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.
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."
From poster JW: 5000 points ($50) minimum redemptions into Fidelity account. $1 spent = 2 points from the first dollar.
Fidelity VISA >> $1 dollar spent = 1.5 points for the first $6000.00 of annual spending - anniversary years, not calendar year. After that for the balance of the anniversary year - $1 spent = 2 points. One legacy user reported $1 spent = 1.5 points for all spending; had to reapply for the 2 points after $6,000 spending.
To check application status: 866 598 4971 (Automated system using SSN)
When the card is not automatically approved, the card issuer FIA Card Services does manual underwriting. In at least one case, the underwritter called the applicant by telephone before a decision was made.
From poster Drinyth: Call 888.503.6090 to talk to a person who was able to verify my approval. Automated system via the other toll-free number would only tell me that my application was pending review and that my application could take up to 30 days to process.
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.
czarandy 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.
Example (say 10% flat taxes):
Situation 1: $10,000 income, $5,000 spent, remaining $5,000 into IRA. $500 taxes. $100 rebate (untaxed). Net result: $-400 taxable money, $5,000 in IRA.
Situation 2: $10,000 income. $5,000 spent, $4,900 into IRA. $510 taxes. $100 rebate also into IRA. Net result: $-410 taxable money, $5,000 in IRA.
So, no, you are not correct.
No, this example isn't correct. In Situation No. 2, you can deduct the $100 rebate that is going into the IRA, so your taxes would decrease by $10. So, for tax purposes, both situations are the same. Also, to clear up some other confusion, the rebate is not income---conceptually, its like a mail-in rebate for a product (do you declare income for every coupon that you use? Of course not, and the IRS doesn't require that. This type of card follows the same theory---you're just paying 2% less for everything you purchase, but have to wait a bit to get that 2% back).
BUT, the two things to consider are: (1) If you can't make tax deductible contributions to an IRA (because your income is too high or because you participate in 401(k)/403(b) or other employer sponsored plan), do you want this money going into a non-tax deductible IRA? Maybe, maybe not, its something for you to decide. And, (2) If you are a student and don't have earned income, then you can't contribute to an IRA (you can only contribute to an IRA up to the maximum amount allowed by law, or to the amount of your earned income, whichever is lower), so what would happen to these rebates?
MikeR397 said: FYI people, this is an AMEX card, and AMEX no longer allows for consolidation or CL movement between exisiting cards.No, this is an FIA card.
CreditGuy, I currently have the 1.5% Visa linked to a Roth IRA. Cash Back is deposited directly and appears on statements the same way that normal bank initiated contributions do. The only way to tell the difference is that they always appear in $75 increments. IRS reporting is limited to the annaul 5498 Form I recieve which only gives total amount contributed, does not differentiate funding source.
From the terms and conditions for the card: 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. Sounds like you should be able to use this with any non-retirement accounts as well, even though its not advertised that way.
I have the old Fidelity 1.5% MC that pays cash every quarter, no points etc. Anyone check on whether that card is eligible for the 2% into a regular brokerage account? All that IRA stuff is of no use to me, I'm already retired!
I've got the new Schwab 2% card, so if my Fidelity MC doesn't change it's no big deal.
I own and am also huge fan of the 1.5% Fido Card. I use it for 99% of my purchases and the year-end summary they send is an incredible budgeting tool for tracking seasonal spending, identifiying tax-deductions, and tracking purchases by category.
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. Wonder if that means that they will convert existing accounts.... On the other hand it mentions Investment Rewards AMEX, which mine is not.
Just cashed out $75 today at the 1.5% rate.... Wonder if I should have saved up for the 2% rate.
Crazytree said: useless to those of us who max out our IRA contributions every year anyways.
why? you can always wait til the next year, cash in the points for IRA contribution and add cash to max your IRA contribution. Earn 500000 pts in a year, and that should be enough to cover your IRA contribution for '09.
Crazytree said: useless to those of us who max out our IRA contributions every year anyways. No. Everyone needs to read bjlee's post: "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."
beethovengirl said: Crazytree said: useless to those of us who max out our IRA contributions every year anyways. No. Everyone needs to read bjlee's post: "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."
DiMAn0684 said: Crazytree said: useless to those of us who max out our IRA contributions every year anyways.
why? you can always wait til the next year, cash in the points for IRA contribution and add cash to max your IRA contribution. Earn 500000 pts in a year, and that should be enough to cover your IRA contribution for '09.I have my contributions automated with a monthly DD of $416.66 to my account and the wife's. my situation is unusual in that sense.
beethovengirl said: No. Everyone needs to read bjlee's post:in all fairness it was the QuickSummary.
Ok... question: anyone been able to change their 1.5% cards over to the new 2% card?
I had recently messaged FIDEL CS to see if they were going to respond to the new Schwab 2% card -- and they replied "not at present". But then I just read in the WSJ that FIDO will be upgrading its Investment Rewards Visa Signature cc from 1.5% CashBack to 2% in "early 2009". No info at FIDEL Web site yet. Cannot wait ! -- Scott
Satriani said: Does this card have any foreign transaction fee? Also is there any iOS app that lets you see your charges and statements? There is a 1% foreign transaction fee. There's a Fidelity app, but it will only show the balance, payments, and rewards for the card. I recommend Check (formerly PageOnce) for the information you're interested in.
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