Credit‑Card Perks Should Follow Warren Buffett’s “Circle of Competence,” Says TD Bank Executive
TD Bank’s head of credit cards argues that most consumers are better off with simple cash‑back cards than chasing complex bonus categories.
Buffett‑Style Simplicity for the Average Cardholder
Chris Fred, TD Bank’s head of credit cards and unsecured lending, told Fortune that “just like Warren Buffett says to buy the index fund, a good flat‑rate card often wins out over all the fancy bonus categories.” He argues that most people lack the time and expertise to manage multiple cards with rotating categories, and that a straightforward cash‑back card can deliver better results without the mental gymnastics.
What “Churning” Really Means
Churning—opening and closing cards to capture sign‑up bonuses—has been around for decades. The practice gained mainstream attention in 1999 when David Phillips exploited a pudding promotion to earn more than 1.25 million frequent‑flyer miles. Today, the r/churning subreddit draws nearly 30,000 weekly visitors, and its FAQ warns that the average consumer rarely beats a modest 2% return.
TD Bank’s Card Lineup
Fred highlighted three TD Bank credit‑card options: one that provides 2% cash back on every purchase, and two others that start at 1% cash back with additional 2% to 3% on select categories. He noted that, compared with cards that require shoppers to decide which card to use at the pump or restaurant, the “mental math just isn’t worth it for the average consumer.”
He illustrated the point with a hypothetical premium card offering 4× points on dining, 3× on groceries, 1.5× on travel, but only 1× on other purchases. While the high‑earning categories can outpace a 2% blanket rate, the lower‑earning categories drag the overall return down, forcing users to track spending in spreadsheets.
Rising Annual Fees and the Cost of Perks
Premium cards often carry “exorbitant” annual fees that can approach $1,000. Fred warned that “the higher the fee, the more benefits you tend to have,” and that cardholders must actually use those benefits or struggle to justify the expense.
Airline issuers are raising fees as well. American Airlines announced an increase for its Citi AAdvantage Platinum Select World Elite Mastercard from $99 to $150, with the business version also set at $150. In return, cardholders receive three‑times miles on hotel bookings through the airline’s portal, a credit of up to $120 every four years toward Global Entry or TSA PreCheck, and a $100 annual statement credit for in‑flight purchases. United and other rivals have followed suit, pushing entry‑level airline cards toward the $150 range.
Consumer Behavior and the “Sticky” Nature of Premium Cards
A recent TD Bank “Merry Money” survey found that 79% of consumers actively seek coupons, sales, and deals, while 72% of credit‑card users planning holiday spending intend to apply rewards toward those purchases. Fred said that third‑party partners offering additional perks help issuers and cardholders rationalize high fees, creating an ecosystem where “customers are sticky” because they have already committed to paying the annual cost.
Bottom Line
For most people, Fred recommends staying within one’s “circle of competence” by choosing a simple cash‑back card rather than juggling multiple premium cards with complex reward structures. The trade‑off is clear: lower effort and predictable returns versus the potential upside—and hassle—of premium perks that may not offset their steep fees.
