![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2026\/04\/GettyImages-94814136-1.jpg?w=2048\")
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If you\u2019re a Boglehead like myself, you can talk endlessly about the compounding powers of the three-fund \u201clazy portfolio:\u201d 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\u2019t 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 more.<\/p>\n
If you\u2019re a Warren Buffett aficionado, you\u2019ll recognize this as his ever-touted \u201ccircle of competence,\u201d in which you stick to what you know and leave what you don\u2019t 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 volatility to those who know what they\u2019re doing.<\/p>\n
It seems as if the king of compounding\u2019s philosophy might not just work for investing but also for picking credit cards\u2014and the perks you get with them.<\/p>\n
At least that\u2019s according to Chris Fred, TD Bank\u2019s head of credit cards and unsecured lending, who said sometimes, points chasing (or as how those in the know call it, \u201cchurning\u201d) might prove too difficult for the average person.<\/p>\n
\u201cJust like Warren Buffett says to buy the index fund, a good flat\u2011rate card often wins out over all the fancy bonus categories,\u201d Fred told Fortune.<\/p>\n
The concept is simple, a la Buffett: If you know what you\u2019re doing, you are fully encouraged to open several cards, each with various amounts of points or cash back per category. If you don\u2019t, you should stick to the \u201ccircle of competence\u201d and opt for a blanket cash-back card so you\u2019re not trying to day trade at the checkout counter.<\/p>\n
Churning, as a concept<\/p>\n
Churning, although a fairly new (re: within the last three decades) concept with regards to credit cards, might be as old as personal finance itself. You might remember the App-O-Rama days of the aughts, in which people tried to fool financial institutions by opening multiple credit cards at once so as not to tank one\u2019s credit score with each pull. <\/p>\n
In 1999, David Phillips brought churning to the mainstream by taking advantage of a pudding promotion to earn over 1.25 million frequent flyer miles. (For what it\u2019s worth, credit card perks have just started\u2014take a blast from the past and go though the 2003 webpage of Amex\u2019s offerings to see the beginnings of credit card perks). In the 1900s, banks would encourage folks to open savings accounts with a free $100 or so deposit. And even in the 700s and onwards, people were purchasing silver coins and at face value and turning them into the Mint in England for new coins, worth more than their initial purchasing price.<\/p>\n
Long story short, churning, in various forms, has been around for a while. In the credit card world, the r\/churning subreddit boasts nearly 30,000 weekly visitors, and even has a whole FAQ section about dissuading the average person from engaging in churning, several reasons that Fred agrees with.<\/p>\n
\u201cPeople think, \u2018I can always beat that 2%.\u2019 On average, they don\u2019t,\u201d Fred said. <\/p>\n
Fred referenced TD Bank\u2019s three credit card offerings, which includes a 2% cash back on everything, and another base 1% cash back on everything in addition to 2-3% cash back on select categories. When compared to other card issuers that have cardholders remembering which card to use at the pump compared to the restaurant table, Fred says that mental math just isn\u2019t worth it for the average consumer, especially when they never end up beating the blanket 2% cash back they\u2019re guaranteed to get with other cards. <\/p>\n
Take, for example, a premium card that offers 4x on dining but only 1x on pharmacies and basic goods. It offers 3x on groceries, 1.5x on travel, but not transportation. The points on dining and groceries may very well exceed the 2% cash back from other cards, but it would be offset by the 1x and 1.5x elsewhere. Then, add in those with multiple cards and you have cardholders who, Fred joked, would need to constantly refer to a spreadsheet to ensure they\u2019re getting the most bang for buck\u2014when a blanket 2% cash back would leave the cardholder without a care in the world knowing they\u2019re getting the most they\u2019ll get.<\/p>\n
Add in the annual fees <\/p>\n
That\u2019s just the points\/cash-back debate. Add in the exorbitant annual fees, and it really becomes a race of using all of your cards\u2019 perks.<\/p>\n
\u201cThe higher the fee, the more benefits you tend to have,\u201d Fred said. \u201cIt\u2019s a dangerous proposition: You\u2019d better start using those benefits, or it\u2019s going to be really hard to justify the fee.\u201d<\/p>\n
Some of these cards can cost nearly $1,000\u2014but are marketed as being worth thousands more in perks, only if the cardholder remembers to use it accordingly. Use one card and get a monthly takeout or rideshare credit; use another and get a semi-annual hotel bonus or early access to restaurant reservations, or to exclusive sporting events. <\/p>\n
These are designed, Fred said, in a way to discourage the use of it for most users, even of these high annual fee premium credit cards. There\u2019s a reason you have to opt into an offer on your credit card\u2019s portal instead of it being automatically applied as a bill credit. And it\u2019s also the reason that keeps customers coming back.<\/p>\n
\u201cThose customers are sticky. They know they\u2019re spending a certain amount each year in annual fees, so they\u2019re vested,\u201d Fred said.<\/p>\n
A recent survey by TD Bank\u2019s Merry Money found 79% of consumers are actively seeking coupons, sales, and deals, while 72% of credit-card users planning to use a card for holiday spending expect to apply rewards toward those purchases. Those offers, Fred said, might be how some even budget their credit-card spend.<\/p>\n
It gets complicated by the third-party partners who also offer perks to cardholders, which then is how card issuers and cardholders justify the high annual fee. <\/p>\n
\u201cThey believe they\u2019re going to get a good deal if they keep that card and use it\u2014and that\u2019s what makes these ecosystems so powerful,\u201d Fred said. <\/p>\n
#pick #credit #card #perks #Warren #Buffett #picks #stocks #Bank #exec<\/p>\n","protected":false},"excerpt":{"rendered":"
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