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Capital One's new cash-back rewards credit card offers many benefits

August 29, 2011

| Money Rates Columnist

The ink wasn't even dry on Capital One's offer to buy ING Direct than the card issuer unveiled the head-turning new Capital One Cash Mastercard that offers 1.5 percent cash back.

The company's new Capital One Cash MasterCard gives customers 1 percent cash back on all purchases--immediately--and then another 50 percent back on their total cash-back rewards each year on the anniversary of getting the card. You can also get a one-time $100 bonus if you spend $500 in the first three months.

In other words, if you get the card on December 15 and put $10,000 in purchases on the card over the next year, you'll get $100 in cash back throughout the year and then another $50 on December 15 the following year. You can get the cash back as a check or as a credit on your monthly bill and you can automate the rewards process so you don't have to remember to request it. It's one of the best credit card offers to come along in a while.

In another incentive to apply, you can also get a one-time $100 bonus if you spend $500 in the first three months.

Credit card benefits you receive

There is no annual fee on the Capital One Cash MasterCard and there are a number of other reasons to apply for credit from Capital One, including:

  • There are no minimums or limits on how much cash you can get back.
  • The annual bonus continues for as long as you have the card and keep it in good standing.
  • You get 24-hour travel assistance so you can get help if your car breaks down or you get locked out.
  • You get travel accident insurance when you use your card to pay for travel, and you are covered for collision, damage and loss when you rent a car with the card.
  • You get additional warranty protection on items you buy with the card.

Application requires excellent credit score

If you want to make a successful application for the Cash MasterCard, you will need to have a first-class credit score, typically in the high 700s on the FICO scale. According to the Associated Press, this usually means:

  • You have no payments that were later than 60 days on any type of loan or medical bills.
  • You have no history of bankruptcy or defaults.
  • You have a loan or credit card that is at least three year old with a limit of more than $5,000.

A good credit score could also earn you the best credit card rates on the Capital One Cash MasterCard. Although the introductory rate of zero percent will last through October 2012, the rate will range from 12.9 to 20.9 percent after that, depending on your credit score. The variable rate will be based on the prime rate.

Capital One's expansion plans

Capital One recently proposed buying ING Direct for $9.2 billion, which would allow it to use ING's deposits to help finance credit cards like this one. Capital One previously acquired HSBC's $30 billion credit card portfolio, giving it nearly 10 percent of the U.S. credit card market, according to the New York Times.

The acquisition of ING still has to be approved by the Federal Reserve, which under the the Dodd-Frank Act must determine if the expansion of Capital One makes it "too big to fail"--in other words, large enough that its failure would undermine the entire U.S. banking system. Capital One has already argued that this expansion makes it a more solid company, the Times reported.

And that's good news to anyone who wants to apply for credit from Capital One. As the Times reported, Charles Schwab introduced a 2 percent cash-back card some years ago before getting out of the card business altogether.

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