This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the adviser for The Motley Fool’s Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.

My better half and I are two days into the process of re-evaluating our best rewards credit cards for 2012, contemplating switching to a card with better rewards. For us, it comes down to which one provides the most cash back; if it provides a way to get that money invested automatically, all the better.

Airfare rewards don’t appeal to us because, as parents of four kids (that we know of), it’s too expensive to fly too often, even if we get a free ticket every once in a while. Plus, I like the idea of a reward that leads to good financial behavior (investing) rather than more consumption (even if the flight is free, you’re going to spend money wherever you’re going).

But before we get into the cards I’m considering, we must start with the obligatory sermon about debt. Here’s what I — a fellow who was once studying to be a priest — came up with:

Robert’s Sermon of the Cards

To those who walk through the valley of the shadow of debt, know that to everything there is a season, and a time for every purchase under heaven. For what will it profit you if you gain the whole wardrobe but lose your FICO? Therefore keep watch, because you know not the day the Master Card will come. I tell you, it is easier for a camel to pass through the eye of a needle than for a person to eliminate debt by paying the monthly minimum.

Thou shalt not covet thy neighbor’s McHouse, thou shalt not covet thy neighbor’s showy wife, nor his maidservant, nor his X-Box, nor his ass (unless he has a Booty Pop). Those who live by the card, die by the card. And the number of the beast shall be 26.6%.

Cash is always patient and always kind. Blessed are the cheap, for they shall inherit the net worth. Consider the lilies of the valley, how they grow; they neither transfer nor maintain a balance.

So go forth, and borrow no more. Love your net worth as yourself.
Lead us not into temptation, and deliver us from Visa.
Amen. (And keep your mitts out of the collection box.)

The lesson, my brothers and sisters, is this: If you maintain a balance on your credit card, forget rewards programs; just get the card with the lowest rate, and pay it off. Now, for those who pay off the balance each month, here are three cards that could put some money in your investment accounts.

The Bank of America Upromise Card
This is our current card. If you don’t already know, Upromise is a program by which certain purchases through certain partners result in money deposited in a Upromise account. That money can then be deposited in a 529 account, which allows you to save money for college on a tax-free basis, as long as you use the money for qualified expenses. Between the card and other Upromise rewards, we’ve been able to add more than $1,000 to our college savings accounts.

  • The good stuff: No annual fee, earn 1% toward college savings on every purchase, as well as up to 10% on qualifying grocery and drug store purchases and 10% at participating restaurants (with one version of the card) or 2% at Exxon or Mobil gas stations (another version). You can also earn 2% on certain online purchases through Upromise. Right now they’re offering a $50 signing bonus.
  • The fine print: You don’t get earn 10% on all of your purchases at grocery and drug stores — just selected (and limited) items. Plus, you have to find participating stores. Then, you’ll likely have join the stores’ loyalty programs and register your membership number with Upromise.

The Fidelity Investment Rewards Visa Card

  • The good stuff: No annual fee, and — in the words of Fidelity’s website — “Turn 1.5% of purchases into a deposit in your Fidelity account (earn 2% once you’ve spent $15,000 annually).”
  • The fine print: That does not mean 1.5% to 2.0% of the value of your purchases will be deposited in your account. Rather, “You’ll earn 1.5 points for each $1 spent on the first $15,000 in purchases per year, and 2 points per $1 in purchases thereafter.” For every 5,000 points you accumulate, you’ll get $50 added to your account. Kinda misleading, if you ask me. Still, it ends up being a decent reward, percentage-wise. I calculate that it results in a reward of 1.33% of purchases if you spend $15,000 in a year, and 1.66% if you spend $30,000 in a year.

The Fidelity Rewards American Express Card

  • The good stuff: No annual fee, and you get 2 points per $1 spent. This ends up in a much more straightforward 2% reward. The card’s website has a little calculator that gives you an idea of how much you’d earn from the rewards program, and how much that could be worth years from now, assuming different rates of return on your investments.
  • The fine print: As with the Fidelity Visa card above, the cash earned from this card can only be deposited in a Fidelity brokerage account or IRA, which is fine if you already have an account. If not, you have to open an account. Fidelity funds have $2,500 minimums (unless you sign up for a $200-a-month automatic investment plan), and it will take a while to earn that much from the credit card, which earns $100 for every $5,000 spent. You can invest in stocks, though you’ll pay a $7.95 commission. Fortunately, Fidelity allows you to purchase 25 exchange-traded funds commission-free. You can also have the money deposited in a Fidelity 529 plan, though the investment options are more limited, and the plan may not be as good as what’s offered by your own state (either in terms of investment choices, expenses, or tax breaks).

Ouch! My brain!
In January, J.D. asked readers for advice on picking the best credit card. He wrote: “My thoughts are that looking at credit card offers makes my mind numb.” I feel the same way, which is why I haven’t finished the process of choosing a new card after two days.

I also think this is fine place to bring this post to an end (before it makes your mind numb, if it hasn’t already). There are plenty of other details about these cards that I didn’t include. I’m also considering just a plain, old cash-back card (though I like that the rewards are automatically deposited in investment accounts with these cards). If you have any experience with these cards — or have a recommendation of your own — add a comment below.

Credit cards are tricky tools — convenient and useful, but dangerous. Plenty of GRS readers will say that people should stick with cash or a debit card, and those are worthy arguments. But if you’re going to use a credit card, you might as well make the most of it.

J.D.’s note: In July, I asked GRS readers which credit cards they use and why. I promised to tally the 200+ responses, but haven’t yet made time to do so. I’ll try to do this by the end of January. Or maybe next July…

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