How to Shop for Credit Card Deals
QUESTION: It seems like every time I go to the mailbox, there is another come-on from a financial institution wanting me to accept a credit card. I really wouldn’t mind having another card or two, but I have this nagging feeling that none of the ones making pitches to me by mail are the best deals. Is there a place I can turn to for comparison shopping of credit card terms?--I. L.
ANSWER: Several companies offer comparison services for consumers stumped by all the different rates, fees and grace periods available from credit card issuers.
One of the most complete listings is available from a Santa Monica company called Consumer Credit Card Rating Service. For $10, you get the details on 350 credit cards. Write P.O. Box 5219, Santa Monica, Calif. 90405.
Spend $2 less and you get a rundown on the 25 cards offering the lowest interest rates. The company offering this service is Bank Credit Card Observer, 120 Wood Ave. S., Iselin, N.J. 08830.
(Of course, for consumers who almost always pay off their credit card bills before the interest clock on those bills starts running, choosing the card with the lowest interest rate isn’t always the best deal. Such consumers should instead look for cards offering low annual fees or no fee at all. How many days there are in the grace period before interest is charged also is an important consideration for such consumers.)
One dollar will get you another list of cards with relatively low interest rates. Bankcard Holders of America chooses 50 cards offering interest rates of 16.5% or less for its comparison guide. For this list, write the company at 333 Pennsylvania Ave. S.E., Washington, D.C. 20003.
Q: Does the Internal Revenue Service still pay people interest for tax overpayments? Or is that yet another break we lost under tax reform?--T. G.
A: Tax overpayments are still rewarded with interest from the IRS. Currently, the agency pays 8% on such overpayments.
You are due interest on overpayments if the IRS fails to process your tax return within 45 days of the April 15 filing deadline. And if your tax return is later audited and it turns out that the IRS owes you money, you are entitled to interest on the overpayment from the return’s due date until the date the IRS cuts the check.
There was, however, a change under tax reform. Previously, the interest rate was adjusted twice a year. Now, the adjustments will be made four times a year--at the end of every quarter.
The same goes for the interest taxpayers are charged for tax underpayments. The current rate on tax underpayments is 9%. That rate, too, will be reviewed at the end of March and after all subsequent quarters for possible adjustment.
Q: I am hearing conflicting reports on whether income averaging for people who get a big pension payment from their employer is dead as of this year or not. Can you give me the definitive answer?--A.C.
A: Until this year, taxpayers who received a so-called lump sum pension distribution could reduce the huge tax bill accompanying that payment by taking what the IRS called 10-year averaging. Essentially, that entitled taxpayers to pretend that this huge boost to their gross income was given to them over a 10-year period instead of in a single year.
Tax reform did end that tax break, which for many elderly taxpayers was a financial lifesaver. But lawmakers didn’t leave such taxpayers completely out in the cold. They just cut the break in half.
Taxpayers receiving lump-sum pension payments from this year on can average the pension income over five years.
Now that we’ve said that, you should know that, as usual, there is an exception. Taxpayers who turned age 50 before Jan. 1, 1986, are still entitled to use 10-year averaging when they receive a big payout from their pension fund. In addition, they are permitted to treat as a capital gain whatever portion of their lump-sum payment was put into that pension account before 1974.
