MONEY credit cards

The Best Credit Cards for Holiday Shopping

credit card purchase of holiday present
Lucas Lenci Photo—Getty Images

'Tis the season to spend! These cards can help take some of the pain out of your purchases by giving you cash back, protection against price drops and extended warranties.

The holiday season is upon us, which means it’s time for you to open your wallet.

The average American expects to spend $781 on presents this year, according to Gallup—the most since 2007. Use the right plastic, though, and you can shave some off that bill, or at least get more for your money.

Below you’ll find the best cards for rewards, price protection and extended warranties. They should make your holiday a little more merry. Ho, ho, ho.

Best for Holiday Rewards

Two no-fee cards—the Discover It and Chase Freedom—are offering Christmas shoppers fat cash back.

From October through December, Discover It cardholders can receive 5% back—on purchases up to $1,500—at online retailers that include Amazon and Zappos, and department stores like Bloomingdale’s and Sears.

Discover also has a robust online shopping portal—ShopDiscover—where its customers can earn additional cash back simply by using the online mall. So combining ShopDiscover’s 10% back from with the 5% back that the card gives you normally, and you’ll reap $15 on a $100 purchase.

Over the same time period, Chase Freedom also offers shoppers a chance to earn 5% back on up to $1,500 of their holiday gift list.

The Freedom limits online discounts to Amazon and Zappos, but has a varied department store list that includes JCPenney, Kohl’s and Nordstrom. Also, Freedom cardholders usually receive a $100 sign-up bonus—although that’s been bumped up to $200 for a limited time—if you spend $500 in the first three months of opening the card. And you can receive $25 for adding an authorized user and making a purchase within 90 days. So you have the possibility of earning up to $300 by year’s end.

Best For Price Protection

Some issuers and networks offer price protection on certain purchases, meaning they will reimburse you the difference when the price of an item you’ve bought drops within a specific period of time.

“Having managed benefits for an issuer in the past, I can tell you that very few consumers are aware of the coverage they may have,” says Ben Woolsey of “I would be amazed if one in 100,000 consumers ever makes a claim.”

Not every item is covered (generally not cars or event tickets or anything off eBay), and refund maximums are limited per item and per year. But you can still save yourself some significant dough—not to mention fits of rage—when you see an expensive television you bought at full price go on sale a few days later. Plus, the price protection windows tend to be long enough that if you buy now you’ll be able to take advantage of steep after-holiday discounts.

Citi Price Rewind offers a max refund of $300 per purchase and $1,200 per year, and gives you 60 days to receive the lower price. Unlike Discover and MasterCard Price Protection, you don’t have to keep track of your own purchases, notice if the price drops and submit a claim. Instead you register the item on the Price Rewind site and it notifies you if the price has dropped.

Of the three major protection programs, Discover has the most generous refunds ($500 per claim and $2,500 per year) and the longest time to submit a claim (90 days). MasterCard, meanwhile, gives you 60 days and limits your refunds to $250 per item and four claims a year. For more details on these three major programs, see NerdWallet’s roundup.

A great no-fee rewards card that includes this insurance is MONEY Best Credit Card winner Citi DoubleCash. You’ll receive an unlimited 2% cash back on everything—1% when you swipe the card and 1% when you pay your bill—in addition to a price protection program that requires the least amount of work on your end.

Best for Extended Warranties

Are you among the 31% of consumers who buy extended warranty programs each year? Well, skip that expensive insurance—MONEY generally doesn’t think the plans are worth the price they go for anyway—and use the right piece of plastic.

Credit card networks (Visa, MasterCard, American Express and Discover) typically offer a similar type of protection. recently released a report on which network offers the best extended warranty, and selected Amex as the winner. All Amex cards are eligible for extended warranty, and unlike Discover or MasterCard, the program covers refurbished items as well as failure due to wear and tear.

If you’re in the market for a new card and want this kind of protection, your best bet would be MONEY Best Credit Card winner Blue Cash Preferred. You’ll receive 6% on groceries on your first $6,000 spent, and an unlimited 3% back on gas. Moreover, you’ll receive a $150 sign-up bonus if you spend $1,000 in the first three months, which more than makes up for the $75 annual fee.


Don’t Get Suckered into Signing Up for Store Credit Cards this Holiday

Money’s Best Credit Cards of 2014

RELATED: Money 101: How to Pick a Credit Card

MONEY credit cards

Don’t Get Suckered Into Signing Up For These Credit Cards

retail store financing is a bad deal
Sarina Finkelstein (photo illustration)—iStock

The sales clerk will try to lure you in with discounts and 0% financing—but may not tell you that the card could ultimately cost you more than it saves you.

This time of year, retailers start to turn up the advertising on their promotional payment plans—0% interest for six months! Special financing for a year with a 15% discount on your purchase!

With offers like those, you might be tempted to consider paying for little Sally’s Disney Frozen doll/dress/lunchbox with store financing or a brand new store-specific credit card.

But beware: A new study by CardHub found that many of these promotions have potentially costly caveats in the fine print.

Among the 69% of major retailers surveyed that offered financing options, half currently have what’s known as a deferred-interest plan.

With these payment programs and credit cards, you’re told that you won’t be charged any interest for the first six months or more. But even if finance charges aren’t showing up on your monthly statement, “shadow interest” is accumulating behind the scenes, explains Gerri Detweiler, director of consumer education at Once the grace period ends, consumers who haven’t paid off their balance in full—or in some cases, who have simply made one late payment—will see a lump sum of back interest added to the remaing balance.

Lots of people end up in this worst-case scenario. According to the Consumer Financial Protection Bureau, 43% of subprime borrowers who use this kind of financing are retroactively charged interest on their purchases.

And the missteps can be very costly: The CardHub study found that, under a deferred interest payment plan, paying off your credit card debt one month behind schedule or missing a single payment could increase your financing costs by more than 27 times.

“At that point, you have to give yourself an ‘F’ because you didn’t accomplish anything, you just deferred interest instead of eliminating it,“ says John Ulzheimer, credit expert at

There are other reasons to be wary of retail credit cards, too. A recent analysis by revealed that the average annual percentage rate on cards was 23.23% vs. 15.03% on general-use cards. And Ulzheimer says the high interest rates—combined with low credit limits—amount to subprime lending terms.

Additionally, store financing can impair your future borrowing prospects if you’re not careful. Low credit limits make it easy to spend close to your maximum, and 30% of your credit score is affected by the ratio of credit used to available credit.

No wonder a recent study showed 49% of Americans who opened a store card during the holiday season regret having done so.

That said, retail cards aren’t always a bad idea. The discount or free financing window can make sense for a rare big-ticket purchase; you just have to make sure you understand the terms beforehand. The cash register is not an ideal time to make a decision about opening a new card, Detweiler says, but if you’re stuck in this situation, at least take your time to read the fine print.

Then, put a strategy in place to make timely payments that will cover the cost of the purchase before the grace period ends.

“The way to protect yourself is to divide up the balance by the number of months left, plus a little extra, then set up auto payments from your bank account,” Detweiler says.

Want to know a better way to pay? See our related story on the best credit cards to use for holiday shopping.

RELATED: The Dark Side of Retailer Credit Cards

MONEY credit cards

This Is Why Prepaid Cards Are Still Risky

swiping card
Erik Isakson—Getty Images

You might not be able to recover your money if your card is lost or stolen. The Consumer Financial Protection Bureau wants to change that.

Over the past five years, prepaid cards have become an increasingly popular alternative to debit and credit cards. Last year, 12% of households used the cards, which can be loaded with cash and used like debit cards.

They’re especially popular among millennials, whom surveys have found to be credit card averse and distrustful of financial institutions. More than 25% of people aged 25 to 34 years old used prepaid cards last year, according to a survey from the Federal Deposit Insurance Corporation. And among people without bank accounts—who are typically lower income—27% used them, up from 12% in 2009.

People without bank accounts are also more likely to rely on the cards for critical financial transactions. Almost 80% of unbanked households with prepaid cards used them to make everyday purchases, pay bills, or receive payments. Some even say the main reason they use prepaid cards is to “put money in a safe place” or “save money for the future.”

What these people might not know is they’re taking a risk, since prepaid cards don’t have the same legal protections as other kinds of plastic. Right now, if you lose your prepaid card, or if someone steals your card and uses it, you might not be able to recover all of your money, depending on the terms of your contract.

The Consumer Financial Protection Bureau wants to change that. On Thursday, the agency proposed new rules that would require prepaid cards to offer the same kind of fraud and lost-card protections that credit cards have, along with other kinds of protections.

“Consumers are increasingly relying on prepaid products to make purchases and access funds, but they are not guaranteed the same protections or disclosures as traditional bank accounts,” CFPB Director Richard Cordray said in a statement. “Our proposal would close the loopholes in this market and ensure prepaid consumers are protected whether they are swiping a card, scanning their smartphone, or sending a payment.”

The biggest deal of the new proposal is that it would limit your liability for fraudulent charges. Under the new rule, if your prepaid card were lost or stolen, the most you would pay for unauthorized charges would be $50, as is the case with credit cards.

The new rules would also require that financial institutions send you statements about your balance, offer you opportunities to resolve errors like double charges, and disclose more information about fees, on a form that looks like this. That’s important because prepaid cards sometimes charge high fees for activation, balance inquiries, and inactivity.

The proposal would also add protections to prepaid cards that allow users to overdraw into a negative balance, such as imposing limits on late fees.

The CFPB hasn’t implemented the changes yet. The proposed rule will be open for public comment for 90 days before the CFPB decides whether to issue a final rule.



How Square Will Disrupt the Banking Industry

Square reader
Zuma Press—Alamy

The sky is the limit for Square's still-incipient program.

Some industries are riper for disruption than others. And if there was any doubt about the vulnerability of banks, then Square Capital’s announcement that it has now advanced $75 million in financing to small businesses over the last year serves as a not-so-subtle reminder.

To be fair, Square Capital is still in its infancy. While its latest milestone is an achievement, particularly when you consider that Square’s cash-advance service is only a year old, it pales in comparison to the bank industry’s nearly $8 trillion in outstanding loans.

But, as Square has proven in the payments space, disruption by its very nature begins with a small beachhead from which later offenses can be waged.

An industry ripe for disruption

The fact that so many alternatives to traditional banks have flourished in the years since the financial crisis should come as no surprise given the industry’s well-deserved reputation for running roughshod over customers.

Its list of misdeeds is long and growing. Among other things, the nation’s biggest lenders have been accused of:

  • reordering debit-card transactions to maximize overdraft fees
  • fixing ostensibly neutral credit card arbitration hearings
  • illegally foreclosing on thousands, if not millions, of homeowners
  • manipulating bond, energy, currency, and interest rate markets

And those are just the most widely publicized allegations that come to mind. Consumers and small businesses would be excused, in other words, for welcoming any and all assaults on the bank industry’s traditional stranglehold over the nation’s finances.

Just recently, for instance, Wal-Mart WAL-MART STORES INC. WMT -3.1236% teamed up with Green Dot Bank GREEN DOT CORP. GDOT -23.1738% to offer checking accounts to customers of the retail behemoth, many of whom have been intentionally shut out of the bank industry. Meanwhile, deposits at the nontraditional Bank of the Internet BOFI HLDG INC BOFI 0.3271% have increased from $570 million in 2008 to more than $3.2 billion today — a sixfold spike.

The nuts and bolts of Square Capital

It’s in this vein that Square Capital has begun offering select customers of its payments service the opportunity to acquire financing to grow their business. “Because we process our customers’ transactions, we have a unique insight into the growth and momentum of their businesses that allows us to make smart financing decisions,” Square’s Faryl Ury told me.

Source: Square.

The process works like this: Square identifies existing customers with substantial cash flows, reaches out to them, and then offers financing. But instead of charging interest, Square assesses, in essence, a one-time fee equating to between 10% and 14% of the agreed-upon advance.

I say “in essence,” because the deal is actually structured more along the lines of a repurchase transaction, as opposed to a loan. That is, in exchange for the cash advance, the merchant sells Square a portion of heavily discounted future cash flows, which are designed to be paid back over a 10-month period — though, strictly speaking, there is no set duration, as the financing is satisfied via a remittance of a set percentage of ongoing cash receipts.

Here’s how Square explains it:

With Square Capital, businesses sell a specific amount of their future card sales to Square and in return the seller receives a lump sum payment. Businesses automatically pay Square as a set percentage of daily card sales, so they pay more when sales are strong and less if things slow down. Square leverages its data-driven understanding of each business to develop unique offers for businesses with the expectation that sellers will complete their advance in approximately 10 months, although there is no set time frame.

Suffice it to say, this isn’t cheap financing. Using the 10-month duration as a benchmark, that equates to an average effective annual interest rate of roughly 14.5% — this assumes a one-time fee equal to 12% of the advance.

But what it lacks in pricing, it makes up for in efficiency. As Ury explained, merchants don’t have to spend time filling out applications; Square has already preapproved them. Additionally, advances can often be processed the following business day, while bank loans can take weeks if not months to proceed through the application, underwriting, and funding processes.

The net result is that certain small businesses that are among Square’s best customers have a ready and immediately accessible source of financing to grow or otherwise reinvest in their operations. It’s likely for this reason that “[m]ore than a third of merchants who have completed their first Square Capital advance have renewed for a second round of capital to make additional investments in their business,” according to Square.

The scourge of credit risk

The significance of this move to Square itself can’t be overstated, as it exposes the payments company to credit risk — that is, the danger that cash-advance recipients will default on their obligations. This is new territory for Square, and a lack of respect for its perils has been the scourge of countless financial institutions throughout time.

That being said, one thing Square has going in its favor is access to the payments data of its customers. Additionally, with only $75 million in advances to date, it has been able to tightly control who gets access to funding, presumably limiting financing to companies that are patently capable of managing the liability.

Perhaps most importantly, unlike traditional lenders, Square doesn’t have liquidity risk, which is the precipitating cause of failure of most companies in the financial industry. At present, as far as I can discern, Square is financing cash advances with equity and a recent investment from Victory Park Capital, a privately held investment advisor that specializes in credit and private equity investments.

However, the protection afforded by these fail-safes will be diluted as Square grows its portfolio of merchant financing. At a certain point, it will need to supplement its source of funds. When it does so, it doesn’t seem unreasonable to presume that it will gravitate to deposits, which are exceptionally cheap but carry the threat of capital flight.

Growing Square Capital, moreover, means opening its coffers to less qualified customers, thereby increasing the risk of default. Is this a bad thing? Certainly not, as risk is the price of return in the credit industry. But managing the process will require prudence and humility, as even the most sophisticated risk models can’t tame the cyclical nature of credit risk.

For Square, the sky is the limit

Over the last century, the bank industry has been transformed through countless incremental advancements to the way money is allocated between savers and spenders. Square’s foray into financing can be understood in this context.

The sky is the limit for Square’s still-incipient program. The payments business is big and lucrative, but few things promise the magnitude of profits that can be earned by the adroit allocation of other peoples’ money.


5 Holiday Spending Mistakes That Can Kill Your Credit

handing money over
PM Images—Getty Images

This time of year can be brutal on your credit score

Now that the holiday shopping season is here (what, you didn’t know Halloween is the new Black Friday?), companies are pulling out all the stops to get us to spend. But watch out: There are some fairly common holiday spending behaviors that can do a number on your credit score. Here’s what the experts say you need to avoid.

Maxing out your cards. In truth, getting anywhere near your credit limit is a bad idea. “Your credit card utilization rate accounts for nearly a third of your credit score,” says Charles Tran, founder of This percentage of the credit you’ve used compared to how much you have available should be at 30% or less, and if you’re actively trying to raise your score, you should aim for as little as 10%.

This holds true even if you don’t revolve a balance, Tran says. “Even if you religiously pay off your credit card balance in full, the snapshot that the credit report captures might show a high balance, which has a negative impact,” he says.

Loading up a low-limit card. This is a corollary to not maxing out your cards because your credit is scored based on both your per-card as well as aggregate limits, explains John Ulzheimer, credit expert at “The closer your balance is to your credit limit, the lower your credit scores,” he says. If you put $1,000 on a card with a $1,500 limit, that looks much worse than putting the same amount on a card with a $15,000 limit, he says, even though the amount you’re spending and the total amount of credit you have available hasn’t changed.

Ulzheimer notes this is even more important if you plan to pay off your holiday purchases over a number of months, because this maximizes the amount of time you’ll have a harmfully high ratio on the card.

Opening a slew of store cards. Yes, we know — you’ll get 10% or 15% off, or maybe you’ll even be able to jump that insane line on Black Friday. Opening a bunch of store credit cards is still a bad idea. Every time you apply for credit, your score takes a (small) ding, so making your way through the mall filling out applications can cumulatively have a noticeable effect on your credit score.

Closing a bunch of cards. “It can… be damaging to panic and close credit cards because you’re afraid of overspending for the holidays,” warns analyst Jeanine Skowronski. If you know you can’t handle the temptation, then go ahead and close cards, but this should be a last resort because it can hurt your score because closing a card takes that credit away from your utilization calculation, she says.

Similarly, a lot of people think they’ll sign up for a store card just to get the one-time discount, pay it off and then cancel it. This is really a double-whammy for your score because you ding your credit profile twice, once when you open the card and again when you close it.

Taking the deferred-interest bait. “One marketing strategy that can get folks in trouble is the delayed interest offer,” says Beverly Harzog, consumer credit expert and author of “Confessions of a Credit Junkie.” Not paying by the end of the grace period or even missing a payment could trigger retroactive interest on your purchase, often at sky-high retail card rates. “You’ll owe the interest that would have been charged during that time period,” Harzog says. Not only does this make that purchase ultimately more expensive, it also increases the likelihood you’ll need to revolve that debt, which hurts your utilization.

MONEY identity theft

Here Are the Companies That Have Been Hacked — And What to Do

You're not just imagining it: Lately, a new data breach has been reported almost every week. Here's how to find out if your information has been exposed.

By mid-October, the Identity Theft Resource Center had already identified more data breaches this year than it had in all of 2013. In other words, it’s more likely than not that some of your personal information has been compromised. “There are two kinds of consumers — there are those who know they’ve been breached, and those who don’t,” says ITRC president and CEO Eva Velasquez.

Source: Identity Theft Resource Center. Data as of Oct. 30, 2014.

Many Americans are in the first camp. According to a new Gallup poll, 27% of Americans say their credit card information has been stolen in the past year, and 11% say their computer or smartphone has been hacked. And the rest are scared: Almost 70% of Americans worry that hackers will steal their credit card numbers from retailers, and 62% worry that hackers will target their personal devices.

It’s hard to say whether there has really been an increase in the number of data breaches, or we’ve just gotten better at detecting and reporting incidents, Velasquez says. Either way, the outdated magnetic stripe technology in the United States probably makes it too easy for hackers to run off with your credit card number.

“Thieves are going to go where it’s easiest to steal,” Velasquez says. “We’ve got the most antiquated technology protecting the actual cards, and we’re the biggest issuer of those cards – we’re a treasure trove.”

At MONEY, we’re tracking the major data breaches that may have exposed your personal information in recent months. Read on to see if you’ve been affected. If so, we’ll walk you through what you need to know about protecting yourself from identity theft.


MONEY Out of the Red

How I Paid Off $158,169 in Debt

G. McDowell Photography

Think there's no way to get out from under your obligations? This first in a series of profiles of people getting "Out of the Red" proves that it's possible.

Rachel Gause just wanted to give her three kids more than she had growing up. So, though she was receiving a secure income along with child support, she found herself living beyond her means every month—eventually racking up six figures in debt. With a whole lot of determination and almost a decade’s worth of belt-tightening, she’s climbed most of the way out. This is her story, as told to MONEY reporter Kara Brandeisky.

Rachel Gause
Jacksonville, N.C.
Occupation: Master Sergeant, United States Marine Corps
Initial debt: $179,625
Amount left: $21,456
When she started paying it down: 2006
When she hopes to be debt-free: November 2015

How I got into trouble

“I was just trying to keep up with everybody else. I’m a single parent to three kids, ages 10, 14, and 16. I was always spending extra on Christmas and on birthdays. Also, growing up, I didn’t have new clothes and new shoes at the start of every school year. But I wanted to make sure my kids always did.

Looking back, I wish I would have known not to rely on credit cards. I wish I would have known that it’s okay to keep your car for four or more years, as long as you maintain it.

I started going into debt when my first daughter was born, 16 years ago. I remember I had to get a furniture loan. By 2006, I had $55,848 in credit card debt and $76,711 in car loans. Then there were the personal loans. I had a consolidation loan that I used to pay off my credit cards. Altogether, it came out to $179,625.”

My “uh-oh” moment

“I wasn’t aware of how much debt I was in. The turning point for me was when I hit the 10-year point in the Marines, and I saw other people around me retiring. I wanted to sit down and see where I was at. And that’s when I realized I didn’t want to retire in debt. I didn’t want to be that person.

At the time, I had a Toyota Sequoia, and I couldn’t make payments on it. I knew I was in way over my head.

Even though I had three kids, we didn’t need that big truck. It was going to put my family at a financial challenge. So I spoke to a lady at my church, and I said, ‘I have this truck, and I’m going to trade it in for something smaller.’ And she said, ‘I always wanted a Toyota Sequoia.’ I sold it to her and got into a Corolla instead.

I realized buying that truck was a bad choice, and I knew I needed to develop better habits from there. That was my first step forward.

How I’m getting out from under

Now I put roughly $2,100 a month toward my debt.

For the rest of my income, I use the envelope system. Before I get paid, I do my budget. Then I have 13 envelopes—one for groceries, one for clothes and shoes, one for charity, one for dining out, one for gas, and so on. I go to the bank, take the money out, and divide it between the envelopes.

I don’t spend anything that doesn’t come out of those envelopes. Debit cards are nice, but swiping is less emotional. Cash makes me more aware of what I’m spending my money on. If I run out of money for something that month, I don’t buy it. But I’ve never run out of money for something important—now I’m more aware of how much I’m spending.

That’s because I also got a small composition book from Dollar General to track my spending. Every time I spend money, I write it in that book. Then I compare that to what I’m supposed to be spending, according to my budget.

I also do a quarterly audit on myself to make sure I’m not spending too much more on my cable or cell phone bills.

But it’s not all deprivation. We have a chart that we color in every time we reach a milestone, and we treat ourselves to something nice. For example, recently I went on a trip with my high school classmates to Atlanta—funded totally in cash.

My kids have been understanding about our debt-free journey. They know that mommy has made some bad financial decisions in the past. Now I teach them about needs and wants.

The other day, I was coming home from work, and I said, “Do you need anything from the store?” My son said, “We don’t need anything, but we’d like some candy.”

If they want a video game, they know they need to save their money to get that video game—and that means there’s something else they won’t be able to get. They understand if you have a big house, that means you have to pay big electricity and water bills. I’m teaching them to live within their means and not just get, get, get to try to impress people.

What I’ve learned that could help someone else

My advice would be to sit down, see where you’re at—first, you have to know how much debt you’re in—and then create a spending plan. (Some people are scared of the word “budget.”) You have to tell your money where to go, or it’s going to tell you where to go.

The numbers may scare you in the beginning. It takes two or three months before you can get the budget right.

And you have to be consistent. If you don’t put 100% into it, it’s not going to work. You can’t be half, ‘I’m trying to get out of debt,’ and half, ‘I still want to spend money.’ You have to sacrifice.

My hopes for the future

Once I become debt-free, I plan to build up my emergency fund and then start actively investing and saving for retirement.

Then I hope to get my kids off to a better start.

My daughter will go to college soon. We’ve talked about student loans.

The main reason I joined the military was to obtain my college degree for free. I earned my degree in business administration from the University of North Carolina-Wilmington last year. But while I was there, I saw so many kids taking courses for a second and third time because they were failing and they weren’t going to class.

So I told my daughter, you’ll pay for that first year, and we’ll see how you manage. Then I’ll assist you with your second, third and fourth years. But first, I need to make sure you’re dedicated.

After I retire from the military, I want to become a certified financial counselor so I can help people break the vicious cycle of being in debt and dying in debt. My passion is to put together financial classes for non-profit organizations like women’s shelters, churches, and organizations for military service members. There aren’t that many in this area, and I see a real need. I see so many people struggling to survive, living paycheck to paycheck.

I’ve already started counseling some people who ask for help.

Every now and then, I get a message on Facebook from someone I helped that says, ‘I just paid off another credit card’ or ‘I paid off my car.’ That’s my motivation now. I don’t want to stop – the need is out there.

Are you climbing out of debt? Share your story of getting Out of the Red.

Check out Money 101 for more resources:

MONEY mobile payments

This Is How Walmart Can Win Its War With Apple

Frederic J. Brown—AFP/Getty Images

Retailers rejecting Apple Pay is just the latest salvo in a longstanding war between merchants and banks. Now the battle is coming to a head, pitting the world's biggest retailer against the world's most powerful tech company.

Corrected — 5:21 P.M.

When Apple Pay triumphantly launched last week, there was hope in the air. The service generally worked as advertised. The reviews were mostly positive. For a brief moment, it seemed, the emergence of phones-as-wallets would be one technology transition that happened smoothly.

But it’s never that simple; not with this much money on the line. Over the weekend, news broke that Rite Aid and CVS were dropping support for Apple’s payment system. An in-house memo, leaked by Slashgear, revealed the reason: The merchants plan to release their own mobile wallet next year. Until then, users of Apple Pay—or Google Wallet, or any other mobile payment service—would simply have to pay with plastic.

Apple Pay is not simply a fun new feature for your smartphone. It’s the most audible shot in a larger conflict that pits retailers against credit card companies and banks in a battle for the future of payment. Apple is just the most recent—and most visible—belligerent in this battle, and now the fight is finally spilling over into the mainstream.

What This Is Really All About

Doug McMillon, CEO of Walmart, is at war with credit cards. From his perspective, American Express, Visa, Mastercard, and the banks who issue their products are shaking his company down for billions each year. Whenever a customer swipes a credit card, part of that payment—between 1% and 3%—goes to the card’s issuer in what is known as an interchange or “swipe” fee. That means Walmart, and other major retailers, are losing serious money every time someone pulls out the plastic.

The retail giant has been fighting this situation for more than a decade. Back in 2003, Walmart was one of around 50 retailers to join an antitrust suit against Visa, Mastercard, and the banks that issue their cards, accusing them of conspiring to inflate credit-card fees above market rates. The card companies offered merchants $5.7 billion in compensation, as well other other concessions, but Walmart rejected the settlement in favor of filing separate lawsuits against individual companies.

It’s not hard to understand why Walmart turned down the deal. Depending on how many of the company’s customers are using credit cards, major retailers can spend billion of dollars in a single year on fees. That’s why, at the end of the day, Walmart felt that money alone could not make things right. “The settlement does nothing to reform the price-fixing payments system that has let credit card swipe fees skyrocket over the past decade and nothing to keep them from continuing to soar in the future,” explained Mallory Duncan, general counsel at the National Retail Federation, after his group (which includes Walmart) rejected the deal.

What merchants like Walmart really want is their own payment system — one that isn’t controlled by third-party financial companies who take whole percentage points of revenue for their services. So they decided to make one.

Wallet Wars

The retailers faced two challenges in trying to disrupt credit-card companies: One, getting a competing payment system into the hands of consumers; and two, creating a cheaper system to process those payments.

On the first count, companies like Starbucks have proven that consumers are willing to embrace proprietary wallet apps if they get deals in return. The coffee giant’s app, released in 2009, allows users to fill a virtual Starbucks card with money and then pay by scanning an advanced bar code called a QR code. Loyal customers are rewarded with free coffee. The Starbucks app now accounts for 11% of the company’s sales and over four million transactions a week. (Benjamin Vigier, the mastermind behind Starbucks’ application, joined Apple in 2010.)

While apps emerged as a good consumer-facing approach to a modern payment system, merchants were also hard at work developing behind-the-scenes payment-processing systems. Target’s REDcard looks like a normal debit card (it even offers cash back), but works only at Target stores and dodges traditional payment networks. “It’s a debit card in the sense that it’s debiting straight from a bank,” explains James Wester, research director of global payments at IDC, “but using different rails.”

Cheaper rails, that is. Target uses something called Automated Clearing House (ACH) to process REDcard transactions. Michael Archer, a global financial services expert at Kurt Salmon, estimates ACH transactions are one-tenth as expensive for retailers as credit cards, and a little less than half the cost of a normal debit card transaction. Multiply that times billions of transactions and it’s a lot of savings.

In 2012, a group of retailers led by Walmart decided to combine these two approaches and make a mobile wallet app that would work across all of their stores. The companies formed a group—Merchant Customer Exchange, or MCX for short—and set to work creating a product that would be as usable as credit cards and work over a cheaper payment network, just like REDcard, by connecting directly to a user’s checking account.

The result was CurrentC. The app, which is set to launch in the first half of 2015, works on iOS and Android phones and allows users to pay at participating retailers by scanning a code at checkout. CurrentC will automatically apply coupons and loyalty programs at the register, giving consumers an incentive to choose CurrentC over competing e-wallets.

Apple the Underdog?

Initial reviews of CurrentC are not flattering. TechCrunch called the service a “clunky attempt to kill Apple Pay and credit card fees” and complained that the system seems built for retailers, not consumers (which, after all, is true). Quartz mocked MCX merchants’ penchant for developing anti-consumer technology (like this comically long receipt) and others worried the app was a conspiracy to grab customer data.

Apple Pay supporters have a point. CurrentC is clunky—at least in its current beta state—and Apple Pay certainly wins on privacy by keeping all transaction data away from merchants. But as hard as it is for Walmart detractors to admit, CurrentC also also has some advantages over Apple Pay.

For one, the largest retailers in the country have hitched their horse firmly to the CurrentC bandwagon. Apply Pay may have some big names—such as Walgreens, Toys R Us, McDonalds, and of course, Apple itself—but MCX has more. CurrentC’s coalition includes Walmart, Target, K-Mart, 7-Eleven, Best Buy, Gap, Banana Republic, Dunkin’ Donuts, and a host of other major retailers from a diverse mix of industries. Together, the participating merchants process more than $1 trillion in payments every year.

This stable of retail powerhouses puts CurrentC in a powerful position. Are consumers going to boycott their favorite stores just because they’re asked to scan a code (or swipe a card) instead of wave their iPhone? Unlikely. Especially considering Apple Pay is limited to iPhone users only. The cross-platform CurrentC app may win fans simply because it’s available to millions more people, and works at more popular stores.

Second, Apple Pay isn’t especially appealing to retailers. The payment system costing merchants interchange fees every time it’s used and they don’t get any consumer data from purchases. The QR code technology that powers CurrentC is also less expensive than the NFC terminals required by Apple Pay, and many more stores already have QR readers installed.

Another problem with Apple Pay is that it’s not built to support merchant loyalty programs. “The real value of mobile wallets is merchants can put loyalty in them and get repeat business,” says Henry Helgeson, CEO of Merchant Warehouse, a company that provides point-of-sale technology for both platforms. (Helgeson predicts Apple will add loyalty features in the next version.)

“Apple Pay is a different form factor for the same things that have been plaguing [retailers] for decades,” says IDC’s Wester. “Other than getting a very vocal group of people who are loyal to Apple, I’m not sure a good value proposition has been shown to merchants yet.” CurrentC, meanwhile, has the potential to save the MCX coalition billions annually in processing fees.

Third, and perhaps most importantly, Apple Pay isn’t really a great deal for customers, either. Industry experts are skeptical the masses will adopt a mobile wallet that offers a slightly more convenient experience, and not much more. “‘Hey, I get to use a credit card on my phone’ is not a sufficient value proposition,” argues Archer, the financial services analyst. “Ongoing use requires a return of value. ‘Cool’ is good for one time. Probably not beyond that.”

The research backs him up. In a recent study by his firm, 61% of current mobile wallet users said rewards and loyalty programs are the primary reason they use their smartphone to make payments. CurrentC is built around these sorts of deals. Apple Pay decidedly is not.

Who Should We Root For?

Of course, neither side is really in it to help consumers. Apple is arguably in league with the banks and card companies, accepting a slice of each transaction as a reward for helping perpetuate the credit-card status quo. Meanwhile, Walmart is in this fight to lower its expenses, not make things cheaper for the average Joe.

However, despite MCX’s less-than-pure motivations, its wallet app is more likely to save customers money. Target’s REDcard offers 5% off all purchases as a reward for using a cheaper payment processor and giving Target information on what you buy. If CurrentC ultimately offers similar deals, consumers will be forced to choose between cool and cash — and many may ultimately opt for the latter.

One thing’s for sure: Neither side will go down without a fight.

Correction: A previous version of this article said Apple Pay did not support debit cards. In fact, some debit cards are supported.

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TIME relationships

Why You Need to Talk About Your Partner’s Credit Card Debt

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The modern dating scene is tough — we know that all too well. Finding a great partner feels like hitting the jackpot, so you might be tempted to overlook certain serious red flags in the name of love. But, what if you’re ready to take the next step with your partner and discover that he or she is deep in credit card debt? This is an issue you definitely shouldn’t dismiss — money is one of the main reasons couples fight. Failing to address your partner’s debt before you move in together or get married could cause heartache down the road. So, should you move forward or hit pause? Here’s how to decide.

Consider The Why
Discuss your financial situations. It’s important to get to the bottom of why he or she is dealing with debt. Asking specific questions about how the balance was incurred will give you a better sense of your beloved’s overall level of financial responsibility.For instance, did your partner face a major emergency that they didn’t have the cash to cover? In this case, the debt can be chalked up to an expensive, one-time event. It doesn’t indicate a pattern of irresponsible financial behavior. But, if your partner carries credit card debt due to reckless spending, you should give this some thought. If you budget carefully and live within your means, you might have a hard time coupling up with someone who doesn’t share your values.

(MORE: Why I Don’t Feel Guilty About My Credit Card Debt Anymore)

Consider The How
Next step? Consider how your significant other is dealing with the shortfall to decide if the relationship is worth pursuing. Even if a mountain of credit card debt is the result of frivolous spending, your partner may have realized the blunder. If your mate is taking steps to pay off the balance — moving to a smaller apartment, going out less, taking on an extra job — count these as good signs. Everyone makes mistakes, and working hard to correct a financial misstep means your partner is trying to get on the right track.However, if he or she seems unconcerned about the debt and isn’t making an effort to pay it off, you should take a step back. Credit card debt is a serious financial burden, and your partner should be treating it as such. Ignoring a lingering balance could signal a lack of judgment when it comes to money.

(MORE: Do You Really Need A Credit Card?)

In The End, It All Depends — But Tips Help
Money is a highly personal and emotional topic, so only you can decide if your partner’s credit card debt is a deal-breaker. The important thing is to discuss the issue before taking a major step in your relationship, and keep the lines of communication open. This will help you assess the direction of your partnership and keep you informed about how your mate’s financial situation is evolving.If you want to help improve your partner’s credit card habits, consider sharing these tips: Keep a budget and track your spending — this will keep you from spending more than you can afford to pay off. Pay your bill in full by its due date — you’ll stay out of debt and keep your credit score healthy. Never use more than 30% of your available credit — this will help you achieve and maintain good credit. Read your monthly statement carefully — you’ll be able to spot fraud if it occurs.

The Takeaway
Understanding why your partner is in credit card debt and how he or she is dealing with it is an important step to take before getting serious. Consider it one more stepping stone on the road to finding “the one.”

(MORE: How to Keep Your Finances Safe After a Breakup)

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