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Updated on Monday, January 4, 2016
Banks are able to give customers credit card rewards thanks to interchange fees. Typically, banks charge merchants a two percent interchange fee for the convenience of swiping a credit card. Then the banks incentivize customers to apply for and use a card by offering some of that interchange fee in the form of a reward.
Knowing this, we often caution people to be wary of cash back rewards over two percent. So when you see a deal for 5% cash back – your bogus radar should go off. Sure, you might receive 5% for a quarter, but there is often lots of red tape, earning limits and categories that don’t even apply to your spending habits. If you aren’t doing home improvement work, how often are you really going to Home Depot?
How it works
But there is a catch: you have to have a Fidelity account if you want the full 2% back.
The cash back goes into an eligible Fidelity account, which could be a brokerage account, a cash management account, a retirement account or a Fidelity-managed 529 account, and you can set up the account to automatically deposit the rewards each month you reach 5,000 points worth of rewards (the minimum you can redeem).
Any other way of using your rewards like statement credit, gift cards, or travel won’t guarantee you the full 2% rewards rate that depositing rewards into your Fidelity account offers.
The good news is you don’t need any money at all to open the account. Fidelity’s ‘cash management‘ account is basically a no fee checking account where your cash back rewards can be deposited, though you’ll get better rates from a good online savings account.
How it stacks up
Fidelity® Rewards Visa Signature® Card receives the highest amount of cash back available without strings and rotating categories. The only other card currently offering similar cash back is the Citi® Double Cash Card – 18 month BT offer, though if you have heavy spending in certain categories there are other rewards cards that can earn you more.
People have various strategies for their credit cards, so see if your style is below and whether this card is right for you.
- One is enough: If you’re overwhelmed at the prospect of having too many credit cards in your wallet, then this credit card is hard to be beat. You won’t consistently earn higher than 2% cash back with any other card.
- Bonus game: If you’re a rewards seeker dedicated to finding the best sign-on bonus, then this card is going to disappoint you. There is no bonus to sign up, though a prior version of the card that was an American Express offered $50 if you spend $500 in the first 60 days.
- Bring on the categories: Perhaps you carry one card for gas, another for groceries and a third for travel. Odds are all these cards only get 1% cash back in non-category spending, so you might as well add Fidelity Investment Rewards to your line-up for all other purchases.
When Fidelity® Rewards Visa Signature® Card would lose to Citi® Double Cash Card – 18 month BT offer back:
- You have to have a Fidelity account for 2%: This may be a deal breaker for some people who don’t want to take the time to set up a new account. You could simply set up a cash management account and then consistently transfer your cash back over to another bank account, but that also takes an extra step.
- This is managed by US Bank: While Apple Pay and other modern features are available, US Bank isn’t known for having the best online interface for customers. Citi isn’t perfect either, but if all you want is 2% back and have no loyalty to Fidelity, you might prefer the Citi website and Citi® Double Cash Card – 18 month BT offer where you Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases..
- Stricter approval: Fidelity has historically considered total assets under management in their underwriting, so if you’re not already a Fidelity customer, you may not see the same credit line you could receive from Citi. Additionally, US Bank pulls your scores from two lesser known credit bureaus (SageStream, formerly known as IDA, and Advance Resolution Services, “ARS”) which may have a different history for you than the major bureaus. Citi typically uses one of the major bureaus that’s easy to keep track of. Our sense is you’ll likely be rejected with a credit score under 700, but you could have a chance with Citi.
When Fidelity® Rewards Visa Signature® Card beats Citi® Double Cash Card – 18 month BT offer:
- Costco acceptance: If you’re a Costco member, the Fidelity® Rewards Visa Signature® Card is a Visa. This is one of the best choices if you’re a Costco shopper looking for rewards.
- Automatic redemption: You can link your Fidelity account so that every month that you rewards balance reaches 5,000 points or more ($50 in rewards), the rewards are automatically deposited.
As with all financial products, you need to pay close attention to the fine print. We do like that this card offers 2% cash back with no hoops to jump through and no rotating categories. There is also no annual fee and foreign transactions have a 1% fee.
However, there are a few things to look out for.
- You have to be a Fidelity customer or open a Fidelity account in order to be eligible for this card.
- The interest rate for cash advances is much higher than that for purchases, but you really shouldn’t be using this card if you’re carrying a balance
- Your credit line might be based in part on investable assets – so if you don’t have anything invested with Fidelity, you may receive a lower credit line.
- Don’t expect 2% forever: Fidelity is committed for now to 2% based on its recent switch from American Express to Visa, but we wouldn’t be surprised if in a few years the cash back level is reduced or just reduced for those without assets under management. But right now, it’s a good deal. You can always search for another 2% cash back card, if and when Fidelity changes the rules.
We’re fans of this card for offering 2% cash back, but it may not be the best fit for you unless you’re an existing Fidelity customer. Those with 401(k)s, IRAs or other accounts already linked to Fidelity could help fund their futures with this cash back card.
The information related to Fidelity® Rewards Visa Signature® Card and the Citi® Double Cash Card – 18 month BT offer has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.