Charles Schwab and Bank of America just introduced a new cashback credit card that pays you a straight 2% cashback into a Charles Schwab brokerage account. This makes it better than the Fidelity Investment Rewards card, which only pays you 1.5% back. Schwab brokerage accounts require a $1,000 minimum deposit, but the commission rates are pretty competitive, and Schwab has really good customer service. An added benefit for international travelers is that this card doesn't carry a foreign exchange fee (unlike most others that extort 3% from you when you travel abroad). For some other credit cards to consider, check out an earlier post. The Wall Street Journal has an article about this new Schwab card.
Is this card too good to be true?
Considering that large merchants pay Visa around 1.7% for every transaction, I wonder how they make money on this card. I have wondered this about a Fidelity 529 Mastercard that I carry (no longer offered to new customers), which pays 2% back into a 529 account. Okay, I don't wonder so much...Bank of America expects you to carry a balance paying 14.99% and Schwab/Fidelity expect you to trade a couple times a year. Just don't carry a balance and don't trade excessively, and you can free ride off of those who do!
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