Wells Fargo launches new flat-rate cash back card with no annual fee

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The summer of 2021 has brought exciting activity to the credit card market. Major issuers are revamping their products, and the new offers may have the potential to shape the future of rewards credit cards.

For instance, in June, Citi launched the Citi Custom Cash℠ Card with a flexible 5% cash back category, signaling that flexible bonus categories might become more common. Further, American Express has just updated The Platinum Card® from American Express, upping the statement credit benefits and the annual fee – possibly targeting high earners rather than an average consumer.

Meanwhile, Wells Fargo has announced a new credit card portfolio and a renewed focus on credit cards. The cards will be on the Visa network, and the first one – the Wells Fargo Active Cash℠ Card – is launching today. The new card offers 2% cash rewards on purchases and charges no annual fee, which makes it one of the most valuable flat-rate cash back cards in the current market.

What the new Wells Fargo Active Cash Card offers

The new Active Cash card from Wells Fargo offers 2% cash rewards on purchases – the highest rate among flat-rate cash back cards with no annual fee so far. This type of card is an excellent option for consumers looking for a simple credit card product with no annual fee or bonus categories to keep track of. At the same time, it would work just as well for credit card enthusiasts who want to maximize rewards on purchases that fall outside of bonus categories offered on their other cards.

Active Cash cardholders will be able to redeem cash back as a credit to their card account or at Wells Fargo ATMs in $20 increments using a Wells Fargo debit or ATM card. Alternatively, they’ll have an option to direct deposit their cash back into a Wells Fargo savings or checking account or redeem it toward purchases they’ve already made.

“One thing the pandemic laid bare was that the credit card rewards ecosystem has become so complicated and even irrelevant as people’s lives and spending habits changed on a dime,” said Krista Phillips, head of Marketing, Product, Loyalty and Digital for Wells Fargo Credit Cards.

“Customers aren’t interested in complex rewards programs, and while each of our new cards offers something different, the thread that will tie them together is simplicity. Active Cash provides the no-nonsense value customers want: unlimited 2% cash rewards on purchases with a $0 annual fee,” said Phillips.

Wells Fargo reshaping its credit card strategy

We can expect more news from Wells Fargo in the near future. The issuer has shared it’s planning to launch additional credit cards, including a low APR card later this year and a new rewards card line in 2022.

“We are pleased to mark a new era in Wells Fargo Credit Cards with the arrival of the Active Cash Card, the first in our new portfolio of Visa cards,” said Mike Weinbach, Wells Fargo’s CEO of Consumer Lending. “Each of these new cards and the different values they’ll offer are thoughtfully designed with specific customer needs in mind. We are proud to provide a best-in-class customer experience and lay the foundation for Wells Fargo’s arrival as a cards competitor to watch.”

Indeed, Wells Fargo’s first step in their new credit card strategy seems to be a strong offering that most leading issuers can’t compete with. Currently, only one flat-rate cash back credit card from a major issuer matches the Active Cash’s earning rate. The Citi® Double Cash Card earns 1% back when you make a purchase and 1% back when you pay it off. The rest of the cards of this kind typically earn 1.5% back.

Will other major issuers follow suit and make 2% cash back a new norm? Not likely, according to CreditCards.com’s industry analyst Ted Rossman.

“I think issuers are reluctant to offer these cards because of the economics,” he explained. “The average interchange fee is about 2.3%, so if they’re paying out 2% in rewards, that doesn’t leave much profit (and that’s not even accounting for other overhead and the potential for default). Of course, they get interest from people who carry balances, but 2% cash back cards aren’t as profitable for issuers as other types of cards. Often, they require you to have a broader relationship with the institution to get these rewards. For example, PayPal, SoFi, TD and Fidelity all require you to have another account with them in order to get those 2% rewards.”

Bottom line

The new Wells Fargo Active Cash Card is an exciting product and a rare offer from a major credit card issuer. It can be an excellent choice for any type of cardholder and currently comes with a solid welcome offer of a $200 cash rewards bonus when you spend $1,000 in purchases in the first three months.

“I’m a huge fan of no annual fee 2% cash back cards,” Rossman said. “They fill a strong role in everyone’s rewards strategy, either as a baseline that you use when you don’t have a card that offers a higher bonus in certain categories, or even as your primary card. On a blended basis, it’s hard to top 2% cash back across all of your spending, especially if you’re not paying an annual fee.”