People say that you use credit cards for rewards you’ll get burned. That many people never redeem their rewards. What is the actual value of the redeemed rewards? What’s the purpose?
Well on one of our cards, I just redeemed $273 in cash and applied it to the balance of the card. This our primary credit card and we use it for most everything. Which card is it? It’s a really old card the Citibank Simplicity Cash Back Card. It maxes out at $300/year in cash back, but we have other cards we also use when we are close to maxing out the rewards. What are the incentives?
5% back on gas and pharmacy purchases, 1% on everything else flat off the top. So every time we spend on something big we earn 1% back and it adds up. This year alone we charged $13k in tuition for my DH’s degree alone. That’s $130 on honestly stuff we’d have to pay either with a check or a credit card. Does it mean much? No, but boy it adds us. Like I’ve previously mentioned we will have paid $70k for his degree and 1% cash back is $700 on tuition we couldn’t negotiate, plus for some of it, I actually earned 5% cash back with Discover Card. Did I really spend money above and beyond? No. Was it necessary? Well not really, my DH didn’t have to go to school, that was a choice. But once that choice was made, we DID have to pay.
So what’d I use the cash for? Nothing, just applied it to the balance. I usually redeem my rewards once a year, usually in the spring. But since this particular card was close to maxing out for the year I decided to do it earlier.
Personally I don’t spend money to get rewards. I get rewards because I spend money I already planned and budgeted on spending. Now if contractors would take CC, then I’d be raking in more rewards. I still another another $500 coming from American Express, Discover, and Costco next February.
It seems like a lot of money to pass up for moral judgment of being able to say I don’t use CC. Do you redeem CC rewards?
Oh and I never pay an annual fee or use cards that charge them. Nor do I use airline rewards cards because I don’t travel enough, I just like the flat cash back rewards to keep it simple. Perhaps I’m not maximizing my usage and gaming the system like some, but it works well enough for me. One card for most everything, and American Express and Discover for certain stores.
9 responses so far ↓
1 444 // Nov 19, 2009 at 2:11 pm
That’s awesome. I just did the same thing, but it was only $58. Still, that’s $58 less that I owe!
2 Cassie // Nov 19, 2009 at 4:04 pm
My husband and I both have cash back rewards cards that we use for almost everything, just to get the rewards. At the end of the year, we spend the rewards on something nice for ourselves that we wouldn’t otherwise have been able to afford.
3 JoeP // Nov 19, 2009 at 4:40 pm
Did I read this correct, you charged $13k in tuition for your husband’s degree? At you’re looking at $70k worth of debt when you’re said and done?
I’m generally not in favor of cash back cards unless they are paid off in full each statement period. It would seem that going after a card with a lower interest rate would be the better option.
4 LAL // Nov 19, 2009 at 4:58 pm
Nope, we paid the CC in full JoeP. We charged $13k and paid it in full.
We have $25k in student debt but we paid the rest OOP.
We don’t carry a CC balance. We charged the tuition that we would have paid for anyway out of our checking account.
Was it confusing? Sorry about that. Should have clarified. I meant to say, if someone said don’t charge tuition, it’s not an option! We would be paying it in cash or on a CC.
5 CentsInTheCity // Nov 19, 2009 at 5:00 pm
I’ve been tracking the rewards I’ve earned so far this year and it’s currently about $200. I’m expecting about $60 more before the end of the year. I always pay off my balance, and have never paid a fee. I paid $0 to get $200+ buying items I’d normally buy. That would never happen if I used cash! That’s why I always use my credit card when I can.
6 LAL // Nov 19, 2009 at 5:00 pm
Yep we just seem to get a lot in rewards because we have a lot of charges that we need to pay either in cash or on the credit.
7 LAL // Nov 19, 2009 at 5:01 pm
I think we make around $500-600/year in rewards and we don’t pay interest either.
8 Kerry // Nov 22, 2009 at 11:24 pm
I fight with people about this all the time. We filter everything (and I do mean everything!) through a credit card, and which card changes monthly because so do their increased rewards incentives. We have been doing this for years, as of yet have not paid a single penny to the card companies, and yet have hundreds coming back to us every month.
I do not believe that we spend more because we use the cards. The electric bill is the same no matter what. We put aside cash as we use the cards, make a deposit at the end of the month and immediately pay the bill.
Prior to figuring out this “game” we were using all cash…so maybe we started with a leg up.
9 LAL // Nov 23, 2009 at 8:02 pm
Kerry, I agree about not spending more. There unfortunately are a lot of people who see CC as cash, weird.
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