New credit card touts average return of 6% cash back

The Save Premium Wealth Card claims that it gives users an average annual return of 6.04%. That sounds too good to be true, right? I recently spoke with the company’s founder and CEO, Michael Nelskyla, to learn more. There’s a lot to unpack, so let’s dive in.

First of all, this is a credit card developed by Save Advisers LLC (an SEC-registered investment adviser) in tandem with Visa, Solid Financial Technologies, Inc. and Evolve Bank & Trust. In fact, this quartet actually offers two credit cards: the Save Premium Wealth Card (which has an annual fee of $750) and a “Plus” version (with an annual fee of $300 and an average annual return of 4.03%). Both are currently in the wait-list stage. There’s a debit card, too (its average annual return is 2.93%).

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How the cards work

Rather than traditional cash back or travel rewards, Save’s Premium and Plus credit cards give rewards based upon investment returns. Every time a Premium cardholder makes a purchase, Save invests $2.17 for each dollar they spent. With the Plus card, the strategy-linked investment is equivalent to $1.45 per dollar spent.

Both cards also offer a $10,000 investment sign-up bonus, ultimately worth approximately $600 if you get the Premium card’s expected average return of about 6%, which works out to roughly $400 with the Plus card’s expected average.

Save oversees three portfolios for its cardholders, all of which are invested in exchange-traded funds (ETFs). The aforementioned averages are based on “hypothetical back-tested performance” from January 2006 to December 2021 for the moderate offering (a detailed breakdown is available on the company’s website). There’s also a higher-risk version and a lower-risk flavor.

Other options focused on alternative assets (including cryptocurrency) and ESG (environmental, social and governance) investing are coming soon. Nelskyla said Save conducts a customized risk assessment for each cardholder and recommends one of the portfolios, although cardholders could overrule the suggestion if they wish.

Cardholders cannot access their rewards for a little more than a year. Nelskyla explained that this is partly to give Save time to generate the expected returns and also so the investment gains are subject to more favorable long-term capital gains taxes. Save takes a management fee of 0.79%, which has already been deducted from the averages stated earlier.

Save cardholders’ actual returns can never be negative. They will vary from month to month depending on how the investments perform. Nelskyla said some months have earned returns as high as about 20%. Once a cardholder has been active for a year, rewards vest in monthly installments and are paid out in cash, potentially representing a steady stream of cash flow.

There are higher multipliers for certain types of spending. Save says Premium cardholders have an expected return potential of 18% when they buy something from Tesla, Peloton, SoulCycle or Electrify America. That’s about three times higher than the typical expected return. Apple, Samsung and Microsoft come in at 12% and Amazon and Whole Foods are at 9%.

Nelskyla said his company is taking a more inclusive, altruistic approach to the economics that power traditional credit card businesses. He described how banks take in deposits and do many things behind the scenes to make money – investing, offering loans, charging fees and so forth – but the typical customer shares in very little of that bounty. He believes that Save and its customers are engaging in a win-win relationship.

My verdict

Save’s credit cards are too complicated and too expensive for most people. They’re the complete opposite of a no annual fee, 2% cash rewards card such as the Wells Fargo Active Cash® Card or the Citi® Double Cash Card (which technically gives 1% cash back when cardholders make a purchase and another 1% when they pay it off). Those flat-rate, 2% cash back cards offer tremendous mass appeal, since they give a solid return that’s very easy to understand and use. Most people don’t want to pay high annual fees, wait for their rewards to vest or juggle too many cards.

Who might be a good candidate for one of Save’s cards? High spenders, for starters. These cards don’t make sense if you only spend $1,000 per month on your credit cards. Even if you got a 6% return on that $12,000 in annual spending, that’s $720, which is less than the Save Premium Wealth Card’s $750 annual fee. The card comes with a few benefits beyond the investment returns – such as primary rental car insurance, trip cancellation/interruption insurance, travel emergency assistance and access to the Visa Luxury Hotel collection – but signing up still isn’t the best choice if you’re only spending $1,000 per month.

Nelskyla said higher-end credit cardholders normally spend between $4,000 and $6,000 per month. Taking the midpoint of that range, the math works out more favorably for Save customers. Annually, a 6% return on that spending represents $3,600 in rewards ($2,850 more than the annual fee). If you put $5,000 per month on a no annual fee 2% cash back card, you’d only end up with $1,200 in rewards at the end of the year. Subtracting the Save Premium Wealth card’s annual fee from the accumulated rewards suggests an actual return of more like 4.75%, but it’s still well ahead of a flat-rate, 2% cash back card.

On Save’s website, the company compares the Premium Wealth card with three high-end travel cards: the Capital One Venture X Rewards Credit Card, the Chase Sapphire Reserve card and The Platinum Card® from American Express. Save says each of these competitors’ cards returns about 1.5% in value for every dollar spent. I think the real value is much higher than that, since all three offer potentially lucrative rewards categories, airport lounge access, credits that offset travel and everyday spending, airline and hotel transfer partners and much more. Their annual fees are lower, too.

I’d argue that the Save Premium Wealth Card either needs to add travel perks (for example, lounge access, travel credits, a TSA PreCheck or Global Entry fee waiver, etc.) or it needs to target a different audience.

In my view, this card is a better fit for someone who prefers money over travel. It could be a higher-end competitor to the Fidelity Rewards Visa Signature card*, which also offers an investing tie-in. The Fidelity card gives 2% cash back on all purchases when you redeem rewards into an eligible investment account, with the added incentive that those dollars should gain value over time.

For the right kind of person (for instance, a big spender who prefers cash back and is willing to delay gratification), Save offers a much higher potential return. It’s a very niche offering, but if it works out as planned, the gamble could be worth the risk in certain situations.

Have a question about credit cards? E-mail me at ted.rossman@creditcards.com and I’d be happy to help.

* All information about the Fidelity Rewards Visa Signature card here has been collected independently by CreditCards.com and has not been reviewed or approved by the issuer.