Fidelity 2% Cash Back Credit Cards At Risk?

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fidoamexOne of my long-time favorite credit cards is a grandfathered Fidelity College Rewards MasterCard that gives me 2% flat cash back on all purchases. I’m not sure exactly when I first applied for this card, but it was in the early 2000s. The current Fidelity line-up as of September 2015 is still pretty good (if you have a Fidelity account):

All three of these cards, including my legacy MasterCard, are issued by FIA Card Services, which is a wholly-owned subsidiary of Bank of America.

But watch out, this Bloombers article says that Fidelity Investments is considering dropping AmEx, BofA as partners:

Fidelity Investments is considering dropping American Express Co. and Bank of America Corp. to find new partners and better terms for one of the top-rated cash-back credit cards in the U.S., according to people with knowledge of the matter.

Visa Inc. and MasterCard Inc. are in talks with Fidelity, vying to replace AmEx on a card that’s been amassing customers for more than six years, according to the people, who asked not to be identified because negotiations are private. AmEx is parting with Costco Wholesale Corp. and JetBlue Airways Corp., and losing the Fidelity deal would affect a key area of growth: facilitating transactions in which another bank is the lender.

Here’s my previous post on how Costco dropped American Express for its future co-branded credit cards.

Does dropping FIA as an issuer mean the Fidelity 2% cash back cards will also get the axe? The 2% cash back graveyard already includes Schwab, Priceline, and Sallie Mae co-branded cards. I’ve racked up thousand of dollars in 2% cash back rewards from Fidelity, which have grown even more my sitting in a tax-deferred Fido 529 account. I think this shows that the co-branding has encouraged me to keep assets with Fidelity, but if they kill the card I will probably roll my 529 funds into another plan like Utah.

Does “better terms” mean better for Fidelity’s profit margin, or better for their customers? By ending the relationship entirely, perhaps that would make it easier for Fidelity to say “sorry, we broke up, all existing cards must go”. On the other hand, maybe Fidelity has the negotiating power to get another issuer on board with 2% cash back? I really can’t see it going any higher than 2%.

If it does end, there will still be cards that can get you 2% in value, but as the article notes the only remaining 2% flat cash back card with no annual fee will be the Citi® Double Cash Card (review). I applied for this new Citi card is a back-up play, in case Citi also closes it to new customers but grandfathers existing users into the 2% cash back. After I paid my Citi bill using my bank account online twice, I can now get the full 2% cash back by requesting my rewards to be sent online back to that same bank account.

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Comments

  1. For this year at least, I’m still getting 3% back on all purchases with my Discover IT Miles…

  2. That would be unfortunate for those who were willing to sign up for a credit card through Fidelity. I used to be very happy about my Schwab Credit card with its 2% cash back. I was unhappy that they canceled the service and I ended up with a Bank of America card that only pays 1%. At some point, the potential hassle could be a deterrent for customers.

  3. I had the Schwab 2% card. When Schwab stopped sponsoring the card, it ultimately became a Bank of America Cash Rewards card paying 3% on gas 2% on groceries and 1% on everything else. As a result, even though I never cared for B of A, I ended up with a Merrill Edge account and a B of A checking account. Now I am a preferred customer and get an extra 75% on credit card cadhback, free safe deposit box, free checking and up to 100 free stock/ETF trades per month. Now I really like B of A and Merrill Edge.
    Schwab lost a lot of my business by discontinuing the card and introducing me to B of A and Merrill Edge. B of A could end up the winner if Fidelity stops sponsoring their card and B of A could get a share of Fidelity brokerage and banking business as well as the card business.

  4. If this card goes away, I’ll just hop over to the Citi Double Cash card.

    FYI, with this card you can redeem 50k points as a statement credit at the same redemption value as a fidelity account.

  5. “Must redeem in $50 increments” is incorrect, at least for the amex version. Your own review cites a different amount as an example.

    • You’re right, at least for the American Express it looks like it works the same as on my old MasterCard = “Please note that automatic redemptions will occur on a monthly basis as long as you have reached the point redemption threshold of 5000 points.” I don’t see the same language on the Visa but I’m guessing it works the same. You get fully cashed out, just have to reach $50 in points before it triggers.

  6. no!!! that’s my card!

  7. This may just be wishful thinking on my part, but I predict that Fidelity will continue to offer a 2% cash back card, even if they do part ways with Amex. Here’s why:

    1. As Jonathan notes, Fidelity has been offering some sort of 2% cash back card since at least the early 2000s. There are a lot of cards in the 2% cash back graveyard, true, but Fidelity has been a (or maybe even the only? The citi card is relatively new, no?) constant player in this field for a long time. That gives me some confidence that they will continue to do so. Clearly they’ve figured out how to make it work where others have failed. Which is probably due the fact that…

    2. Fidelity reps have been clear in past articles I’ve read that this card is just a tool to get and retain customers, and probably a loss leader. That’s obvious enough from the way the card is structured (the cash back goes into a Fidelity account), and my guess is it’s working. Anecdotally at least it’s worked with Jonathan as he says above, and it’s worked with me (I recently switched to using a Fidelity Cash Management Account as my checking account, and this card was a significant factor in that decision; I also have an IRA and a brokerage account there and probably wouldn’t otherwise, but it’s just so convenient to have a lot of things in one place.)

    3. Perhaps most significantly, Fidelity just a few month ago offered a cash bonus for new people signing up for this card. That’s the first time I remember that ever happening (probably because, frankly, they haven’t needed to; it’s a great card even without one, and their target audience is probably more motivated by long term benefits than a one-time bonus). That suggests to me that they’re looking to expand this program, not end it.

    (And, related to point #2 and #3 above, if the whole point of this card is to get and retain customers, and presumably Fidelity just got a wave of new card signups earlier this year through that promotion, my guess is at the very least existing users are going to be grandfathered even if this program were to end. Otherwise the perception of a bait and switch is going to burn bridges where Fidelity is hoping to build them.)

    4. When Amex announced the partnership with Schwab a few months ago, I recall the news coverage involving some theorizing that it was related to Amex’s concerns about losing the Fidelity partnership. So, my guess is a contract is running out and both sides have been gearing up for renegotiations for awhile, and the “leak” that led to this Bloomberg article may even just be an attempt at gaining some leverage. I wouldn’t be surprised at all if the Amex partnership continues.

    5. Even if the relationship with Amex does end, though, Fidelity has offered a 2% cash back card before that wasn’t an Amex (a MasterCard, as Jonathan notes). So they’re not necessarily only able to make this pencil out with the higher swipe fees associated with Amex. (And personally I would welcome a Visa or MasterCard so I don’t have to carry a backup for places that don’t accept Amex.)

    P.S. Jonathan, I started reading your blog shortly after you started it, read it for a few years, then gradually, and without any particular reason, stopped, as often happens with this sort of thing. I rediscovered it a couple months ago and have been reading regularly again since. Was very glad to see that you’re still at it and still producing great content.

    • You’ve got me optimistic! The best case scenario I think would be 2% flat card with either Visa or MasterCard. I mean, if the Citi Double Cash can make it work (I have my concerns), Fidelity should be able to do it.

      • Just to be clear, I thought the contract and negotiations are between the credit card issuer (Bank of America, or their FIA subsidiary) and the affiliate (Fidelity), and not with the network?!? Just like how BJs switched from Chase(?) to Barclays, to now Comenity; or Sams from DiscoverCard to Synchrony; or JetBlue from AmEx to Barclays (by 2016); Costco from AmEx to Citi, and lost network; GM from HSBC to Capital One; BestBuy …

  8. This is the only AMEX card that offers 2%, given it’s 3rd party affiliation with AMEX, it’s very helpful for exploiting other AMEX branded products. Not the least of it is AMEX Offers.

  9. This is the only AMEX card that offers 2%, given it’s 3rd party affiliation with AMEX, it’s very helpful for exploiting other AMEX branded products. Not the least of it is AMEX Offers.

  10. I used the FIA Amex card for years for the 2% cashback feature (I actually opened the Fidelity cash management account solely for that purpose) and was quite satisfied. However, I stopped using it after I relocated outside the US because all FIA cards charge foreign transaction fees, which cancel out the cashback. I hope Fidelity can offer a 2% cashback card that does not charge foreign transaction fees. If this happens, I will once again switch all my spending back to the Fidelity card.

  11. I really like the Fidelity Amex card. I also like Fia and Bank of America. So, I want no changes to the current program. I still have a large IRA in Fidelity. If Fidelity removes this credit card – I will be tempted to roll the IRA to Vanguard and/or Merrill Edge. The Fidelity Card is the main reason I am still somewhat loyal to Fidelity. I don’t want Fidelity to end the relationship with Fia – because I also have a Bank Of America travel (preferred rewards). This B of A card that effectively earns 2.65% cash back. With the current arrangement – I can transfer these 2.65% rewards points to my Fidelity account. So right now – I am earning 2% cash back at places that only accept AMEX (Costco), and 2.65% cash back on places that accept Visa.

  12. Fido Investor says

    Dana – You are the only person I have ever seen state they like FIA Card Services for the Fidelity AMEX card. They have the worst customer service, the most outdated customer card services website, and you are unable to use the core AMEX apps, website, and services which tarnishes the AMEX brand. It’s a disgrace to Fidelity that they are unable to offer ApplePay over a year later due to FIA Card Services sitting on their ass.

    Good riddance to FIA Card Services ASAP.

    Jonathan – Have you heard any updates on if/when Fidelity would be transitioning to a new provider? It can’t happen soon enough.

  13. mary sanseigne says

    I have had the misfortune to deal with FIA as a POA on my husbands account. He is disabled and I manage all our accounts without difficulty except the FIDELITY
    Amex Investment rewards. My husband signed up for automatic deposits into his cash management account before he became ill. They have yet to pay one cent in any rewards to his account although he had over 25K points. When I tried to do this they have refused to honor my POA. Every bank and even Fidelity does permit it but not FIA. I will take the loss and drop the card and possibly our Fidelity accounts as unable to resolve.

  14. FYI, original links as of today to apply do not work. Fidelity removed links to apply on their webpage for the Fidelity College Rewards MasterCard, Fidelity Investment Rewards Visa Signature Card (1.5% back) and American Express Card (2.0% back); as of around December 29, 2015. Details on Fidelity’s cash management webpage states to check back January 4, 2016 to apply; any gossip or rumor if Fidelity went with another credit card issuer and/or network vi/mc/ae/dis?

    • Fidelity will most probably drop AMEX, the rest is conjecture at this point. It’s thought the 2% will go away or be neutered. Hopefully those with the cards will still be able to use them as intended.

  15. https://www.bostonglobe.com/business/2016/01/03/fidelity-switches-credit-card-partners
    I think it’s official; Fidelity will be cobranding their 2% credit card with US Bancorp and Visa network over time in 2016.

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