Suppose you were spending 10x more on cashback card than me, with $45,000 on the cashback card. Then we are talking about an extra $280/year over a 2% cashback card. The best CD rate I saw on the website was 4.9% APY on 13th months, which was part of a special promotion. Normal rates are lower. Best national CD rates are a little above 5%, including some reputable and well known banks. Instead choosing a 4.9% could negate the majority of the $280 extra… or all of the $280 extra if I choose default rates instead of special promotional ones. Sure that potentially remaining $100/year is a positive return, but if you are spending $45,000 per year on a cashback card, I expect an extra $100 per year is not going to be make a big difference in your finances. I’m not saying it’s a bad decision, just that it’s useful to put in perspective and review how much you are really saving from the extra 0.62% cashback.
I personally prefer to keep cash in treasury products, rather than CDs. Shorter term t-bills are currently at ~5.5% APY (less in default format of APR), and unlike CDs are state/local tax exempt. They are also often more liquid than CDs, with it being easy to sell prior to maturity without penalty. These treasury product investments can also be stacked with other brokerage type bonuses that are far more valuable than the cashback difference, often adding in an extra ~2% per year, depending on bonus, or an extra ~$2000/year on $100k cash, in addition to the ~5.5% APY without state/local taxes.
Wells Fargo has the Active Cash card which is a 2% card with no limits. Citibank has the Double Cash card which gets 1% rebate and then doubles the rebate if you pay your balance in full every month, so effectively, it’s a 2% card as well. Neither has any annual fees.
Thanks. I wouldn’t do a Wells Fargo card – possibly the only US bank with a worse rep than BofA. But the Citi card sounds good since we do pay our balance every month. I’d consider it, then next time we have reason to change a card.
Yes, I have treasurys too at my primary bank. I’ve had this card well over a decade, going back to when we did actually bank at BofA as opposed to just parking a balance and using the credit card. I’d consider switching to a different 2% card the next time fraud or something else results in resetting the card’s #'s anyway, but until then the inertia against switching (including unlocking my credit reports) is stronger than the minor trade-off. It’s relatively easy to always get the latest promotional rate on their CD’s BTW. You just have to call and say you’re cashing and and pulling the money and they always offer it.
There are quite a few >= 2% cashback type credit cards. A partial list is below. I did not include business credit cards. I believe all have no direct annual fee, but as noted a few have indirect fees via requiring membership to other services.
Alliant CU Visa Signature (2.5% on first $10k, 1.5% on >$10k)
Amex Bread Cashback
Bank of America Cash Rewards (2.6% with $100k investments, 1.5% without)
BJs One Plus (need to be member at Bjs, which has fee)
Citi Double Cash (2.2% with transfer to Citi Rewards, 2% without)
Fidelity Rewards Signature
FNBO Evergreen
Keybank Key Cashback
Logix FCU Platinum Rewards (3% with 100k invested/borrowed, 1.5% without)
Penfed Power Cash Rewards
PNC Cash Unlimited
Robinhood Gold (3%, need to be gold member at Robinhood, which has fee)
SoFi Credit Card (2.2% with direct deposit to Sofi bank, 2% without)
SDFCU Premium Cashback
Synchrony Premier World
TD Double Up
USAlliance Visa Signature
Wells Fargo Active Cash
We just signed up for the BofA card with the $95 annual fee. It differs from their other similar card because it pays a higher rebate on travel and dining, and offers a $600 bonus as opposed to $200.
DW has a 401k at ML but in order for that to qualify for the bump from 1.5 to 2.62 she’ll need to convert it to an IRA, which she probably should be doing anyway.
As a kicker, by opening a new substantial IRA she’s getting a $1000 bonus.
Bottom line, $1000 IRA bonus, $600 CC promotion bonus, and 2.625% cash back going forward.
Yeah, I guess my steady payment every month is not as valued as sporadic underpayments that Cap One can’t depend on getting.
Their business model might be making money off of interest and late fees, as opposed to the 3% or so processing fee that vendors pay them.
Still have the card, but use it mainly as a back up card for overseas, as it has no foreign transaction fees. Charge something on it once in a while, not as much as we did pre-COVID.
If you have an iPhone and you use Apple Pay, the Apple card is a winner with us. They give 2% for all Apple Pay transactions. For us, that’s basically everything. 3% for Exxon if you use their app.