Interview with Schwab about Their 2% Cash Back Credit Card

With both the American Express Blue Cash and the Chase Freedom credit cards lowering their cash back rewards recently, I'm of the impression that the relatively new Schwab Visa cash back card is the new king of the hill (FYI, it wasn't far back before in my analysis, but since the others have cut back and Schwab hasn't, it's the best cash back card now IMO.) I have a contact at Schwab's PR firm, and she set me up for an email interview with Schwab Product Manager Marjorie Scott who answered the following questions for me. As you can see from my first question, I wanted to be sure they weren't going to change like the others. Here are my questions and Marjorie's responses:

Are there any planned changes to the Schwab Visa that would reduce the current level of rewards?

There are no plans to change the Schwab Bank Invest First Visa credit card rewards program. With the Schwab Bank Invest First card, you get unlimited 2% cash back on all purchases automatically deposited monthly into a Schwab One brokerage account. And there are no cash back limits, merchant categories, or minimum purchase amount to receive the cash back.

What are the criteria for getting a Schwab card? Do you have to open a brokerage account or will some other account do?

The cash rewards is deposited into a “Schwab One brokerage account” monthly, so in order to get the 2% cash back the cardholder does have to have a Schwab One account and it needs to be linked to their credit card. Only a Schwab One brokerage account is eligible to receive the cash back.

Do you have to fund the brokerage account with $1,000 or is this waived if you apply for a card too?

Yes, the minimum $1,000 requirement to fund the Schwab One brokerage account is waived when it is opened with the Invest First card.  Also, the Schwab One brokerage account has no monthly service fees, low-cost trading, plus 24/7 online and customer support.

How does this work since it appears the forms to apply for both a card and an account are separate and are sent to separate places?

When you apply online or over the phone for both a card and a brokerage account, the Schwab One account is automatically linked to the credit card account. However, paper applications are processed by two separate areas. Once the client receives their Schwab One account number, they can call us or go online to link the account to the card. This will meet the criteria and waive the minimum balance requirement for the Schwab One account.

Anything else you’d like to add about the card?

The Schwab Bank Invest First card has no annual fee or foreign exchange transaction fees. Simply put, with the Invest First card our clients get the most from their credit card by helping them save as they spend with 2% cash back on everyday purchases like gas, groceries, etc.

-------------------------------------

So there you have it, straight from the source. Thought you all would like to know.

I realize that Fidelity also has a 2% cash back card, but unless I'm wrong, that goes into an IRA. I don't have an IRA with Fidelity and don't want one. I'd prefer to have my cash back in cash back to me, not locked into an account for 20 years. As such, I'm listing the Schwab card as tops in my book.

Comments

[rwh]

I've had the Schwab card since December. So far it is working just as advertised. They also allow checking account priviliges from the Schwab One Account.

[Sarah]

FMF, you really should label these types of posts ads. That's what they are. (How amazing, that a PR person was willing to sit down with a blogger and regurgitate her ad campaign! What unparalleled access!)

[FMF]

Sarah --

You seem to be crankier than usual these past few days. I think you need a vacation.

Actually, an ad would be something they solicited and for which I got paid. Neither of these things happened in this case. There's a problem with the other two cards, I contacted them about their card (and especially wanted to know if they were changing too), and they answered my questions. What's the big deal?

[tom]

I've been using a combo Costco Business Amex and Schwab and it's great, BUT I was at Costco yesterday and noticed that the 5% cash back on gas I was getting is now 4%. I have to call AmEx to confirm, but restaurants still get 3% and travel, 2%.

[Olivia @Independent Beginnings]

This card sounds good, but I still prefer the Discover More card. With that, you get 5% on rolling categories throughout the year. Some of these categories include gas, groceries, and travel. Usually, at least half of the year has rewards valuable enough to me to make up for the rest of the year. All purchases that are not given 5% still earn 1%. Plus, you can redeem your cash back for gift cards instead of cash and raise the value of your cash back. For example, you can redeem $20 of cash back for a $25 gift card instead of cash. It has been working well for us.

[My Personal Rants]

I could say I told you so! :-). I have commented a while back on how I switched from American Express to Schwab 3+ months ago. For me the last straw was when American Express lowered my credit limit to a measly $2,700 because I was carrying $10k on another Amex Blue card for credit card arbitrage and they refused to bump my limit or transfer credit limit from one card to the other after I paid off the $10k in January. I mean $2,700?!?!? I couldn't even buy a decent set of airline tickets to Europe with it. I'm glad I switched. Now I'm only using my Amex card for gas, groceries and drugstores (I'm getting 5% on those) until my November anniversary at which point I'll just close it altogether and use my Schwab for everything.

There is also a Card from PenFed ( https://www.penfed.org/productsAndRates/creditCards/RewardCards.asp ) that gives back 5% on gas purchases and automatically applies it to your balance at the end of the month. If you're a multi-card toting frugality master you can combine that with the Schwab card and make out great! I spend about $3k on gas annually I'm not going to do the inconvenience of having another card for$90 a year tho.

[jason]

I was leaning toward blue cash but I guess this is really better for me since it would take a while to clear $6.5k

Question: how do you get your cash back? I know it is deposited monthly into your brokerage account, but I don't plan on trading any stocks. Can I transfer my cash back to my checking account?

[HGupta]

Its a good card, except that it is terrible for users of Quicken! It doesn't allow the daily download of my transactions into Quicken, and so I have to either do this by hand, or wait until a statement arrives at the end of the month. After the frustration, I ended up switching back to my Chase card.

I really wish they went with another bank than MBNA/FIA card service.

[ChrisR]

Regarding the Fidelity card -- I have used the 1.5% Investment Rewards card for the past year and a half. I have been able to deposit the cash back into both an IRA and a regular trading account, which could then be transfered out of Fidelity trading account if I wished.

[FMF]

Jason --

I think you can hook it to your checking account and transfer the money there fairly easily.

[My Personal Rants]

@Jason

You can link your brokerage account to your checking account and have it transferred via ACH.

@HGupta

I agree about the Quicken part. It's terrible as it only downloads once a month not once the items cleared. It certainly is worse in this aspect. But the FIA website shows all pending transactions very quickly, often within minutes, and entering 2-3 transactions a day by hand into Quicken is not that big of a deal for me.

[Old Limey]

I have a Fidelity/AMEX card that provides a 2% Cash Back Reward on ALL purchases. The cash can be deposited into either an IRA or a non-IRA Fidelity account. This card may only be available for Private Access clients, check with Fidelity if you are interested.
I also like it that FIA Card Services manage this AMEX card for Fidelity and I have found FIA Card Services more efficient than AMEX although both get the job done.
The Fidelity/AMEX card also offers an unbelievable 2 for 1 offer on airline bookings made through AMEX(Coach, Business, and 1st. Class) for destinations in N. America, the Caribbean, and Europe. This offer can be used four times/year.

[Davis]

Yes - you're wrong on the Fidelity AmEx card. The 2% is good for non-IRA Accounts as Old Limey mentions above.

But I haven't heard of the 2 for 1 travel option. I thought this was an AmEx Gold perk when you buy a certain full price fare tickets. How do I find more about this offer.

[Sarah]

Just because you give away the space for an ad doesn't mean it's not an ad, FMF. Seriously, if I want to read a regurgitation of corporate talking points, I can always hit up their website. I look to a blogger to add some analysis or at least some hard-to-find details.

[Sarah]

P.S. Vacation coming in July! ;)

[FMF]

Sarah --

Actually, there is good news here if you look for it. For instance, whether or not Schwab was going to make changes to their card is NOT on their website. This is a real and concerning question because of what's happened with Amex Blue and Chase Freedom recently.

Also, there is the explanation of what happens when you apply by various means. I applied by mail and the process was confusing (what was required and what wasn't), and the explanation above helps to clarify. So to me, this is a worthwhile post.

Thank goodness July is almost here! Oh no, you're not planning on going to Niagara Falls are you? ;-)

[Old Limey]

Davis:
You have to purchase one unrestricted full airfare to get the second one free. The letter telling me about this offer came shortly after receiving the card from FIA Card Services, the company that services the Fidelity/Amex card. The airfare offer I received is good for one year. It remains to be seen whether it gets extended for another year when the offer expires. There are also some minimum fare requirements so it is not intended for short commuter flights.

I use this Fidelity/Amex card as my primary card, even for my electricity, phone, water, garbage, and cable bills. I also use Costco's AMEX card that gives back 3% for restaurants and gasoline, 2% for travel and 1% for everything else. I also keep the Fidelity/MasterCard that gives back 1.5% as a backup for a couple of restaurants that don't take AMEX. Since going to this three card system I am saving myself quite a bit of money, not paying any annual fees, and of course, I never pay interest on anything, and have very little need for cash these days. I find that my Credit Union's Bill Pay system (also free) is the ideal way to pay credit cards because the payment is made electronically on exactly the day that you specify. You definitely don't want to pay using a check and the US postal service and run the risk of a late payment.

I have only two companies out of all the ones I deal with that do not offer credit card payment, one is Pacific Gas and Electric, my natural gas supplier, and the other is State Farm Insurance, all they offer is an automatic bank withdrawal.

[Davis]

Old Limey,

Thanks for the info! I must have discarded that letter without checking it properly. Do I need to go through AmEx Travel directly to book the full-fare ticket?

[George Y]

For those who mentioned problems not getting daily updates to Quicken from the Schwab card: Try Mint.com. It does automatically update with the Schwab card, as soon as the charge clears. I know some people are loyal to Quicken or Money, but for me the point is the less manual entry, the better.

[Frank]

Mint.com does not allow you to reconcile transactions like Quicken or MS Money though.

[Jordan]

You can get daily updates from the FIA/Schwab card into Quicken/Money. You need to get a login to 'FIA Services' at this sit - https://www.ibsnetaccess.com. Initially your Schwab login will get you started, then create a new FIA login. Then you add the Schwab credit card to Quicken/Money as an FIA card and use your FIA credentials, then you get daily updates... The Schwab reps that I've talked to don't even know this.

[Benjamin Bryan]

Jordon,

A couple quick questions:

1. Which institution in Quicken did you use to get daily updates? I can't get it to work more than once a month with FIA Card Services but I also see FIA Card Services Credit Card, FIA Card Services Business Card, and FIA Card Services N.A (but none of them accept my login). FIA Card Services Credit Card says I should have received a Quicken ID and password within 7 days but I haven't.

2. What do you mean by "Create a new FIA login." My schwab and fia login are the same (so maybe I've already done this) and when I login I see my credit card. I tried creating a new FIA login but it won't let me move forward without an account number, if I enter my account number it notices I already have an account.