Fidelity Cash Back Rewards Cards

The 2% cash-back rewards card formerly known as Schwab Invest First Visa lasted a year and a half after Schwab officially ended its sponsorship back in April 2010. Like many other cardholders, I received a notice from the card issuer that it will be replaced effective Nov. 1, 2011.

The replacement card offers 3% cash-back for gas, 2% for groceries and 1% for everything else. Because I buy a lot more outside gas and groceries, the blended cash-back rate will be barely over 1% – not very appealing.

In addition, if I want a card just for gas and groceries, other cards pay a higher cash-back percentage for these two categories. For instance PenFed Platinum Cash Rewards Visa pays 5% cash-back on gas.

I like simplicity. I don’t want to juggle that many cards. Two cards are ideal for me: one primary card, one backup. My two best candidates for this setup come from the same issuer FIA Card Services. They are marketed by the same brokerage firm: Fidelity Investments.

Fidelity Rewards American Express Card offers 2% cash-back and no annual fee, just like the old Schwab card, except it’s an AmEx card. This one can be the primary card.

Some smaller places don’t take AmEx because AmEx charges a higher fee to the merchants. The cash-back is higher for that exact reason. Higher fee pays for higher cash-back, which makes the customers use the card more often, which generates higher fees to the issuer and more sales to the merchants. Win-win-win for the customers, the issuer, and the merchants. Other customers who don’t use an AmEx card lose.

At those places that don’t take AmEx, Fidelity Investment Rewards Visa can be a good backup card. It pays 1.5% for purchases up to $15,000 a year and 2% after that.

Both cards will deposit the cash-back rewards into a Fidelity account, which has no minimum balance nor annual fee. You can link a bank account to it and transfer the rewards out. Or you can use the money to buy ETFs with no commission.

None of the companies mentioned pay me anything if you decide to open an account.

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  1. Colby Lemon says

    “Higher fee pays for higher cash-back, which makes the customers use the card more often, which generates higher fees to the issuer and more sales to the merchants. Win-win-win for the customers, the issuer, and the merchants.”

    By this logic, shouldn’t smaller merchants take AmEx, and isn’t this also an implicit argument that credit card merchant fees should be even higher? Or at least that Visa/Mastercard should charge merchant fees similar to AmEx. To me, it seems like the merchant is actually the loser when you use AmEx instead of Visa/Mastercard. (but maybe AmEx offers something to merchants to make it worth their while?)

  2. Harry Sit says

    @Colby – Because not taking AmEx is an option, I trust that the merchants that do take AmEx did a calculation and concluded that they are better off taking it. If AmEx doubles the merchant fee rate, it starts to lose more merchants. That will make it less appealing to the consumers because their cards won’t be widely accepted. AmEx strikes that balance between the fee rate and acceptance. Visa and MasterCard are already charging merchant fees similar to AmEx on their Signature/World cards.

  3. Harry Sit says

    @KD – I don’t know if they do a credit check. Try the customer service chat or call their 800 number. Yes, that Cash Management Account, formerly known as mySmart Cash, will work. Any other regular Fidelity brokerage account will work as well. The main difference is that in a Cash Management Account, you get unlimited ATM fee rebate worldwide from the linked debit card, whereas you don’t get a debit card with a regular brokerage account unless you ask for it (and no ATM fee rebate even if you do). I have the Cash Management Account and I keep a small balance there. I find it very helpful not having to worry about ATM fees wherever I go.

    If you are only transferring the rewards back to your own bank account, the ATM fee rebate on a debit card makes no difference to you. In that case, you may not want an extra debit card that automatically comes with the Cash Management Account.

  4. Mike says

    No Fidelity account needed for the AMEX card. Just request a check when you reach 25,000 worldpoints after spending $12,500 on the card and you can get a $250 check in the mail. Smaller redemption levels are available but you earn less than 2%.

  5. indexfundfan says

    Too bad the Fidelity 529 card is no longer being offered. It is a Mastercard and is my primary card. Offers a straight 2% on everything, and deposited into any Fidelity account (no longer limited to just 529 accounts).

  6. Harry Sit says

    @Mike – Thank you for the info on the check redemption option.

    @indexfundfan – Because Fidelity has demonstrated they are willing to grandfather existing cardholders long after the card is no longer offered, it makes even more sense to get the Fidelity cards now.

  7. Bucky says

    Yup, I came to the exact same conclusion for credit cards. I don’t like to play the rotating categories game that Chase and other CC companies are offering. Fidelity’s CC are currently the best straightforward cash back cards.

  8. Mettur says

    Amex Blue cash offers 1.5% for any thing over $6500 per year (1% before that) Plus 5% cash on Gricery & Gas. Since I put every thing on card, the average exceeds 2%.

  9. Todd says

    As a micro-business owner, I don’t take Amex because they are a pain to work with (especially with their foreign customer service), and there are so few people who actually have their card that it isn’t worth the bother.

  10. edward says

    Sometimes you get lucky on the grandfathering. My Gas Rewards Visa from First National Bank Omaha is still paying a 3% cash/credit reward on gas since Oct 2007 even though I don’t think the card is issued now. The Chase Freedom 5% gas rebate ends today, so FNBO goes back in the wallet; I don’t mind the juggling. BTW, your link about Chase ending 5% Gas and Grocery rebates is confusing until you see the date on it is June 2007 – kinda dated. Discover also does the quarterly categories, but their $300 quarterly eligible limit makes it rather useless.

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