Source: Fortune.com
Summary
Td Bank’s head of credit cards and unsecured lending, Chris Fred, suggests that the average person may not benefit from “churning” or frequently switching between credit cards to maximize rewards. Instead, a simple flat-rate card may be a better option. Fred compares this to Warren Buffett’s investment strategy of sticking to what you know and avoiding frequent trading. He notes that many credit card perks are designed to be complicated and require mental math, which may not be worth it for the average consumer.
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The strategy enters a familiar phase.
Chris Fred’s comments echo Warren Buffett’s “circle of competence” philosophy. The idea of sticking to what you know and avoiding complexity is applied to credit cards. The average person may not be able to beat the 2% cash back offered by a flat-rate card. The mental math required to maximize rewards can be overwhelming. Annual fees add to the complexity. Card issuers design perks to be sticky, making customers feel invested in using the card to justify the fee.
It’s a game of complexity, where the house often wins.
Author: Evan Null
