Funnel Your Credit Card Rewards Into Retirement Savings

Saturday, April 9, 2011, 2:00 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 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.


Small-business advantage

  • 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

    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

    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.

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