Credit Cards That Decrease Debt

My primary credit card has been pretty good to me. I opened it five years ago through Providian (now Washington Mutual / Chase) because it offered 1% cash back on all of my purchases. That means if I charge $10,000 to it in a year, I get a nice little check for $100. Which I in turn spend on some new clothes or meals at a favorite restaurant. 

Now, credit card companies are asking consumers if we need something beyond just 'cash back'. And the most resounding answer is: Less debt, More savings. Because the truth is that very few of us have the discipline to put those 'cash back' checks into our retirement funds or send them back to the credit card company to pay down our balances.

Wells Fargo and Fidelity have both designed credit cards that directly contribute to your savings and retirement goals. The Wells Fargo Cash Back Card will put 1% of your total purchases towards a personal loan or credit card balance, or into a savings or checking account. You decide. It also still gives the option to receive a 'cash back' check in the mail. But why not avoid that spending temptation and designate the funds for a loftier purpose?

Of course, Wells Fargo can only apply your cash back towards other Wells Fargo accounts, so the card doesn't really work for those of us who bank at other institutions.

Personally, I'm more intrigued by the new Fidelity credit card. Fidelity, a leading provider of Individual Retirement Accounts (IRAs), has partnered with American Express to create the Retirement Rewards Card. This card gives you a 2% earn rate (yep, 2%) on all purchases. It then directly deposits the rewards into a Fidelity IRA. So, $2500 charged with the card yields a $50 current-year IRA contribution. That's double the rewards my Providian card pays out, and it's going to a better cause than a shopping spree.  

Like the Wells Fargo card, you must have a Fidelity IRA account for the Retirement Rewards Card to do its job. Also, American Express cards aren't accepted everywhere, so you might not be able to use this card as often as you would like.

While the new Wells Fargo and Fidelity cards can give your savings a little boost or help you put a dent in your debt, you certainly shouldn't rely on them to do all the work for you. Take a close look at your budget, look for extra ways to save, and then use that money to pay down debts and build up savings. 

One last tip: Never use a credit card just to get the rewards. That's like buying something just to get the tax write-off. It doesn't make sense to spend money just because you'll get a fraction of it back. Only charge what you know you can pay off, or what you would otherwise buy with cash. Credit card rewards are just a perk that comes with purchases you would have made anyway.