Personal finance has long presented a familiar fork: pay someone to manage your money, or keep things simple and let compounding do the work. Devotees of passive investing—Bogleheads, as they are known, after Vanguard founder John Bogle—can hold forth endlessly on the compounding power of the three-fund “lazy portfolio”: some bonds, some domestic stocks, and some international stocks, set up once and never touched again until the money is needed. Those less comfortable picking funds on their own can instead hire a financial advisor to select specific stocks for a fee calculated on assets under management.

The opportunity cost, as it were, is largely psychological. For a low expense ratio, an investor can hold a set of ETFs that fits the three-fund model, or hand every decision to an advisor who charges more to manage the portfolio. Either way, someone or something is managing the money. The trade-off comes down to effort: pay a higher fee to have it done for you, with potentially higher rewards—though financial advisors rarely beat the market returns of ETFs—or grab a low-expense-ratio fund and call it a day.

Anyone familiar with Warren Buffett, the Berkshire Hathaway chairman whose name has long been synonymous with patient, low-cost investing, will recognize this as his oft-touted “circle of competence”: stick to what you know, and leave what you don’t know to those who do. Invest in what you understand and in assets with long-term value, and leave the frequent trading and market volatility to the people who know what they are doing.

Apply the Buffett test to credit cards

The philosophy of the “king of compounding” may extend beyond investing—specifically to how consumers pick credit cards and the perks attached to them. The parallel works like this: a shopper can grab a high-annual-fee card loaded with perks and so-called “freebies,” or, without shuffling through a rolodex explaining the finer points of credit card maxxing—the practice of wringing maximum value from a wallet full of cards—settle on a simple no-fee card paying cash back.

At least, that is the view of Chris Fred, TD Bank’s head of credit cards and unsecured lending, who says that points chasing—or “churning,” as those in the know call it—can 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 Buffett-style logic is simple. Shoppers who know exactly what they are doing are fully encouraged to open several cards, each earning a different number of points or amount of cash back by category. Everyone else should stay within their own circle of competence and opt for a blanket cash-back card, so they are not effectively day trading at the checkout counter.

A long history of chasing rewards

Churning, a concept that is fairly new to credit cards (within roughly the last three decades), may be as old as personal finance itself. Many will remember the App-O-Rama days of the aughts, when applicants tried to outfox financial institutions by opening multiple credit cards at once, so that no single credit pull would tank their credit score.

Churning hit the mainstream in 1999, when David Phillips took advantage of a pudding promotion to earn more than 1.25 million frequent-flier miles. Credit card perks, for what it is worth, had only just begun—an archived 2003 web page of American Express’s offerings captures the category in its infancy. The impulse runs far deeper: in the 1900s, banks would encourage people to open savings accounts with a free deposit of $100 or so. And as early as the 700s, people were buying silver coins at face value and turning them in at the mint in England for new coins worth more than their original purchase price.

Long story short: churning, in one form or another, has been around for a very long time. In the modern credit card world, the r/churning subreddit counts nearly 30,000 weekly visitors, and even maintains an entire FAQ section devoted to dissuading the average person from churning—offering reasons Fred agrees with.

“People think, ‘I can always beat that 2%.’ On average, they don’t,” Fred said.

Why the math rarely adds up

Fred pointed to TD Bank’s three credit card offerings as an illustration: one card pays 2% cash back on everything, while another provides a base 1% cash back on all purchases in addition to 2% to 3% cash back in select categories. Set against issuers whose cardholders must deliberate over which card to use at the gas pump versus the restaurant table, the mental math simply is not worth it for the average consumer—particularly when they never end up beating the blanket 2% cash back they are guaranteed with other cards.

Consider, for example, a premium card that offers 4x points on dining but only 1x on pharmacies and basic goods, 3x on groceries, and 1.5x on travel, with no bonus on transportation. The points earned on dining and groceries may very well exceed the 2% cash back from a flat-rate card, but those gains would be offset by the 1x and 1.5x rates earned elsewhere. Then add in cardholders who carry multiple cards, and you get people who—Fred joked—would need to constantly refer to a spreadsheet to make sure they are getting the most bang for their buck. A blanket 2% cash back card, by contrast, leaves the cardholder without a care in the world, knowing they are getting the most they can get.

The annual fee arms race

That is only the points-versus-cash-back debate. Fold in exorbitant annual fees, and card ownership becomes a race to use all of a card’s 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 cost nearly $1,000, yet are marketed as being worth thousands more in perks—provided the cardholder remembers to use them accordingly. Use one card and collect a monthly takeout or rideshare credit; use another for a semiannual hotel bonus, early access to restaurant reservations, or exclusive sporting events.

Those benefits are deliberately structured to discourage usage, Fred said. There is a reason cardholders have to opt into an offer through their credit card’s portal instead of having it automatically applied as a bill credit—and the same friction is what 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.

Nor is the trend confined to premium products: 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; the business version of the card will also cost $150. 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.

For everyday cardholders, the upshot is that the trade-off Fred describes is no longer reserved for premium-card enthusiasts: as the entry-level price of perks-bearing plastic climbs, so does the pressure to actually use whatever benefits justify the fee.

Rewards as a budgeting tool

A recent Merry Money Survey by TD Bank found that 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 even be how some cardholders budget their credit card spending.

The picture is complicated further by the third-party partners that also extend perks to cardholders—a dynamic that helps both 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.