Why no Vanguard 2% cash back Visa card?

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lhl12
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Why no Vanguard 2% cash back Visa card?

Post by lhl12 »

Since Fidelity is able to offer a 2% cash back Visa card (1.5% on the first $15,000 of spending) with automatic direct monthly deposit into a Fidelity account, why can't/won't Vanguard do the same? Perhaps Vanguard could do even better given their not-for-profit status?
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Rainier
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Re: Why no Vanguard 2% cash back Visa card?

Post by Rainier »

Fidelity most likely loses money on a 2% cash back card. It is just a vehicle to earn other income.
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Re: Why no Vanguard 2% cash back Visa card?

Post by neoptolemus412 »

lhl12 wrote:Since Fidelity is able to offer a 2% cash back Visa card (1.5% on the first $15,000 of spending) with automatic direct monthly deposit into a Fidelity account, why can't/won't Vanguard do the same? Perhaps Vanguard could do even better given their not-for-profit status?
Vanguard rarely advertises or spends much on promotional products such as this (not to mention they are not a bank). These cards are like 0% balance transfers. Companies utilize these tactics to attract new customers. Vanguard does this by low ERs. Vanguard is moving more towards a one-stop shopping model, where they believe consumers want straight forward investment products at minimal costs. This is why they do not have high cost, advisory services. The belief is investors who consider buy & hold strategies would prefer straight forward, low-cost investments rather than a credit card w/ 0% interest or money back.
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Re: Why no Vanguard 2% cash back Visa card?

Post by YttriumNitrate »

Rainier wrote:Fidelity most likely loses money on a 2% cash back card. It is just a vehicle to earn other income.
With merchant fees over 2%, the occasional person who carries a monthly balance, and a default rate that is probably near rock bottom, I'd be quite surprised if Fidelity/FIA is losing money on that credit card.
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Re: Why no Vanguard 2% cash back Visa card?

Post by lhl12 »

neoptolemus412 wrote:
lhl12 wrote:Since Fidelity is able to offer a 2% cash back Visa card (1.5% on the first $15,000 of spending) with automatic direct monthly deposit into a Fidelity account, why can't/won't Vanguard do the same? Perhaps Vanguard could do even better given their not-for-profit status?
Vanguard rarely advertises or spends much on promotional products such as this (not to mention they are not a bank). These cards are like 0% balance transfers. Companies utilize these tactics to attract new customers. Vanguard does this by low ERs. Vanguard is moving more towards a one-stop shopping model, where they believe consumers want straight forward investment products at minimal costs. This is why they do not have high cost, advisory services. The belief is investors who consider buy & hold strategies would prefer straight forward, low-cost investments rather than a credit card w/ 0% interest or money back.
I don't view a 2% cash back credit card as a promotional product. I have one and have had it for many years. I view it as a core component of my financial management. It allows me to capture a meaningful portion of the credit card fees that would otherwise go to someone else. This is exactly what Vanguard does in its investment products, and I think a strong credit card offering would be completely consistent with their mission.

P.S. Fidelity is not a bank either.
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Re: Why no Vanguard 2% cash back Visa card?

Post by stan1 »

I'd rather Vanguard have low expense ratios than a 2% cash back credit card.
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Re: Why no Vanguard 2% cash back Visa card?

Post by TomatoTomahto »

... because many of us would consider moving to another firm if the ERs were affected. Cash back cards work well for companies whose customers carry a balance; I hope Vanguard customers know better.

More seriously, Vanguard claims to have its interests aligned with their customers/owners. A rewards credit card would blur the issue, since it is only a win for Vanguard when it's a lose for the customer.
I get the FI part but not the RE part of FIRE.
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Re: Why no Vanguard 2% cash back Visa card?

Post by lhl12 »

TomatoTomahto wrote:... because many of us would consider moving to another firm if the ERs were affected. Cash back cards work well for companies whose customers carry a balance; I hope Vanguard customers know better.

More seriously, Vanguard claims to have its interests aligned with their customers/owners. A rewards credit card would blur the issue, since it is only a win for Vanguard when it's a lose for the customer.
Assume for purposes of this thread that a 2% cash back card is not a money loser (which other threads seem to confirm), and would therefore not affect Vanguard's ER's.
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Re: Why no Vanguard 2% cash back Visa card?

Post by frugaltype »

lhl12 wrote: Assume for purposes of this thread that a 2% cash back card is not a money loser (which other threads seem to confirm), and would therefore not affect Vanguard's ER's.
I think Schwab got rid of its 2% card because they were losing money on it. How many Vanguard customers do you think aren't paying in full each month?
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Re: Why no Vanguard 2% cash back Visa card?

Post by gkaplan »

Vanguard is in the mutual fund business, not the credit card business.
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Re: Why no Vanguard 2% cash back Visa card?

Post by MnD »

They are not a investment/financial supermarket like Schwab or Fidelity, and even Schwab couldn't get their 2% card to work out financially or presumably they would still have it.
It sounds good in theory for a financial supermarket model. Even if it broke even, having 2% of your customers credit card spending deposited into brokerage accounts is nothing to sneeze at. That credit card deal might end up capturing a households entire investment net worth if they are happy with the products and services.

Cap1 in contrast is a bank with a huge credit card division, gets $59 per year for their 2% Visa, which they promote like crazy and have for years now.
Must be working for them.....
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Re: Why no Vanguard 2% cash back Visa card?

Post by rj49 »

Even if Fidelity loses money on the cash back itself, it gets customers in the door to buy their funds, and they make it up with fees, selling high-profit financial products, and getting customers locked into their company. It's the same reason why Amazon sells its Kindle Fire at near or below cost, because they know they can get enough customers buying Amazon products and services to make it worthwhile. The same thing goes for airline credit cards--they get you as a loyal customer by giving you an incentive to buy more things and fly on their airline. VG gives rewards to its customers through low fees and expense ratios and index funds that are more beneficial to long-term investor wealth, and that's a better way to attract and keep customers than cash back gimmicks (or Fidelity's other cheap trick, temporarily lowered expense ratios, or undercutting Vanguard on only a few of their Spartan funds while keeping fees high for everything else).

I went into a Fidelity advisor meeting with my sister for planning an inherited IRA, and they gave her the options of a snazzy portfolio of managed funds with expense ratios near 2%, or a managed portfolio with a fee of 2% or so of assets, so they know how to get profits out of their customers (after my advice, she told the advisor to invest everything in a balanced portfolio of low-cost index funds).
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Re: Why no Vanguard 2% cash back Visa card?

Post by gerrym51 »

i pay off my credit card every month. get 1 percent in disney dollars. since we go to WDW frequently it usually covers most of park passes.
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Re: Why no Vanguard 2% cash back Visa card?

Post by lhl12 »

gkaplan wrote:Vanguard is in the mutual fund business, not the credit card business.
No, Vanguard is in the financial services business. Mutual funds are one of those services, but there are many others that Vanguard provides today -- Institutional Money Management, ETF's, brokerage accounts, trust services, investment consulting services, donor advised funds, etc. There's no reason credit cards couldn't be another, IF they are additive to Vanguard's offering and if they allow customers a better overall deal.
Last edited by lhl12 on Wed Aug 28, 2013 3:23 pm, edited 1 time in total.
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Re: Why no Vanguard 2% cash back Visa card?

Post by lhl12 »

frugaltype wrote:
lhl12 wrote: Assume for purposes of this thread that a 2% cash back card is not a money loser (which other threads seem to confirm), and would therefore not affect Vanguard's ER's.
I think Schwab got rid of its 2% card because they were losing money on it. How many Vanguard customers do you think aren't paying in full each month?
I don't know why Schwab got rid of their card - they never told the public. Perhaps they were losing money on it, but perhaps not. Vanguard would only need to break even.

Fidelity and Capital One both seem happy with their offerings, and they are both for-profit enterprises.
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Re: Why no Vanguard 2% cash back Visa card?

Post by nisiprius »

You would have to ask Vanguard, but there are a lot of things Vanguard doesn't do. My personal perception is that Vanguard has a pretty good sense of identity and a sense of what their "core competencies" are, and doesn't go too far outside them. There are plenty of places where you can get a credit card and it's not clear to me why one would think Vanguard could do this particularly well.

I recently got an email from someone at Vanguard that contained the slogan

"Vanguard's core purpose: To take a stand for all investors, treat them fairly, and give them the best chance for investment success."

Fidelity says "Fidelity Investments is among the most diversified financial services companies in the world, offering a full range of product solutions for individual investors, employers, institutions and intermediaries. Our fundamental mission is to help customers and clients achieve their financial objectives." I don't know how much to make of mission statements and corporate gobbledegook but that sounds a little broader than Vanguard's.

Some other things that Vanguard doesn't do: storefronts and face-to-face meetings with clients; as far as I know, it doesn't sponsor sports events like Fidelity, which sponsored America's Cup last year; it doesn't operate a bank like Schwab.

Some things Fidelity doesn't do include, oddly enough, ETFs.
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Re: Why no Vanguard 2% cash back Visa card?

Post by dumbmoney »

nisiprius wrote:Some things Fidelity doesn't do include, oddly enough, ETFs.
Weirdly, they have exactly one ETF, about 10 years old. Recently they've registered a bunch of new ones - some me-too sector funds and some actively managed bond funds.
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Re: Why no Vanguard 2% cash back Visa card?

Post by WendyW »

Vanguard vs Fidelity in my mind is like Wal-Mart vs Target.

Target has nicer amenities, and has weekly specials. However, the customer still pays for these features in the end: everything at Target is Slightly more expensive.

There's no free lunch.
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Re: Why no Vanguard 2% cash back Visa card?

Post by neoptolemus412 »

Ultimately, a credit card is a promotional product that requires tons of marketing. This is why mailboxes get flooded with ads. Companies offering cards have to continually add new customers to cover those that pay off balances in full, 0% balance transfers, default, or late payments. It's a monster that needs constant feeding to keep itself working. It's a bad business to startup as it takes exorbitant costs and tons of upfront money. However, many do it b/c they want to bring in new customers and a credit card is an easy way to create brand awareness.

Vanguard has little reason to create such awareness. Vanguard does not need a credit card to attract clients. Have you seen a vanguard ad on television? Have you seen vanguard in popular, non-business or finance, magazines? They operate on a different sphere where clients come to them. The reason: $2 trillion in aum. The majority of it is passively invested with low ERs. Vanguard's annual growth on their aum is enough in one year to place them in the top asset management firms period. No reason to offer credit to strangers to attract new customers, when retirement plans, institutional, and retail investors are already beating down the door.
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Re: Why no Vanguard 2% cash back Visa card?

Post by lrak »

gkaplan wrote:Vanguard is in the mutual fund business, not the credit card business.
Neither is Fidelity or Schwab. Bank of America issues the credit cards. You just get double value if you deposit the points into Fidelity (and formerly Schwab) accounts instead of redeeming them in one of the usual methods.
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Re: Why no Vanguard 2% cash back Visa card?

Post by neoptolemus412 »

lhl12 wrote:
I don't view a 2% cash back credit card as a promotional product. I have one and have had it for many years. I view it as a core component of my financial management. It allows me to capture a meaningful portion of the credit card fees that would otherwise go to someone else. This is exactly what Vanguard does in its investment products, and I think a strong credit card offering would be completely consistent with their mission.

P.S. Fidelity is not a bank either.
Simple business logic dictates a company offer perks, discounts, and rewards to build customer loyalty when your businesses cannot differentiate from competitors. Why does Apple offer minimal discounts? Their is absurd demand for their products. Credit cards are the polar opposite. They have little to no differentiation and the 'cash back' rewards are simply a tool to get consumers addicted to using their products.

A credit card is not a core financial management tool. It's a gimmick to convince people they need to pay with plastic vs. cash. Yes, credit cards offer some protection. However, a risk of paying 8-25% interest on simple purchases outweighs this protection the majority of times. Not to mention the risk of fees of transfers, late payments, disputes, ect. If you are one of the few that pays off the card monthly and hooked on 'perks', you're fooling yourself that it's making a major impact in your life. Proper budgeting, savings, or investment planning are financial management tools, not chasing coupons or perks. I've yet to meet a millionaire or successful businesswoman obsessed with credit card points. It's like the lottery. Suckers keep buying in b/c they think they're going to game the system. Credit card companies win in the end. Look at a 10Q/K for Amex and see the absurd funds spent on advertising and the revenues from fees.

Also, I think we all acknowledge that banks are not the only companies offering credit cards. Target, Macys, Universities, and tons of other businesses offer credit cards through corporate sponsorship deals. Again, it's an easy way to generate advertising and brand awareness. Vanguard has $2 trillion in aum. Easier ways to create brand loyalty than getting into the carousel of retaining credit card users.
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Re: Why no Vanguard 2% cash back Visa card?

Post by lhl12 »

neoptolemus412 wrote:
lhl12 wrote:
I don't view a 2% cash back credit card as a promotional product. I have one and have had it for many years. I view it as a core component of my financial management. It allows me to capture a meaningful portion of the credit card fees that would otherwise go to someone else. This is exactly what Vanguard does in its investment products, and I think a strong credit card offering would be completely consistent with their mission.

P.S. Fidelity is not a bank either.
Simple business logic dictates a company offer perks, discounts, and rewards to build customer loyalty when your businesses cannot differentiate from competitors. Why does Apple offer minimal discounts? Their is absurd demand for their products. Credit cards are the polar opposite. They have little to no differentiation and the 'cash back' rewards are simply a tool to get consumers addicted to using their products.

A credit card is not a core financial management tool. It's a gimmick to convince people they need to pay with plastic vs. cash. Yes, credit cards offer some protection. However, a risk of paying 8-25% interest on simple purchases outweighs this protection the majority of times. Not to mention the risk of fees of transfers, late payments, disputes, ect. If you are one of the few that pays off the card monthly and hooked on 'perks', you're fooling yourself that it's making a major impact in your life. Proper budgeting, savings, or investment planning are financial management tools, not chasing coupons or perks. I've yet to meet a millionaire or successful businesswoman obsessed with credit card points. It's like the lottery. Suckers keep buying in b/c they think they're going to game the system. Credit card companies win in the end. Look at a 10Q/K for Amex and see the absurd funds spent on advertising and the revenues from fees.

Also, I think we all acknowledge that banks are not the only companies offering credit cards. Target, Macys, Universities, and tons of other businesses offer credit cards through corporate sponsorship deals. Again, it's an easy way to generate advertising and brand awareness. Vanguard has $2 trillion in aum. Easier ways to create brand loyalty than getting into the carousel of retaining credit card users.
I disagree. You have made some assertions that may be true in some instances, but which are certainly not true universally.

First, while many credit card offers are promotional for issuers, not all are. Amazon, for example, uses its card to drive traffic to its website, which increases its scale, which allows it to build volume, which allows it to charge lower prices to customers. Fidelity's 2% cash back card doesn't get advertised heavily or proactively mailed to people either - it is an additional service to its customers.

Also, a credit card is not just a "gimmick". While some people may use it as a financing vehicle (which all Bogleheads would agree is a poor choice), it is also an electronic payment system that for many people is more convenient than cash. There is an embedded "spread" within that electronic payment system, which a 2% cash back card allows a user to capture themselves (instead of paying to the credit card issuers. Many Bogleheads use the Fidelity or Capital One cards for this purpose. I pay off my balance each month, and I get 2% back on all purchases -- automatically, month after month, year after year. It is entirely Bogleheadish for someone to squeeze the credit card spread out of the system and capture it myself. If I charge $50,000/year on my card, then that's $1,000/year of benefit that I get in rebates. Over multiple decades, that is a LOT of money.

I think it ought to be possible for Vanguard to create a 2% (or more) cash back card that is not marketed promotionally, but instead is intended to allow cardholders to capture that electronic payment spread (without carrying any balances) while also making Vanguard that much more powerful a player in the financial markets, thereby allowing its customers better pricing and lower costs due to its ever-increasing economies of scale (like Amazon).
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Re: Why no Vanguard 2% cash back Visa card?

Post by rustymutt »

Because I would rather have lower expense ratios, than extra thrills other institutions offer.
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Re: Why no Vanguard 2% cash back Visa card?

Post by TomatoTomahto »

lhl12 wrote:[snip...]
Also, a credit card is not just a "gimmick". While some people may use it as a financing vehicle (which all Bogleheads would agree is a poor choice), it is also an electronic payment system that for many people is more convenient than cash. There is an embedded "spread" within that electronic payment system, which a 2% cash back card allows a user to capture themselves (instead of paying to the credit card issuers. Many Bogleheads use the Fidelity or Capital One cards for this purpose. I pay off my balance each month, and I get 2% back on all purchases -- automatically, month after month, year after year. It is entirely Bogleheadish for someone to squeeze the credit card spread out of the system and capture it myself. If I charge $50,000/year on my card, then that's $1,000/year of benefit that I get in rebates. Over multiple decades, that is a LOT of money.

I think it ought to be possible for Vanguard to create a 2% (or more) cash back card that is not marketed promotionally, but instead is intended to allow cardholders to capture that electronic payment spread (without carrying any balances) while also making Vanguard that much more powerful a player in the financial markets, thereby allowing its customers better pricing and lower costs due to its ever-increasing economies of scale (like Amazon).
You're preaching to the choir here. Not counting my wife's Amex Reward Points (I much prefer cash, but that's a topic for another thread), in the past 12 months we've gotten more than $2k in rebates. I think that, even with fees charged to vendors, my family is a net loss to the card issuers since we always pay in full. Why would I want Vanguard in that position? I much prefer Vanguard and my family on the same team, not on opposing sides.

Edited to fix typo
I get the FI part but not the RE part of FIRE.
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Re: Why no Vanguard 2% cash back Visa card?

Post by dpc »

I think it ought to be possible for Vanguard to create a 2% (or more) cash back card that is not marketed promotionally, but instead is intended to allow cardholders to capture that electronic payment spread (without carrying any balances) while also making Vanguard that much more powerful a player in the financial markets, thereby allowing its customers better pricing and lower costs due to its ever-increasing economies of scale (like Amazon).
It's certainly possible. But don't think you've made any kind of a case that doing so would make Vanguard a "much more powerful player". It's just another type of loss leader and apparently, up to this point, they've decided to not offer it. That's the great thing about the market economy. They're free to decide what to offer and we're free to decide where we spend our money. Also, until now, I've never heard anyone describe a 2% cash back credit card as a "core component" of their financial management. I see it as more like clipping coupons or chasing sales. But I find managing money to be very boring - that's probably just me.
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Re: Why no Vanguard 2% cash back Visa card?

Post by mikestorm »

The 2% cash back is a kickback from the high merchant bankcard fees retailers have to pay. Didn't we come to Vanguard to get away from that type of behavior? Why not ask why not a 2% front end load?

Vanguard is pro low fee, which sometimes (but not always) aligns with being pro consumer.
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Re: Why no Vanguard 2% cash back Visa card?

Post by telemark »

Selling directly to individuals may not be that large a part of Vanguard's business. Most of my Vanguard money is held in a 401K managed by Fidelity.
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Re: Why no Vanguard 2% cash back Visa card?

Post by macchiato »

I like 2% cashback and similar schemes, I happily employ them to my benefit, but they are in a whole separate bucket, which is controlling monthly spending. Vanguard is in my investment bucket.

My no-nonsense relationship with Vanguard is nearly perfect. If they add such schemes, I'd take that as a negative signal to the business and to the decisionmakers there.

The phrase may not be directly applicable, but "don't **** where you eat" comes to mind :)
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Re: Why no Vanguard 2% cash back Visa card?

Post by abuss368 »

Simple - Vanguard is not a bank.
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Re: Why no Vanguard 2% cash back Visa card?

Post by SpringMan »

Though there is a Fidelity Bank as far as I can tell, it has nothing to do with Fidelity Investments. The credit cards offered by Fidelity Investments are Visa and American Express cards. The fact that Vanguard is not a bank is not a simple answer. Vanguard has had a relationship with PNC bank in the past, not sure if they still do.
edit: Vanguard still does have a PNC bank relationship, see link here-
https://personal.vanguard.com/us/help/F ... tent.jsp#h
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Re: Why no Vanguard 2% cash back Visa card?

Post by frugaltype »

WendyW wrote:Vanguard vs Fidelity in my mind is like Wal-Mart vs Target.

Target has nicer amenities, and has weekly specials. However, the customer still pays for these features in the end: everything at Target is Slightly more expensive.

There's no free lunch.
I'm pretty sure Vanguard isn't outsourcing to China, or locking its night shift in the buildings. That sort of thing is why stuff at Walmart is cheaper.
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Re: Why no Vanguard 2% cash back Visa card?

Post by YttriumNitrate »

frugaltype wrote:I'm pretty sure Vanguard isn't outsourcing to China, or locking its night shift in the buildings. That sort of thing is why stuff at Walmart is cheaper.
Gosh darn it, I knew it! That's why the expense ratios are 0.05% instead of 0.035%! :twisted: We're getting robbed!

With Kearney and a drum Vanguard could probably break the three hundredths of a percent barrier...
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Re: Why no Vanguard 2% cash back Visa card?

Post by littlebird »

macchiato wrote:The phrase may not be directly applicable, but "don't **** where you eat" comes to mind :)
You may have instinctively hit on the potential trouble spot of having your assets held by someone who is also your creditor. This probably varies by state, but there is a concept called "set off", wherein if someone owes you money ( and is not paying for some reason) and you have some of his money, you may set off the money he owes you by taking the money you're holding for him. Therefore, it's always best to keep your debts and assets at separate institutions.
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Re: Why no Vanguard 2% cash back Visa card?

Post by vbdoug »

After abandoning the Schwab card after they gave up the 2% rebate I went to Priceline. Now that Priceline is now underwritten by Barclays I expect they will also eliminate the 2% rate. So I put 3K into Fidelity's Spartan Total Market Index Fund {FSTMX} with an ER of .10 and am now using their AX card. That is twice the ER of VFIAX {the Vanguard 500 Index Fund Admiral} but as long as Fidelity uses this as a marketing tool all is well in my world.
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Re: Why no Vanguard 2% cash back Visa card?

Post by Bounca »

Vanguard vs Fidelity in my mind is like Wal-Mart vs Target.

Target has nicer amenities, and has weekly specials. However, the customer still pays for these features in the end: everything at Target is Slightly more expensive.
I love it! :D Of all the discussions/comparisons/debates of Vanguard vs. Fidelity, this analogy is whimsical but dead on in my book.
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Re: Why no Vanguard 2% cash back Visa card?

Post by HongKonger »

It would be nice if anyone out here offered a cash back credit card. Actually, it would be nice if anyone offered an interest rate below 35%. You guys don't know when you have a good thing!
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Re: Why no Vanguard 2% cash back Visa card?

Post by madbrain »

Bounca wrote:
Vanguard vs Fidelity in my mind is like Wal-Mart vs Target.

Target has nicer amenities, and has weekly specials. However, the customer still pays for these features in the end: everything at Target is Slightly more expensive.
I love it! :D Of all the discussions/comparisons/debates of Vanguard vs. Fidelity, this analogy is whimsical but dead on in my book.
I have compared many grocery items between Walmart and Target and can't say that I have found Target to be "slightly more expensive" . Often they were actually cheaper.
Then there is Costco, which pays their employees living wages with benefits, and is much cheaper than either of them - on bulk quantities, sure, but you don't get any volume discounts at Target or Walmart.

I'm not sure you really want to compare Vanguard to Wal-mart. Wal-mart is also still a for-profit enterprise, unlike Vanguard.
There are too many differences for the analogy to stand, IMO.
egri
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Re: Why no Vanguard 2% cash back Visa card?

Post by egri »

Curious to hear what people's thoughts are now that Vanguard is branching out into higher fee products, they advertise, and the industry has caught up to them on low-fee funds. I personally would be interested, depending on what the fee is, and rewards structure looks like.
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anon_investor
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Re: Why no Vanguard 2% cash back Visa card?

Post by anon_investor »

egri wrote: Tue Apr 12, 2022 10:58 pm Curious to hear what people's thoughts are now that Vanguard is branching out into higher fee products, they advertise, and the industry has caught up to them on low-fee funds. I personally would be interested, depending on what the fee is, and rewards structure looks like.
2% cash back is par for the course now, so companies offer it now. With Bank of America Platinum Honors tier Preferred Rewards status with 2 no annual fee cards you can get 2.62% cash back on all purchases, or even 3.5% or 5.25% cash back for some categories.
Lionel Hutz
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Re: Why no Vanguard 2% cash back Visa card?

Post by Lionel Hutz »

lhl12 wrote: Wed Aug 28, 2013 1:00 pm
neoptolemus412 wrote:
lhl12 wrote:Since Fidelity is able to offer a 2% cash back Visa card (1.5% on the first $15,000 of spending) with automatic direct monthly deposit into a Fidelity account, why can't/won't Vanguard do the same? Perhaps Vanguard could do even better given their not-for-profit status?
Vanguard rarely advertises or spends much on promotional products such as this (not to mention they are not a bank). These cards are like 0% balance transfers. Companies utilize these tactics to attract new customers. Vanguard does this by low ERs. Vanguard is moving more towards a one-stop shopping model, where they believe consumers want straight forward investment products at minimal costs. This is why they do not have high cost, advisory services. The belief is investors who consider buy & hold strategies would prefer straight forward, low-cost investments rather than a credit card w/ 0% interest or money back.
I don't view a 2% cash back credit card as a promotional product. I have one and have had it for many years. I view it as a core component of my financial management. It allows me to capture a meaningful portion of the credit card fees that would otherwise go to someone else.
It's not that it has no potential value for a customer, it can and does (if used right of course like all CCs :happy).

But it's a bit of a carrot for Fidelity, Schwab, etc to bring in a customer who otherwise wouldn't be with them. "Hey I'm happy with my CC at Fidelity, let me bring my IRAs to Fidelity as well while I'm at it".

Carrot, stick.

Fidelity chooses to go with that business model, Vanguard chooses not to. One is not right or wrong, but Vanguard clearly has some reason why they don't want to get into that business at present. Perhaps they will offer it in the future as their business evolves, or perhaps they decide they're never going to get into CCs, and are comfortable not competing with Fidelity et al in that space.
This is exactly what Vanguard does in its investment products, and I think a strong credit card offering would be completely consistent with their mission.

P.S. Fidelity is not a bank either.
Just my raw take, Vanguard has an absurd influx of new accounts and AUM already, so it's possible they view a CC offering, which others have described as a bit of a loss leader, as having no value for them.
Last edited by Lionel Hutz on Tue Apr 12, 2022 11:19 pm, edited 1 time in total.
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whodidntante
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Re: Why no Vanguard 2% cash back Visa card?

Post by whodidntante »

Vanguard is sticking to its core competence of slowly falling behind its competition in every meaningful way. But they do make you come to them, which creates an air of superiority among their customers and stickiness in the funds that ooze their way.
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Re: Why no Vanguard 2% cash back Visa card?

Post by Northern Flicker »

Rainier wrote: Wed Aug 28, 2013 11:43 am Fidelity most likely loses money on a 2% cash back card. It is just a vehicle to earn other income.
It's an Elan card. It just has Fidelity's name on the plastic.
student
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Re: Why no Vanguard 2% cash back Visa card?

Post by student »

Northern Flicker wrote: Tue Apr 12, 2022 11:20 pm
Rainier wrote: Wed Aug 28, 2013 11:43 am Fidelity most likely loses money on a 2% cash back card. It is just a vehicle to earn other income.
It's an Elan card. It just has Fidelity's name on the plastic.
Doesn't Fidelity subsidize in some way?
Northern Flicker
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Re: Why no Vanguard 2% cash back Visa card?

Post by Northern Flicker »

Cashback cards are a cancer. Merchants traditionally paid a higher transaction fee when one is used. They raised prices to compensate. Because they cannot charge different cardholders different prices, they ended up raising prices more than may be needed.

Today, cash back cards are ubiquitous and transaction fees are lower. Just get rid of the cash back card nonsense and lower the transaction fees and/or purchase prices.
Last edited by Northern Flicker on Wed Apr 13, 2022 12:04 am, edited 2 times in total.
Northern Flicker
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Re: Why no Vanguard 2% cash back Visa card?

Post by Northern Flicker »

student wrote: Tue Apr 12, 2022 11:23 pm
Northern Flicker wrote: Tue Apr 12, 2022 11:20 pm
Rainier wrote: Wed Aug 28, 2013 11:43 am Fidelity most likely loses money on a 2% cash back card. It is just a vehicle to earn other income.
It's an Elan card. It just has Fidelity's name on the plastic.
Doesn't Fidelity subsidize in some way?
Possibly, but why should I assume that? Does Citi Group subsidize their 2% cashback card? Does Paypal?

Citi's doesn't even require depositing with Fidelity-- even gives you 1% as a purchase discount, and the other 1% as a statement credit.
enuff
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Re: Why no Vanguard 2% cash back Visa card?

Post by enuff »

Northern Flicker wrote: Tue Apr 12, 2022 11:25 pm Cashback cards are a cancer. Merchants traditionally paid a higher transaction fee when one is used. They raised prices to compensate. Because they cannot charge different cardholders different prices, they ended up raising prices more than may be needed.

Today, cash back cards are ubiquitous and transaction fees are lower. Just get rid of the cash back card nonsense and lower the transaction fees and/or purchase prices.
Since prices would go up for every customer equally, it makes the cash back card even more valuable since at least its user gets a discount on those prices. All other customers are subsidizing the cash back card users. Fair? Debatable. But I’d rather be the subsidized than the subsidizer :beer
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Re: Why no Vanguard 2% cash back Visa card?

Post by UpperNwGuy »

Northern Flicker wrote: Tue Apr 12, 2022 11:25 pm Just get rid of the cash back card nonsense and lower the transaction fees and/or purchase prices.
That will not happen. The cash back cards are extremely popular with the public.
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Re: Why no Vanguard 2% cash back Visa card?

Post by student »

Northern Flicker wrote: Tue Apr 12, 2022 11:34 pm
student wrote: Tue Apr 12, 2022 11:23 pm
Northern Flicker wrote: Tue Apr 12, 2022 11:20 pm
Rainier wrote: Wed Aug 28, 2013 11:43 am Fidelity most likely loses money on a 2% cash back card. It is just a vehicle to earn other income.
It's an Elan card. It just has Fidelity's name on the plastic.
Doesn't Fidelity subsidize in some way?
Possibly, but why should I assume that? Does Citi Group subsidize their 2% cashback card? Does Paypal?

Citi's doesn't even require depositing with Fidelity-- even gives you 1% as a purchase discount, and the other 1% as a statement credit.
Citi Group uses the 2% cashback to attract customer to its other business. Elan has no other business to attract customers too. If Fidelity does not subsidize it in anyway (whether in fixed cost or in variable cost), how do you think it works? There are three basic possibilities. (1) no money change hands between Fidelity and Elan, (2) Fidelity pays Elan or (3) Elan pays Fidelity. I don't think it is (1).

Using Schwab as an example, it used to have a 2% card issued by FIA, then it terminated it https://www.forbes.com/sites/neilweinbe ... 6523cf6b09 In particular "the brokerage is taking a $20 million charge to wind down its card operation." So there was a cost for Schwab and it is reasonable to assume that there is a cost for Fidelity.
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Re: Why no Vanguard 2% cash back Visa card?

Post by HMSVictory »

Northern Flicker wrote: Tue Apr 12, 2022 11:25 pm Cashback cards are a cancer. Merchants traditionally paid a higher transaction fee when one is used. They raised prices to compensate. Because they cannot charge different cardholders different prices, they ended up raising prices more than may be needed.

Today, cash back cards are ubiquitous and transaction fees are lower. Just get rid of the cash back card nonsense and lower the transaction fees and/or purchase prices.
+1 - I can normally negotiate a discount for paying..... cash. Yes that paper with Presidents faces on it! Crazy I know.

When you spend $50k a year to get $1k back..... cash back cards don't excite me. Credit cards also prey upon the financially uneducated and there is no free lunch - someone is paying for those rewards. Still haven't seen a post that my rewards or cash back set me financially free!
Last edited by HMSVictory on Wed Apr 13, 2022 6:49 am, edited 1 time in total.
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student
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Re: Why no Vanguard 2% cash back Visa card?

Post by student »

UpperNwGuy wrote: Wed Apr 13, 2022 4:54 am
Northern Flicker wrote: Tue Apr 12, 2022 11:25 pm Just get rid of the cash back card nonsense and lower the transaction fees and/or purchase prices.
That will not happen. The cash back cards are extremely popular with the public.
I agree and I don't think merchants will lower purchase price either. Given credit cards are starting to get rid of other perks such as extended warranty, I hope cash back stays.
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