Saturday, April 9, 2011, AM | 9 Comments
Historically, different credit cards have offered a variety of cash back rewards. For example, Frequent-flier miles, Cash-back rewards, Gas rebates, etc. Now you can funnel your credit card rewards into retirement savings.
You can apply for Fidelity Investments’ new Retirement Rewards Card at 800-343-3548 or at Fidelity.com. After you have earned enough points, the card deposits cash into your Fidelity IRA.
Pay your bill on time – then it is a great deal
With 78% of American workers confessing to saving less than they should for retirement, it seems like a timely idea – as long as you pay your bill in full every month.
- If you miss a payment or go over your credit limit, then the deal is a lot more expensive than other credit cards. The rate on your Fidelity Retirement Rewards card could soar to 28.99%. Balance transfers will cost you 3% of the amount transferred, with no cap, and the introductory rate of 1.99% disappears after six months, defaulting to 16.99%.
- Once a card member reaches a minimum of 5,000 points (or $2,500 in purchases – you accrue 2 points for every dollar spent), points can be automatically swept into your Fidelity IRA (either a traditional IRA or Roth IRA) as a $50 current-year contribution.
- If you max out on your IRA contribution for the year, you can continue to accrue points and restart automatic deposits to your IRA next year. That’s good.
- You can contribute up to the maximum each year to a traditional or Roth IRA, plus an additional $1,000 in catch-up contributions if you are 50 or older. Read IRS directive.
- The retirement-rewards feature is probably most valuable if you are self-employed or a small-business owner.
- You can charge your business expenses on the card and direct the rewards to your Fidelity SEP IRA, which has higher contribution limits than an individual IRA.
- You can contribute 25% of your compensation if you are incorporated (or 20% of your net self-employment income if you are not) to your SEP IRA, up to $49,000 in 2011.
Besides Fidelity, below are financial institutions offering cards with different kinds of payback.
Wells Fargo offers new tools to overcome debt that earns rebate on purchases that is applied to the principal balance of your Wells Fargo mortgage.
American Express Co
Amex launched an Autopay program that allows customers to pay their bills automatically.
Discover Financial Services also recently launched a Paydown Planner that helps card holders calculate the amount of time it may take to pay down a balance or help determine how a large purchase may affect their account.The company’s Motiva Card – aimed at cardholders who carry a balance – gives cardholders who make on-time payments six times in a row an amount equal to next month’s interest as a bonus.
In a Nutshell
All these credit cards, I think, are great deals as long as you pay your bills on time and in full every month. If you don’t, then the interest rates, as stated above, are a lot higher than other cards. In that case, you would lose more than you would gain.