Schwab Visa on the Ropes

Here's a piece from the WSJ Bucks Blog that says that Schwab has officially stopped accepting new applications for its 2% rewards Visa credit card. Turns out that most of the people using the card are not carrying a balance (which is bad for Schwab.) As such, they're not making as much money (any money?) as they thought they would, so they're stopping new applications to limit the damage.

Fortunately, those of use who have a Schwab Visa are not affected -- we'll still keep our cards and the associated benefits. That said, the Schwab spokesman was quoted as saying, "there “are no changes to existing clients at this time.” Note the "at this time" wording. I think the Chase Freedom card once said the same thing and look where that got us.

If Schwab drops the rate on this card, I'll bail on it, close my Schwab account (the only reason I have one is to get my card rewards), and move over to the Fidelity American Express card (on the left under "credit cards" -- they don't have a direct link to it). It's 2% deposited into a Fidelity account, exactly the same as Schwab's card. I have a Fidelity retirement account for my 401k, but I'd need to open a new one to get deposits for this card. In fact, I might do this anyway since I have an American Express Blue card that I use at Costco, and I'm not getting close to 2% on it since it's not my main card (and it only works well when you charge a lot on it.)

And if this strategy doesn't work, I'll look at these cards to see if there's one I like there.

Comments

[Jason Steffens]

This card, and the chance to consolidate bank and investment accounts, caused me to switch my banking and brokerage business to Schwab. While I do not carry a balance on the card, Schwab did earn my business in part through the card, and I now regularly purchase Schwab ETFs. I will be disappointed if the rate on the card drops, but my satisfaction with Schwab's service and with the way everything integrates so well may lead me to stick with it regardless.

FWIW, this is not the only change at Schwab. It used to offer a savings account with a decent interest rate. That rate is now down to 0.5%, the same as the checking account interest rate, making the savings account product superfluous.

[KaseyD]

I have the Schwab Visa. Just in case they lower the rate, I applied today for the Fidelity Amex.

Thanks for the heads up about Schwab, it prompted me to act now.

[Josh Stein]

I think that if yet another card makes the change and removes its real value, I'll just go to using cash and the debit card. Too much annoyance.

[Eric]

Ugh. They better not change the terms for existing users (although who am I kidding?)

But I can't help but think that Schwab should have known that their card was only going to attract deadbeats like us that pay our bills in full. They only accepted people with good/excellent credit and most of them don't carry balances.

[shine]

I saw today that chase freedom 5% Cash back card is back at http://www.chasefreedomnow.com/

[MasterPo]

Companies don't give bonuses or freebees for nothing. They pay for it which ultimately means the card holder pays for it. If it isn't profitable for the issuer they drop it.

Eric - Pretty fun that someone who pays their bill in full is "deadbeat". ;-)

[Josh Stein]

Really, they should have required that the rewards stay in a schwab one account - that would have at least given them a little more revenue (though mine have stayed in a schwab one, not everyone does, I'm sure).

[Mary Kate]

I love the Schwab Visa, but I hate the interest rate on their bank savings account. I'm in the process of moving that money. They pay even less interest on money in a brokerage account.

[Eugene Krabs]

Funny, I was JUST looking at the Fidelity Rewards cards yesterday. I even considered moving all of my money there. The thought of consolidating all of my money under one roof has always held some appeal to me.

Alas, their expense ratios and trading fees are still too high for my taste.

The rewards cards themselves seem like a good deal, though it's about the same as what I am getting elsewhere. So, without a deal good enough to put all of my money under one roof, I just don't feel like their rewards cards are worth it to me right now.

By the way, Fidelity also has a Visa Rewards card. I think it's 1.5% for the first $15k, and 2% after that. Otherwise, the arrangement is very similar, if not the same as the Amex version.

[jclimber]

Trades at Fidelity are $7.95 flat, most iShares ETF's trade with no fees.

[jim]

I think they quit taking new applications a while ago. I tried to find an online application for the Schwab visa card a few months ago and they didn't seem to have one. Older links to their card applications were no longer valid pages.

[Bender]

Darn I hope they keep it for existing customers. If they change it, I'll think I'll be moving all my investment accounts to vanguard and my cash accounts to a local credit union (you can still get 2% on cash there).

[TN]

I've had a Schwab Visa for a while and haven't encountered a problem until this month. My reward dollars were not deposited this month. I have called twice over the past week and both times I was told that this would be cleared up over the upcoming days.

Please check your rewards for this month if you have a Schwab Visa.

[Terry]

Well the news came down today...Schwab is terminating the Invest First Visa card as of October 1. It was a good while it lasted....

[Josh Stein]

Yep, I got that word, too. FIA Card Services will still service the card - I'll have to see what they send me. What sucks is that Schwab is actually going to lose business with me, because the money was going into a Schwab IRA (transferring out of a Schwab One account). I'll have to close both of those now. Oh well.

[Stacey]

I received the letter today from Schwab about FIA Card Services taking over the card from Schwab. The letter did say that "FIA Card Services is making no changes to your current terms, conditions, or reward programs. FIA Card Services will provide you with notice if any changes should be made." So I guess FIA Card Services sending a note soon might change the rewards program. I hope not...I really liked this card. Should we lose the 2% on everything card with Schwab, is there another 2% card that FMF or any readers are aware of out there? Thanks

[JKC]

I just got my letter: “Effective September 30, 2010, Schwab has agreed to terminate …(2% reward) … Visa credit cards”

Did you get your letter?

I appreciate your writing on rewards cards, and always check back for the latest info.

It may be time to start scouting for the new “best rewards card”.

Keep up the good work.

[MelMoitzen]

I just got the letter today. Officially, you only get *one* point for every dollar spent, and it is Schwab that then values the points at 2¢ to effectively make this a 2% card.

So what they likely mean by "there are no changes to your current terms, conditions or reward programs" is that FIA will continue to give one point. But trying to redeem that point for something worth 2¢ will be a thing of the past. Bummer.

I still have a grandfathered Orchard Bank 2% MasterCard, but the maximum rebate is $400/year--so I'll use that sparingly as our charges far exceed $20K/year and will offload charges onto other cards offering >1% back in certain categories. Most likely this means the Costco Amex, IMHO the best cash rewards card still available. 3% back on restaurants (all types including fast food) & gas, 2% back on travel, and 1% back on everything else.

[StevieD]

I still get 2% back from my ex-Schwab Visa, now deposited to my checking account rather than my brokerage account. So far the change has been painless, and having the ability to say I want the monthly reward sent straight to my bank is a plus.