Kiplinger’s is quickly becoming my favorite personal finance and investing magazine. I find it has some very useful articles that help me manage our money and investments. Last month Kiplinger’s had an article about a new kind of credit card called the Barclaycard Ring MasterCard. In this month’s magazine, a reader named Corey wrote a letter to the editor singing the praises of the card. So I dug into the details for this review.
The key feature of the Barclaycard Ring MasterCard is its low interest rate. It currently sports a variable APR of just eight percent. While that seems like a great feature, I wouldn’t be too sure. In fact, just last week in my weekly column for U.S. News, I wrote about how Low Rate Credit Cards can be a Rip-Off. In a nutshell, there are three related problems with low rate credit cards:
- Low interest cards require excellent credit to qualify;
- If you do carry a balance from month-to-month, an interest free credit card is a much better option; and
- Low interest cards rarely offer cash back or other rewards.
The Barclaycard Ring card is a perfect example of these shortcomings. It’s a tough card to qualify for, doesn’t offer 0% on balance transfers or purchases, and has minimal rewards.
So why is Kiplinger’s writing about this card? Two reasons. First, any credit card that charges single digit interest rates will get some attention. The average rate today on a credit card is nearly 15%, so an 8% rate is an eye-opener. Second, and more important, the Barclaycard Ring has taken a very unique approach with its cardholders.
A Kinder, Gentler Credit Card
Imagine a credit card company disclosing to its cardholders exactly how much money it has made. And then actually giving some of its profits back to its cardholders much like a profit sharing plan. Barclaycard calls this its Giveback™ program.
As interesting as this is, my first reaction was that Giveback™ is nothing more than a cash back card with lots of fancy marketing. There is, however, at least one difference. Cardholders can decided to give their “profits” to charity rather than receive the cash. But of course, you can always decide to do that with the money you receive from a cash back card.
So all of this prompted me to dig into the terms and conditions of the program. Here’s what I found:
For purposes of the Giveback™ program of your Barclaycard Ring MasterCard®, there is a profit sharing feature. This profit sharing feature is not based on the actual profits of the program. Instead, the Giveback™ program contains a transparent calculation that is used to determine what will be shared with the community members and which may or may not approximate actual profits. The Giveback™ program and the profit sharing features are offered at our sole discretion. We may discontinue the program at anytime. You have no property or other legal right in any aspect of the Giveback™ program, including profit sharing amounts that have yet to be distributed and amounts forfeited as a result of account or Program closure. In addition, your account must be in good standing at the time the Giveback™ is distributed to receive the Reward. The transparent calculations for the Giveback™ program are provided online. To be eligible for Giveback™ you do not need to register online or visit the website. The Giveback™ amount will be presented only online; however, you are not required to log in to receive the reward.
Did you notice the one big thing missing from the terms and conditions? The program doesn’t tell you how much you’ll receive. With a cash back card, you know exactly what rewards you’ll receive based on your purchases.
So where does that leave us? Well, like with most “low interest” cards, you have better options elsewhere. If you carry a balance, a 0% balance transfer card is a better option. If you want rewards, any of the many cash back or rewards cards will likely beat the profit sharing idea of the Ring MasterCard. Indeed, even the Barclaycard® Rewards MasterCard® - Excellent Credit is a better option in my opinion. Your interest rate will be higher, but you get these rewards:
- Earn 5,000 points, equal to a $50 statement credit, after your first purchase or balance transfer
- 0% Introductory APR for 15 months on purchases and balance transfers
- No annual fee
- Earn 2 points per $1 on gas, grocery, and utility purchases
- Earn 1 points per $1 everywhere else
- Use the points you earn like cash to pay for almost any purchases you’ve made.
- No blackout date, no redemption fees, no limit on the points you can earn and no complicated set up.
- This offer is for individuals with a good to excellent credit history which amongst other things is clear of bankruptcy and delinquent accounts
With all of that said, I do think Barclaycard deserves some credit for thinking outside the box. It’s refreshing to see a credit card issuer involve cardholders to this extent and offer a card with very reasonable fees and an excellent interest rate. It will be interesting to see if Barclaycard can integrate some of these features into its rewards card.