Banks and brokerages are enhancing their credit-card reward programs to help customers save more for retirement and reduce their debt. Wells Fargo & Co. is rolling out cash-back credit cards that automatically apply the rebates to pay down loan balances at the bank, while Fidelity Investments unveiled a new Retirement Rewards Card that will apply a 2% rebate earned on purchases to a Fidelity Individual Retirement Account.
The announcements come at a time of concern that borrowers are having trouble paying their bills and saving for retirement.
With Fidelity's new card, which has no annual fees, caps or limits, investors earn two points for each dollar spent on purchases. Once a card holder reaches a minimum of 5,000 points, or $2,500 in purchases, points can be automatically swept as a $50 current-year contribution into the user's Fidelity IRA. If the card holder has already reached the maximum IRA contribution limits for that year, they can roll over their points to the following year. Fidelity is also planning to boost its cash-back rebate to 2% from 1.5% on its Fidelity Investment Rewards Card and the 529 College Rewards Card in early 2009.
------------------------------------------------------------------------------------------------------------------------------ The Fidelity Retirement Rewards Card joins the award-winning(7) suite of credit cards offered by Fidelity that help investors save for key investment goals such as a new home or a child's college education. With enhancements scheduled for early 2009, the new Fidelity(R) Investment Rewards(R) American Express(R) Card and the Fidelity Investments 529 College Rewards(R) American Express(R) Card will be offering a new 2 percent earn rate on retail purchases. The Fidelity Investment Rewards Card and the 529 College Rewards Card, introduced in August 2005 and January 2003 respectively, offer Cardmembers the ability to redeem points for Cash Back to their eligible Fidelity account or 529 account. To date, investors using these two cards have received a combined total cash reward of more than $175 million(8). Consumers can apply for a new Fidelity Retirement Rewards Card, or other Fidelity credit cards, at www.fidelity.com/retirementrewards, calling 1-800-FIDELITY(9) or by picking up an application at any of the 127 Fidelity Investor Centers located across the U.S.
Message edited by: welookgoodcom on 2008-12-08 23:11:50 CST
The points/cash can be deposited in a non-retirement account, i.e. Fidelity brokerage account, MySmartCash account, etc.
From the T&C page... "You can redeem points for deposits into an eligible Fidelity account. You are solely responsible for the accuracy of the data you provide in connection with designating a Fidelity account, for ensuring that the account can accept deposits on your behalf and that the deposits comply with applicable laws and regulations. Eligible Fidelity Accounts include all Fidelity non-retirement, Individual Retirement Accounts, and Fidelity-managed 529 Plan accounts that accept ACH deposits."
To check application status: 1866 598 4971 (Automated system using SSN)
Message edited by: Joecd66 on 2009-07-28 21:00:54 CDT
scanchain said:I will get the 2% AMEX card for use in Costco when it rolls out.
The Costco 2% AMEX is not a real 2%: The rebate is an annual rebate equal to the following percentages of your annual level of purchases; 0.25% for the first $2,000, 0.50% for the next $3,000, and 1.50% for purchases in excess of $5,000. If your account is carrying a balance, you will receive an additional 0.50% rebate for the billing period.
The IRS has maintained the position that Cash Back credit cards (like mail in rebates) provide an after-purchase discount similar to having used a coupon on the original purchase, and therefore reduce basis in any purchased property but are not classified as income.
tripleB said:welookgoodcom said:quickfingerz said:Will this work with a Fidelity ROTH IRA? Otherwise, Schwab would be better since you are getting 2% tax free.
The 2% is TAX FREE regardless...
NOT IF ITS IN A TRADITIONAL IRA BECAUSE THEN ITS TAXED AS NORMAL INCOME WHEN YOU WITHDRAW IT.
I USED MORE CAPS LOCK THAN YOU SO THEREFORE I AM RIGHT! The rewards are just a convenient way to put money in the IRA account. The money is actually coming from your taxable income. If you didn't use the rewards to put it in, you would use your taxable income, which would reduce the amount you could spend on other stuff, except that the rewards would make up for it.
9000 said: The rewards are just a convenient way to put money in the IRA account. The money is actually coming from your taxable income. If you didn't use the rewards to put it in, you would use your taxable income, which would reduce the amount you could spend on other stuff, except that the rewards would make up for it.
Except that a traditional IRA would be coming from pre-tax income.
tripleB said:9000 said: The rewards are just a convenient way to put money in the IRA account. The money is actually coming from your taxable income. If you didn't use the rewards to put it in, you would use your taxable income, which would reduce the amount you could spend on other stuff, except that the rewards would make up for it.
Except that a traditional IRA would be coming from pre-tax income.
um, aren't you going to take that $50 IRA contribution deduction off your taxes anyway? which means that no matter where the source (credit card CashBack), it still offsets taxable income, making it a tax free contribution?
According to CSR: Existing Visa 1.5% cards will NOT be increased to 2% 2% AMEX applications will be accepted starting 1st week of January Managed through FIA Card Services so both Visa and AMEX cards can be viewed/managed through existing login
welookgoodcom said: Fidelity is also planning to boost its cash-back rebate to 2% from 1.5% on its Fidelity Investment Rewards Card ..... in early 2009. Will be the best part if this applies to existing accounts.
Is Fidelity going to put the rewards money directly into your IRA without reporting that to the IRS? I doubt that will happen--so there is going to be a report of the rewards money. Right now, cash rewards on other cards are NOT reported to the IRS since they're not considered taxable income.
We won't know whether or not the direct payment to the IRA will be considered taxable or not--but since there are limits on contributions to an IRA and since Fidelity has a whole reporting structure in place for reporting such contributions, I doubt there'd be no report--and if there is a report, I can't see the IRS taking the position that it's non-taxable income WHEN it's withdrawn. Contributions are taxable when they're withdrawn in any case if they hadn't been taxed before anyway. A Roth IRA would avoid these problems.
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