This site is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as CreditCards.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. What is written in the article is the editor's opinion.
Had to get this off my chest.
There’s always a lot of talk in the points and miles world about which cashback card is “the best.” The speculation is constant, rampant.
- Bank of America recently introduced a card where one could get 2.65 points per dollar so long as they dump $100,000 into an investment account.
- The Barclaycard Arrival always gets mentioned because it’s an effective 2.22% cashback on travel purchases.
- Citibank has a new one too: the Citi Double Cash card.
- Freedom gets a mention due to its rotating 5% categories, which yes, is a good deal, and yes you can cash it out (but keep them for Ultimate Rewards transfers!).
- Then there’s the Fidelity Investment Rewards Amex.
In This Post
Why it’s the king
This card pioneered the cashback space. You get 2% cash back on every purchase, every time, period. No categories, no limits. 2% is obviously less than 2.65% or 2.22% (duh). But what everybody fails to mention, time and time again, is the fact that the money is automagically swept into a brokerage account.
I always read the articles about this card to see if anyone will ever mention that. Why don’t they?
I have and use this card from time to time. Not always. Why?
I value travel experiences. I like to set a goal, save up points for the goal, and redeem. I have access to flights and hotels, thanks to points and miles, that I’d otherwise never be able to afford. But that’s when I’m focused on points. I have interim periods where I like to think about my future instead of the next trip (like now). And I’d rather have my free money working for me than coming back and getting spent.
I personally have my Fidelity Amex linked up to my Roth IRA. I selected a fund that has been holding steady at around 7-8% for a few years by now.
The money I put into my Roth IRA from this card doesn’t actually come out of my pocket. It’s free money that comes from the card. I’m not taxed on it in any way. It’s literally free money.
I’m taking advantage of dollar cost averaging – again, for free. The market goes and up and down. There’s no good way to predict when is a good time to buy. Having automated investments over a long time period ensures you sometimes buy low and at other times buy high – but the average of those two extremes is the sweet spot. Whenever the money from the card gets swept into the account is always a random day and doesn’t take into account what the market is doing on a given day. I like that.
Because I put the money in a Roth IRA, I’ll never ever pay taxes on that money. With other cashback cards, I have to pay sales tax when I buy something. Or, at the very least, when it goes out, it’s gone. In my IRA, it’s there working for me all the time. The interest is compounding, and growing.
2% cashback today can be much more in 20 years. Much, much more.
Say I spend $5,000 per month on the card, my IRA earns me 7%, and I keep up this pattern for 20 years.
Sure, some Avios can get me $20,000 trips to Paris for free, but 70-year-old me is going to really enjoy the extra money that will come tax-free just as much.
That’s why I mix in some spend on this card, just to give my (future) self a little boost here and there. I don’t be 70 for another 40 years, and assuming a constant 7% return in addition to what else I’m investing… that could be a nice amount of cash. MUCH more than the “2%” that went in for free just from running money through a credit card.
Weighing it all
Do I have and use the Barclaycard Arrival? Yes.
Do I have and use other points-earning card. Yes, all the time.
And do I use the Fidelity Amex, too? Yes.
I like having all kinds of currency. Points, miles, and even actual money. I mix it up depending on what I want at the time and what my life is like when I’m transferring money around.
If I want to think about a trip to Europe, maybe I’ll focus spend on my Club Carlson Visa. If I want Avios, the Chase Sapphire Preferred or British Airways Visa. If I want to offset a bunch of booking fees, the Barclaycard Arrival. And when everything is doing its thing, then the Fidelity Amex.
But I don’t overthink it. I set a goal and reassess once the goal is reached. No more or less.
The bonus in all this
The other thing that no one mentions is that the Fidelity Amex gives you access to the Worldpoints shopping portal, and that it actually has really good payouts.
If you spend $1,000 on the Fidelity Amex and click through the portal to a store that is offering 5 points per dollar, you’re getting back 7 points per dollar, or $70. Tax free (or deferred), free money that goes directly into an account that utilizes dollar cost averaging and compound interest. This is why the Fidelity Amex is THE BEST cashback credit card.
All the cashback cards have their place, but it must be said, once and for all, which one is truly the best. In terms of actual cash earned, it’s this one.
With no annual fee, no cap on rewards, and a really no BS flat earning rate, this one is a card that you can get and keep forever.
Anyone have any thoughts on the matter? I’m open to revising my opinion if someone knows something I don’t. Would love to have a dialogue about this topic, as it’s really not discussed a lot.
BEST Current Credit Card Deals
- Amex Starwood Small Business Card - 35,000 Starwood points - My review of this offer.
- Chase Sapphire Reserve - 50,000 Ultimate Rewards points - My review of this card.
- Discover it® Cashback Match™ Card - $50 after 1st purchase within 3 months of account opening - Why I love this card!
- Hilton Surpass Amex - 85,000 Hilton points - Why I picked up this card.