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You should pick your credit card perks like Warren Buffett picks his stocks, TD Bank exec says
TD Bank's head of credit cards says a flat-rate card often beats bonus-category cards for the average person.
Key points
- Chris Fred, TD Bank's head of credit cards and unsecured lending, told Fortune a good flat-rate card often wins out over bonus categories.
- TD's three credit cards include one with 2% cash back on everything and another with a base 1% cash back.
- The r/churning subreddit boasts nearly 30,000 weekly visitors and has an FAQ dissuading average people from churning.
Why it matters. Card holders choosing between high-fee perk cards and simple cash-back cards may weigh whether points chasing is worth the effort, since Fred says it may prove too difficult for the average person.
Chris Fred, head of credit cards and unsecured lending at TD Bank, told Fortune that a flat-rate card often beats fancy bonus categories for the average person. TD's three cards include one offering 2% cash back on everything and another with a base 1% cash back. Fred said people think they can always beat that 2%, but on average they don't. The r/churning subreddit draws nearly 30,000 weekly visitors and has an FAQ discouraging churning.
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You should pick your credit card perks like Warren Buffett picks his stocks, TD Bank exec says
The billionaire’s philosophy for preaching the ways of compound interest might also apply to how many credit cards you have in your wallet. If you’re a Boglehead like myself, you can talk endlessly about the compounding powers of the three-fund “lazy portfolio”: some bonds, some domestic stocks, and some international ones. Set it and forget it; never look at it again until you need to. If you don’t feel comfortable with the three-fund portfolio, you might want to get a financial advisor who can pick specific stocks for you for an AUM. The opportunity cost is in your head: For a low-expense ratio, you can have some ETFs that fit the three-fund portfolio, or you can shove all decision-making onto an advisor who will charge more to manage your portfolio. All it means is someone or something will be managing your money, and depending on the amount of effort and work you want to put into it, you can pay a higher fee and get it done for you for potentially higher rewards (although FAs rarely beat the market returns of ETFs) or grab a low-expense ratio fund and call it a day. If you’re a Warren Buffett aficionado, you’ll recognize this as his ever-touted “circle of competence,” in which you stick to what you know and leave what you don’t know to those, well, who know. Invest in what you understand and on things that have long-term value, and leave the frequent trading and market vola.