If you’re a Boglehead like myself, you can talk endlessly about the compounding powers of the three-fund “lazy portfolio”: 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’t 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. All it means is someone or something will be managing your money, and depending on the amount of effort and work you want to put into it, you can pay a higher fee and get it done for you for potentially higher rewards (although FAs rarely beat the market returns of ETFs) or grab a low-expense ratio fund and call it a day.
If you’re a Warren Buffett aficionado, you’ll recognize this as his ever-touted “circle of competence,” in which you stick to what you know and leave what you don’t 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’re doing.
It seems as if the king of compounding’s philosophy might not just work for investing but also for picking credit cards—and the perks you get with them.
And so it makes the same sense with credit cards too: you can grab a high-annual fee card that comes with all these perks and so-called “freebies,” or if you don’t want to shuffle through a rolodex that explains credit card maxxing, you might just settle on a simple no-fee card with cash back bonuses.
At least that’s according to Chris Fred, TD Bank’s head of credit cards and unsecured lending, who said sometimes, points chasing (or “churning,” as those in the know call it) might prove too difficult for the average person.
“Just like Warren Buffett says to buy the index fund, a good flat‑rate card often wins out over all the fancy bonus categories,” Fred told Fortune.
The concept is simple, à la Buffett: If you know what you’re doing, you are fully encouraged to open several cards, each with various amounts of points or cash back per category. If you don’t, you should stick to the “circle of competence” and opt for a blanket cash-back card so you’re not trying to day trade at the checkout counter.
How do you maximize credit cards points?
Churning, although a fairly new (within the last three decades) concept with regard 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’s credit score with each pull.
In 1999, David Phillips brought churning to the mainstream by taking advantage of a pudding promotion to earn over 1.25 million frequent-flier miles. (For what it’s worth, credit card perks had just started—take a blast from the past and go though the 2003 web page of Amex’s 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 at face value and turning them into the mint in England for new coins, worth more than their initial purchasing price.
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, offering several reasons that Fred agrees with.
“People think, ‘I can always beat that 2%.’ On average, they don’t,” Fred said.
Fred referenced TD Bank’s three credit card offerings, which include 2% cash back on everything, and another base 1% cash back on everything in addition to 2% to 3% cash back on select categories. When compared with other card issuers that have cardholders deliberating over which card to use at the pump versus the restaurant table, Fred said, the mental math just isn’t worth it for the average consumer, especially when they never end up beating the blanket 2% cash back they are guaranteed to get with other cards.
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 are getting the most bang for buck—when a blanket 2% cash back would leave the cardholder without a care in the world knowing they’re getting the most they’ll get.
How much are the annual fees?
That’s just the points/cash-back debate. Add in the exorbitant annual fees, and it really becomes a race to use all of your cards’ perks.
“The higher the fee, the more benefits you tend to have,” Fred said. “It’s a dangerous proposition: You’d better start using those benefits, or it’s going to be really hard to justify the fee.”
Some of these cards can cost nearly $1,000, but 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 semiannual hotel bonus or early access to restaurant reservations or exclusive sporting events.
These are designed in a way to discourage using them, Fred said. There’s a reason you have to opt into an offer on your credit card’s portal instead of it being automatically applied as a bill credit. And it’s also the reason that keeps customers coming back.
“Those customers are sticky. They know they’re spending a certain amount each year in annual fees, so they’re vested,” Fred said.
That’s not to mention how some card fees keep going up, and annual fees are climbing on entry-level cards, too. American Airlines announced that it will raise the fee on its Citi AAdvantage Platinum Select World Elite Mastercard to $150 from $99, its first increase since 2018, and the business version of the card will cost $150 as well. But in exchange, cardholders get three times the miles on hotels booked through American’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 that replaces the old 25% discount on food and drinks. United and other rivals have raised fees on similar cards, and entry-level airline cards that once cost about $100 are moving closer to $150.
A recent Merry Money Survey by TD Bank 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.
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.
“They believe they’re going to get a good deal if they keep that card and use it—and that’s what makes these ecosystems so powerful,” Fred said.
A version of this story was published on Fortune.com on April 27, 2026.
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