Saving for Retirement through a Credit Card? Not So Fast.

Two weeks ago, the WSJ published an article on credit cards that offer cash back or points that can be used to fund your retirement or another investment account.  As the article explains:

Instead of redeeming earned points for the typical airline tickets or gift cards, users of these cards receive cash that they can then deposit into an individual retirement account or another investment or savings account.

This seems like a reasonable deal, and may in fact be useful to those who need some help remembering to move some of their savings into their retirement account.  But beware of the conditions and reward rates.  Here, we review the cards mentioned in the WSJ article:

  • Ameriprise: Ameriprise has 5 credit cards – 2 for only members of its Achiever Circle Elite program.  Its rewards program is like many others, awarding one point per dollar spent on most purchases (and varying bonuses depending on the card).  Points can then be redeemed for a range of things, including travel, gift cards, and funding into an Ameriprise account, including savings and investment accounts.  Points for funding Ameriprise accounts can only be redeemed in increments of 10,000, which are converted into $150 – effectively, a 1.5% reward return.  Two of the cards have no annual fee, while the fees for the other three cards range from $125 to $450 after the first year.
  • Edward Jones: The rewards program for the Edward Jones Personal Credit Card is very similar to Ameriprise’s, offering a variety of options for which points can be redeemed.  One of them is funding into an Edward Jones account, such as an IRA or 529.  However, points can also be redeemed for cash at exactly the same point exchange rate.  For example, for 2,500 points, you can get either $12.50 in your account or as a cash reward check, and for 50,000 points, you can get $500 in either form too.  The reward rate is also relatively low, as it ranges from 0.5% when redeeming 2,500 points to just 1% for redeeming 50,000 points.  There is no annual fee for this card.
  • Fidelity Investments: Fidelity offers 4 different credit cards, all of which transfer your rewards straight into your Fidelity account.  There are 3 American Express options, which post 2% of the value of your purchases into a Fidelity Investment, IRA, or 529 accounts, respectively.  The Visa card, on the other hand, gives only 1.5% on the first $15,000 you spend per year on the card, and 2% thereafter.  All 4 cards do not have annual fees.

The WSJ article also warns about interest rates, but even readers who pay their balances in full every month should think carefully before signing up for one of these retirement or investment cards.  These cards require that rewards be deposited into an account opened at their respective financial  institutions.  Further, their reward rates are quite low, and you are likely better off getting a good cash back card – such as Discover or CitiForward – and, if you want, depositing some or all of your returns into an investment account or IRA of your choice.

Flight Entertainment for Half the Price

Dear Traveler,

Next time you fly, check out the Read & Return program offered by The Paradies Shops, which operates more than 500 stores in over 70 airports.  The program allows you to purchase any book, read it, and return it for 50% off the retail price.  The great thing is that you do not have to return the book at the same airport store where you purchased it  and you have 6 months to return the book.  If the book is in good condition, Paradies will resell it at half price.  If not, it will donate it to a local charity.  For the bored traveler who is stuck at the airport due to a long delay or layover, this is a money- and environment-friendly option.

All the best on your next flight,

MUYF

On Amtrak: Ride Two or Three, Get a Summer One Free

Money Under Your Futon has covered the Amtrak Guest Rewards program several times before, noting that it is a spending-based rather than miles-based program, as it gives points according to the price of the ticket rather than the distance traveled.  The number of points needed for a free ticket also varies by line, with the Northeastern and the Acela being two of the most expensive points-wise.  But until March 13, 2010, riding on the Northeastern – which goes through Washington, DC, Philadelphia, New York, and Boston – or its expressed version, the Acela, may turn out to be a good deal: Amtrak is offering a free Northeastern round-trip ticket for the summer if you take 2 round-trips (or 4 one-way trips) between January 7 and March 13, 2010.  On the Acela, it takes 3 round-trips (or 6 one-way trips) to earn an Acela round-trip ticket for the summer.

Without this promotion, earning enough points for a free trip on the Northeastern or the Acela takes quite a while: to accumulate points, Amtrak Guest Rewards gives one point for every dollar spent on a regular Amtrak ticket and 500 points on the Acela; but a one-way trip on the Northeastern usually requires 3,000 points, and, on the Acela, a business class ticket (there are only business and first class seats on the Acela) goes for 8,000 points.  That is, for a free one-way ticket, you usually have to spend $1500 on Amtrak or take 16 one-way trips on Acela (or a mix between the two).  In contrast, with the current promotion, you only need 2 trips on the Northeastern or 3 trips on the Acela to earn a free round-trip ticket on the respective train.

For both promotions, the qualifying trips must be taken by March 13, 2010, and the free ticket will be valid for travel from June 1, 2010 and August 31, 2010.  Taking advantage of these deals may require some forward planning (and having an idea of your summer plans), but at least enrollment is easy.  To register for them, just log into your Amtrak Guest Rewards and, under the “promotion registration” tab, enter code 10810 for the Northeastern and/or 10710 for the Acela.