions on the Plat Signature, I wouldn't be sure that this policy will hold either.