From Sweet Swipes to Vanilla Value
Did you know that Baskin-Robbins offers 31 flavors, allowing customers to enjoy a different one each day of the month? Since the brand’s inception in 1945, it has produced over 1,400 flavors. The world of credit cards isn’t much different. Do I want Salted Caramel Truffle, Piña Colada, or Cotton Candy Bubblegum Blast? The dizzying array of cards to choose from isn’t poor design by issuers and banks; it’s built that way on purpose.
Last week, in From the Secret Sauce to Sweet Swipes, we covered the mechanisms by which card issuers make money. This week, we flip the script and cover how you can profit from them. Not everyone should chase every card, and your lineup depends entirely on your situation. Some people shouldn’t have credit cards at all.
If you’re prone to overspending, you’re better off with a cash back debit card, the rainbow sherbet of the wallet world. But if you’re comfortable paying on credit, there are plenty of flavors to sample. With a limited credit score or short history, you’ll start with beginner flavors before graduating to the premium ones.
Paying in full each month is crucial to avoid late fees and 20% interest, or even higher rates. One significant benefit of using a credit card for everyday purchases is that it passes liability to the card issuer. You’re buying on credit, meaning you haven’t actually paid yet.
It’s reassuring to know that your transactions are protected from fraud. If a thief steals my card, I can freeze it instantly and incur no liability. Most credit cards come with a zero liability guarantee, a layer of protection that debit cards don’t offer.
In my own lineup, I prioritize cash back rewards over points or miles-based systems to keep things streamlined. I’m also limited by what I can get approved for, so while I can’t snag the Platinum Prestigious Plus Whatever Card, there are still a few beginner-friendly options that pair perfectly.
First up is plain old vanilla. More like a fancier vanilla bean, however, the Fidelity Visa Signature 2% Cash Back card is a classic with upgrades. You earn unlimited 2% back when deposited into Fidelity accounts, with no minimum redemption requirements.
Additionally, you receive a $100 TSA PreCheck credit, which I used for my trip to Omaha. Visa Signature perks, such as secondary rental coverage and travel protection, round it out. For a zero-annual-fee card, it punches far above its weight.
There are no complicated points, math, or airline transfer charts, just straight cash. Like simple vanilla, the Fidelity 2% card gives me a discount on everything I buy and extra money to reinvest in my savings engine.
Some delightful Pumpkin Ice Cream from UNC Charlotte’s SoVi Dining Hall
Let’s say you spend $1,000 a month on your card. That’s $20 in cash back each month, which you invest in the S&P 500 at an average annual return of 10%.
Over 10 years, your $20-a-month investment grows to more than $3,800, from a total of $2,400 in cash back.
Stretch that to 30 years, and you’re looking at nearly $40,000 from just $7,200 in cash back.
By retirement, that same steady cash back could be worth around $280,000, built from just $12,000 you earned on spending you were already doing.
Every swipe becomes a micro-investment.
And the sprinkles on top are that Fidelity automates the entire process for you. Your cash back can be automatically redeemed to your Roth IRA and invested in a low-cost fund. Purchasing an ETF like SPYM, an ultra-low-cost S&P 500 fund, can be fully automated, so you can never look at any of your accounts. Your credit card bill can also be automated, which is something you should be doing anyway to prevent unnecessary charges.
If you prefer simplicity, stop here. Otherwise, come back next week for a taste of the specialty flavors in the credit card game.
