Adieu to the 2% Charles Schwab Credit Card

Updated September 6th and 29th: The replacements for the Charles Schwab credit card suck. A completely unscientific poll of the NerdWallet staff shows that none of us will be going with the Bank Americard Privileges and since there’s, like, a ton of better cards out there, we won’t actually use the regular Bank Americard Cash Rewards for anything other than unlocking stubborn doors.

Lucky cardholders of the Charles Schwab credit card will receive some unhappy news in the mail this week. The fantastic 2% credit card (which I love, and consider to be one of the top cards in the business) will be discontinued, and the replacement Bank of America credit cards simply doesn’t compare. The Schwab Invest First Visa has been my one and only credit card, and it pains me to lay it to rest. While the replacements haven’t impressed me, the Capital One Venture and the Chase Freedom retain some of the Schwab card’s better qualities.

Methadone for Schwab Cardholders

While the letter reveals little more than the fact that the FIA card is being replaced with a BofA-branded card, we were able to get a bit more information out of a customer service rep. In an email brief, reps were told that starting later this month, cardholders will have a choice between two credit cards: the Bank Americard Privileges and the Bank Americard 1-2-3 Cash Rewards.

Details are still up in the air on both of these cards, and could change again before cardholders are informed, but full details are to come in a letter that will be sent out on September 23rd. Below we’ll go through the little we were able to determine, some of which is admittedly hearsay.

And while these presumed rewards programs certainly aren’t terrible, they don’t exactly fare well against either the hallowed memory of the Schwab card or our best rewards credit cards.

BankAmericard Cash Rewards:

This card has no annual fee, and has a 0% intro APR period on purchases and balance transfers for 12 months. Its rewards program is as follows:

• 3% on groceries and 2% on gas (or vice versa, our rep’s memory was hazy), up to a combined spending of $1,500 a quarter (update: it’s 3% on gas and 2% on groceries, up to $1,500 spent a quarter. Thanks a lot, BofA.)
• Unlimited 1% elsewhere
• $50 signup bonus if you spend $500 in the first 60 days
• 10% bonus on rewards if you have them deposited into a BofA checking account [Update September 30th: see below for checking-account-based tirade]
• No word on the foreign transaction fee, but I’m not optimistic

So it’s not a terrible rewards program. But it’s a pretty big step down from 2% on all purchases. Bonus rewards on gas and groceries? A paltry $50 signup bonus? Compared to no-fee rewards cards like the Chase Freedom and Citi Forward (both of which give 5% back in bonus categories), the Bank Americard Cash Rewards is the runt of the litter, still working out the intricacies of depth perception while its brothers and sisters are off hunting geese and saving trapped children. Our verdict? Not worth it.

Bank Americard Privileges:

The Privileges card gives 1% back on all purchases and 3% back in rotating bonus categories. Plus, you get 50% more cash back if you deposit your rewards into a BofA checking account [updates below, in bold], Merrill Edge or Merrill Lynch account. Now, if you have a Merrill Lynch account, lovely, but BofA doesn’t offer straight-up free checking. You have to meet certain qualifications in order to avoid the monthly fee: minimum balance requirements, direct deposits or steering clear of brick-and-mortar locations, depending on the checking account. It’s a bit of an inconvenience, especially if you don’t already bank with BofA. Plus these are WorldPoints that we’re talking about, which are pretty pathetic as far as points programs go.

Updated September 30th: Today, Bank of America announced that it would levy a $5 debit usage fee on its regular checking account members. That means you, MyAccess and eBanking, you freeloaders who dare to expect free checking if you meet BofA’s requirements. Every month that you use your debit card to make a purchase, in addition to any monthly fees you’ll be charged, you’ll have to pay a $5 fee. Did that 50% bonus if you deposit into a checking account sound good? Really? Let’s do the math. Worldpoints are unwieldy. BofA checking accounts are now highly restrictive. Bad rewards into a bad account don’t cancel out. Thanks, Bank of America, you’ve now destroyed any desire I might’ve had to use your cards.

In addition to a pared-down rewards program, the Privileges card has way more fees than the departing Invest First. It has a $75 annual fee that’s waived in the first year, and in subsequent years if you have a combined $50,000 or more in your BofA and Merrill Lynch accounts, which I most certainly do not. Plus, the Privileges charges a 3% foreign transaction fee, where the Invest First charged a grand total of 0% on overseas transactions. I loved the Schwab Visa because it gave a simple, flat 2% back and didn’t have an annual fee. I’m not in love with this new guy.

The customer service rep we spoke to said that the Privileges is geared towards travelers, but couldn’t elaborate on why. We’ll let you know when we find out.

Substitutes for the Schwab Invest First

I’m not sold on the BankAmericard Privileges, and I’m really not sold on the Cash Rewards. Thankfully, my hunt for credit cards that can hold their own against the Invest First was pretty successful. Depending on your favorite features of the Schwab card, you can find some pretty good alternatives.

No foreign transaction fee: See our blog post for a list of credit cards with no foreign transaction fee.
2% rewards on all purchases: If you’re a fan of the easy-to-understand 2% rewards rate, you’ll find the same program with the Capital One Venture. The CapOne Venture Rewards gives 2 No Hassle Miles on all purchases, which can be redeemed for statement credits offsetting travel expenses. These expenses can include anything from airfare to change fees to hotel rooms to gas. One advantage is that No Hassle Miles are easy to redeem in any amount: instead of trading your miles in increments of 25,000, you can redeem 35,908 NHM to offset $359.08 in expenses. The Venture has no complicated bonus programs, or conditional rewards rate increases, or requirement that you have certain checking or investment accounts. Plus, the card comes with a 25k-mile signup bonus and waived foreign transaction fees.

Capital One® VentureSM Rewards Credit Card
	2 miles per dollar on every purchase, every day As seen in Money® Magazine's "Best" issue three years in a row. - Money® Magazine May 2010, 2011, 2012 Earn 10,000 bonus miles when you spend $1,000 on purchases within the first 3 months, equal to $100 in travel Redeem your miles for any travel expense No limit on the miles you can earn and miles don't expire Fly on any airline, any time with no blackout dates No foreign transaction fees $0 intro annual fee for the first year; $59 after that		Pros High rewards rate No foreign transaction fee Cons Has annual fee

Annual Fee	Signup Bonus	APR , Variable*	APR Promotions
$0 intro for first year; $59 after that	Earn 10,000 bonus miles when you spend $1,000 on purchases within the first 3 months, equal to $100 in travel	13.9% - 20.9% (V)	Purchase: None Transfer: None

No annual fee, part 1: We mentioned that the Chase Freedom is comparable to (in fact, superior to) the Bank Americard Cash Rewards. Here’s why. It gives a $100 signup bonus, 4x the Bank Americard’s. It also gives 5% back on bonus categories that rotate quarterly, and can include department stores, movies and groceries. This quarter’s categories are gas, hotels and airlines. The Freedom’s rewards program beats out the Americard’s for a couple of reasons:

• You probably spend more on the Freedom’s bonus categories cumulatively than you do on gas and groceries, so you’re getting 5% on more spending.
• Essentially, the Freedom gives 2% back on all its bonus categories, throughout the entire year. This is because you earn 1% for 3 quarters and 5% for 1, averaging out to 2%. You’re earning 2% back on gas, groceries, hotels, airfare, clothing…the list goes on. Much better than getting bonuses on just gas and groceries.

Okay, okay, technically the Bank Americard gives 1.1%, 2.2% and 3.3% if you deposit your rewards into a BofA checking account. But the difference is pretty negligible. In any case, the Freedom’s rewards program is much broader and much better.

Chase Freedom® Visa
	This offer is for people with a good to excellent credit history which means, among other things, that your credit history is clear of bankruptcy and seriously delinquent accounts Earn $100 Bonus Cash Back after you make $500 in purchases in your first 3 months from account opening 0% Intro APR for 15 months on purchases and balance transfers 5% Cash Back on up to $1,500 spent between July 1 and September 30, 2013 at gas stations, theme parks, and Kohl's® You'll enjoy new 5% categories every 3 months like gas stations, restaurants and Amazon.com. It's free and easy to activate your bonus each quarter! Unlimited 1% Cash Back on all other purchases No annual fee and rewards never expire		Pros Bonus cash back categories No annual fee 0% for 15 mos on transfers

Annual Fee	Signup Bonus	APR , Variable*	APR Promotions
$0	Earn $100 Bonus Cash Back after you make $500 in purchases in your first 3 months from account opening.	13.99% - 22.99% (Variable)	0% APR for 15 months on purchases & balance transfers

No annual fee, part 2: One of my favorite aspects of the Schwab Visa was that it has no annual fee. Now, while the FIA card’s cousin, the Fidelity American Express, gives a flat 2% back and also has no annual fee, it suffers in a few different ways.

• It’s an American Express, so it doesn’t have the same acceptance as Visa and MasterCard, especially in Europe.
• It charges a foreign transaction fee of 1%.
• It has no signup bonus.
• It deposits your rewards into a Fidelity account (investment, retirement or 529), so they aren’t as easy to redeem as cash dumped into a checking account.

The Fidelity American Express is a decent card for those who a) want a 2% card, b) don’t want to pay annual fees, c) don’t travel all that often and d) have Fidelity accounts. But if you don’t meet all of those criteria, a more flexible card might be in order. The Chase Freedom also has no annual fee, but it’s a cash back credit card, so its rewards are far easier to use.  Plus, it has a $200 cash back signup bonus, compared to the Fidelity AmEx’s $0.

While the Schwab 2% Visa’s demise is a loss for cardholders everywhere, thankfully, there are other credit cards to fill the void left in our hearts. Goodbye, Invest First. You will be missed.