Maybe I have some bad math, but stashing $5k in a Smartly savings account to get 2.5% seems like a horrible move?
Putting the $5k in there at 2% interest is $100 a year. You can easily put that $5k in a lot of other savings accounts for 4% interest and get $200. That $100 delta to be made even by the 2.5% Smartly credit card vs a flat 2% card would be $20,000 of spend. That’s a lot of money to just breakeven.
What am I missing here?
$5k in a CD at 4%, changes the math…
Hype is coming from those with 50k/100k in assets that they can squirrel away at US Bank Investments and not really touch.
And Alliant has a 2.5% Visa with only $1k in checking (2.5% capped at $10k/month). If you are spending less than $10k a month that seems like a better way to go.
For 2.5%, the Alliant is a better deal.
Alliant Visa Signature
https://www.alliantcreditunion.org/bank/visa-signature-card
Requirements: keep $1,000 in Alliant bank, sign up for electronic statements, have one qualifying electronic deposit per month (can be as little as $1/month).
Limits: Cash back limited to first $10,000 spent per billing cycle, 1.5% thereafter.
Cash back redemption: Alliant bank account (can ACH out afterwards), or statement credit. Redemption starts at $50.
* * *
There is a lot of (justifiable) balking about the required $1,000 deposit into their bank, so let’s do the math:
People claim that they are losing out on ~4% (current HYSA interest rates), making this an “effective” $40 annual fee card. (1000 x 0.04 = $40), making a 2% catch-all card a better deal.
The interest rate at Alliant is 0.25%, not zero.
So the actual difference is (1000 x (0.04-0.0025)) = $37.50.
But you would pay taxes on this, right? Assuming a 22% marginal tax rate, you’re taking home (37.5 x 0.78) = $29.25 in interest. Substitute your own number here for your own context, of course.
The difference between 2.5% Alliant and a regular 2% card is 0.5%. So the needed spend is 29.25/0.005 = $5,850.
So, look at your own annual spending on your current 2% catch-all card. If it’s less than $6k/year, then stay. If it’s significantly over $6k/year, then it’s worth it to at least look at the Alliant. YMMV, good luck.
@Kieran
Very thorough analysis! I use the Alliant 2.5% as my default catch-all card, and fallback to the Citi Double Cash 2% when I hit the $10k cap at Alliant.
Palmer said:
@Kieran
Very thorough analysis! I use the Alliant 2.5% as my default catch-all card, and fallback to the Citi Double Cash 2% when I hit the $10k cap at Alliant.
Thank you! I used the Alliant until I decided to go Platinum Honors at BoA for their 2.62% unlimited cash back card.
@Kieran
Alliant was good until they put a spend cap in place 
@Tamia
So $12,000 in spend to break even. Still seems like a lot. I put about $3k in CC every month, but I’d say $2k of that is greater than 2%.
In this scenario I breakeven every year. I guess I’m not the target audience.
@Montana
$12,000 is the correct amount to breakeven if you are not paying tax.
@Montana
Good HYSAs and MMFs are earning about 4.3% so there is a 1.5% opportunity cost or about $75 per year. It’s a good point that the interest is taxable, so this might be closer to a $60 effective annual fee for most people.
Alternatively, it looks like you could put the 5K in a 5 month CD at 4.0% interest for an effective annual fee closer to $12 or about $2400 in spend to break even.
If you got 100k in stocks and want to hold, then this card is a no brainer.
Ansel said:
If you got 100k in stocks and want to hold, then this card is a no brainer.
I’ve created multiple posts on the US Bank Smartly. This is the answer.
Honestly I don’t understand the hype for this card. The math doesn’t make sense to me.
LilyHarper said:
Honestly I don’t understand the hype for this card. The math doesn’t make sense to me.
If you have $250k in a long term investment that US Bank also offers, then there’s absolutely no difference whether you keep it at Fidelity or U.S. Bank. Then you just have a free 4% card. I think the math says there’s not a single flat rate card that can beat this.
But the lower you invest, the less it makes sense. And putting it in their savings would be one that almost never makes sense, mathematically speaking.
@elizabethtodd
Multiple calls to CS reps indicate it’s “only” $100k needed at US Bancorp to avoid the fee. The $250k is household, which includes US Bank assets.
LilyHarper said:
Honestly I don’t understand the hype for this card. The math doesn’t make sense to me.
Yeah, but that’s you. This card is a no-brainer for a lot of people. I just put $100k in their 4% 5-month CD and I’ll invest that when it matures and I have some time to look at their investment side. Whether the brokerage account fee is waived at $100k or $250k is inconsequential - would I pay a $50 annual fee for a flat 4% back? Absolutely, I’m making that back in a week of normal spending over what we currently do.
People have complained about all the hoops to jump through, okay, then this isn’t for you. Open an account, move money, earn double what I have been - that’s not much of a hassle.
@Palmer
Again, we have multiple data points that only 100k is needed to avoid the $50 annual brokerage fee. I have called in myself and confirmed with a CS rep.
Kieran said:
@Palmer
Again, we have multiple data points that only 100k is needed to avoid the $50 annual brokerage fee. I have called in myself and confirmed with a CS rep.
Ok, that’s cool. Must be new. Just a couple weeks ago I read in their own disclosures that it was $250k. Have you seen updated disclosures yet?
@Palmer
my guess is $250k if you only have a brokerage/IRA account, but no checking account and smart rewards status.