The spending vs saving paradox

[TreeTired]

So I got a new credit card (Fidelity Amex) that deposits 2% of what I spend directly into my brokerage account.   Meanwhile, the best rate I have found on savings is a semi-safe 1.25% on what is basically commercial paper (not FDIC insured).   So it seems I make more money by spending money than saving it!!   

[Retire-Canada]

The savings account gives you a +1.25% return. The credit card gives you a -98% return on your investment if you didn't need what you bought.

So after buying whatever you need on your card it's better to save the rest despite the 2% cash back incentive.

-- Vik

[Travis]

The savings account gives you a +1.25% return. The credit card gives you a -98% return on your investment if you didn't need what you bought.

So after buying whatever you need on your card it's better to save the rest despite the 2% cash back incentive.

-- Vik

Which is why some folks load up on gift cards when they're credit card churning.

[gimp]

Now if only you could buy index funds using your credit card. ;-)

People used to buy gold dollars from the mint using credit cards - $1 for $1 plus a small percent. Then deposit the gold dollars at their bank account for the same value.

[Dimitri]

Now if only you could buy index funds using your credit card. ;-)

People used to buy gold dollars from the mint using credit cards - $1 for $1 plus a small percent. Then deposit the gold dollars at their bank account for the same value.

That was a great program - buying $1 for $1 and getting free shipping too.  I participated at the tail end.

Some people really made out well - http://www.npr.org/blogs/money/2011/07/13/137795995/how-frequent-fliers-exploit-a-government-program-to-get-free-trips

But the government finally caught on and closed the loophole - http://www.foxbusiness.com/personal-finance/2011/08/02/us-mint-closes-long-standing-credit-card-loophole/