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US Bank Smartly Credit Card Review: Up to 4% Cash Back w/ $100,000 in Qualifying Balances

US Bank recently announced the US Bank Smartly Visa Signature Card, a new rewards credit card that offers up to 4% cash back on all purchases, if you have enough qualifying balances with them. This is the newest entrant to relationship banking, where banks offers you extra perks for combining multiple account types with them like savings accounts and investment/retirement accounts.

The card is not open to applications yet, but you can get on an e-mail waitlist. Here are the details of how that “up to 4% cash back” breaks down according to this US Bank press release and CNBC article.

Base rewards of 2% cash back on all purchases, with no limit. Technically, this card earns 2 points per $1 spent in eligible net purchases. In order get 2% cash back, you must redeem those points into an eligible U.S. Bank checking or savings account.

Bonus rewards of 0.5%, 1% or 2% cash back based on your qualifying combined balances at US Bank. You must also have an open Bank Smartly Savings account. Your qualifying combined balances with U.S. Bank include “open consumer checking account(s), money market savings account(s), savings account(s), CDs and/or IRAs, U.S. Bancorp Investments and personal trust account(s).” Business accounts, commercial accounts, and the Trustee only (IFI) client relationship do not qualify.

  • $5,000 – $49,999.99 earns 2.5% total cash back. Total of 2.5 Points per $1 (a base of 2 Points plus the Smartly Earning Bonus of 0.5 Points),
  • $50,000 – $99,999.99 earns 3% total cash back. Total of 3 Points per $1 (a base of 2 Points plus the Smartly Earning Bonus of 1 Point).
  • $100,000+ earns 4% total cash back. Total of 4 Points per $1 (a base of 2 Points plus the Smartly Earning Bonus of 2 Points).

Other bits: CNBC article reports no annual fee. Points will expire if there is no reward, purchase, or balance activity on your account for 12 consecutive statement cycles. Bank Smartly Credit Card and Bank Smartly Savings available in all 50 states.

Bank Smartly savings account. Let’s take a closer look at the Bank Smartly Savings account, which also earns difference rates based on both your balance inside the Smartly savings account itself AND your qualifying combined balances at US Bank. Here’s their current interest rate grid, updated as of 9/3/2024.

Importantly, these rates can change at any time. But right now, if you have at least $25k in Smartly and $25k in combined qualifying combined balances across US Bank, you can get the current top rate of 4.10% APY.

There is also a $5 monthly maintenance fee, which is waived if you have a Bank Smartly® Checking account (or Safe Debit account for minors). The Bank Smartly® Checking account itself has a $6.95 monthly fee, waived with $1,500+ average account balance, qualifying U.S. Bank consumer credit card, or combined monthly direct deposits totaling $1,000+.

Therefore, technically if you get this credit card, that would make the Bank Smartly Checking account free, which in turn would make the Bank Smartly Savings account free. Right now there is also a $450 bonus for new Bank Smartly Checking customers with a direct deposit requirement.

Rough opportunity costs with depositing cash at Bank Smartly Savings. Let’s try some rough theoretical numbers. Let’s say you actually have $100,000 in cash lying around, but you could get ~5.10% APY elsewhere and so you would be giving up ~1% APY to park your money at US Bank instead. If you held all of it at Bank Smartly Savings to qualify for the 4% cash back on the credit card, you’d be giving up $1,000 in taxable interest each year ($100,000 x 1%).

In exchange, you are getting 2% extra cash back over your existing, flat 2% cash back card. Cash back rewards are generally considered non-taxable as they are a rebate on your purchase. If you assume a marginal tax rate of 0% (this is just a guess), then you’d need $50,000 in annual purchases ($4,166 a month) at 2% extra cash back to break even with the hit from the lower interest. If you assume a marginal tax rate of 22%, then you’d need a little less: $39,000 in annual purchases ($3,350 a month) at 2% extra cash back to break even with the hit from the lower interest.

US Bank self-directed investments accounts! As with the Bank of America Preferred Rewards program, an alternative way to satisfy the balance requirements with minimal opportunity costs is to transfer over existing assets into a self-directed US Bank brokerage account. For example, you could transfer over $100,000 in index ETFs inside an IRA or taxable brokerage account. This would appear to fully satisfy the requirements as a “U.S. Bancorp Investments” account. This way, US Bank also gets a stronger foothold in the world of wealth management, as all the banks seem to want these days.

Be careful though, as US Bank’s self-directed brokerage account has a slightly higher fee schedule than much of the competition. Stock trades are $4.95 each, although you get 100 free trades per calendar year if you have both a Bank Smartly Checking account and paperless statements. There is a $50 annual account fee and a separate $50 annual IRA fee; these are waived if you have $250,000 in combined statement household balances.

My quick take. If all of these details actually hold through launch, they would be a significant improvement over the best current situation of 2.62% cash back on all purchases via the Bank of America Preferred Rewards program and a BofA cash back credit card. (The Robinhood 3% credit card is still “coming soon”.) But will it last? Even the BofA 2.62% has remained something of an outlier, but my hunch is that it has encouraged enough of people to keep a ton of cash at BofA earning zero interest so that BofA is still happy overall. Given that this new US Bank program actually offers a decent interest rate and an even higher cash back rate, I am concerned about its longevity. On the other hand, maybe this is US Bank’s big push to become a major player on the national level of Bank of America or Chase.

I’d have to open a lot of new accounts to go for this one. Savings account, brokerage account, credit card, move over assets, all for a bonus that is based on my credit card spend so will trickle in slowly. (None of these have a big upfront bonus.) Given the amount of shady stuff US Bank will probably have to deal with when paying 4% cash back, I’d have to trust that it will last long enough to be worth the effort.

Always Use Limit Orders, Since Your Market Orders Just Become Bad Limit Orders Anyway

I don’t know how everyone else does this, but whenever I buy shares of an ETF for my portfolio, I always use a limit order. But it’s usually a “lazy” limit order, because I am just aiming to buy immediately at roughly the market price and the limit order is simply insurance against a flash crash or similar anomaly that happens rarely, but still happens. So I look at the bid/ask prices, and add some wiggle room, and submit a limit order good until the end of day.

I’ve read advice elsewhere to place a limit order at the midpoint between bid and ask, but that makes it so there is a good chance the order will not fill that day, and may never fill if the market keeps moving. I don’t want to keep chasing the market price and staring at the order book on a trading screen. I just want a fair fill, and I want it done. My holding period will be decades, so consistently investing in the market is the most important.

However, on newer trading apps like Robinhood, the default option is always a market order. With smartphone user interfaces, all it takes is a quick swipe and off it goes. Sometimes it takes a little hunting around to even find the limit order option.

It turns out, Robinhood actually agrees that market orders are dangerous. Behind the scenes, Robinhood and many other brokers do something called “order collaring” and quietly turn your market order into a limit order with a 5% margin. For example, if the stock is trading around $100 and you put in a market order (that says you’ll pay whatever the best price is that the moment, even if it is $5,000 or something, technically) into a limit order for $105 max. Matt Levine wrote Money Stuff column about order collaring (gift article) that points out that there are trading bots that specifically take advantage of these 5% collared orders, especially on more thinly-traded stocks.

Here’s how I imagine Robinhood’s thinking:

“We gotta keep things simple and fun for these newbie investors, so we will just let them do market orders with a single swipe, no entering numbers or doing math required! Hmm… but market orders are kinda stupid and dangerous. So… let’s actually make them a +/- 5% limit order so they can’t really hurt themselves so badly that they’ll get mad at us. If they are careless enough to do a market order, then they won’t notice a 5% bad fill but they might notice something worse.”

According to Vanguard, the median bid-ask spread for their popular Vanguard Total Stock Market ETF (VTI) is 0.01%. That means roughly 3 cents a share at the current price of ~$270. Here’s a screenshot from my order screen today. The bid might be $268.83 and the ask might be $268.86. Here, I might just put in a limit order at $270 so that even if the market moves up a little quickly, I still get my order filled. It filled at $268.93, and a few minutes later it was at $269.29.

Meanwhile, 5% of $270 is $13.50 per share. That’s a lot! 500 times the usual spread, and something is usually wrong if it’s that much off. I know that VTI is not thinly-traded, and 99.9% of the time, it won’t matter what you put in for your limit. But once in a while, it will matter, and it only takes an extra few seconds to place a limit order instead of a market order.

My guess is perhaps people think that putting in a limit order will actually encourage the market maker to take advantage of them? It’s like if you say “I’ll pay up to $5 for that Pepsi”, and someone will charge you exactly $5. It’s better just to do a market order and not “show your hand”? But this information about order collaring reaffirms that market orders aren’t any better because they just get turned into very loose limit orders anyway. The bots will still see you as a potential sucker. You might as well set a tighter limit yourself.

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