Assuming you use credit cards, that is. I have to admit – we have been cutting back to using them only when necessary and/or on bigger purchases (to get a bigger bang for our “reward”). When we do use them – I quickly pay them off – or at the end of the month. I thought it would be fun to take a look back at 2012 and see how much we actually earned in credit card rewards. Have you ever done this? I was a bit surprised to see what we actually earned (and I use that term loosely). We don't have a lot of cards, but this was our take:
- AMEX $61.39
- Discover $18.90
- US Bank CC $69
For a whopping total of: $149.29 (This doesn't include a store shopping card that my wife has – which also earns nominal rewards). Not too bad for doing nothing but using the card and then paying it off each month.
Why do they do it?
Credit card companies aren't in business to make you rich. Or to reward you for paying off your bills every month. Fortunately for them (and unfortunately for many people – and I used to be one of 'em) there are enough folks who do not pay their balances off every month. I can only assume if everyone was on top of their payments and never was late – they would stop the reward system and close up shop. But, maybe I'm being too pessimistic.
Incentivizing us to spend more by rewarding our spending behavior is a way for them to make more in swipe fees and maybe in late fees. I liken it to a casino. While there are winners here and there (like the people who pay their balances every month but rack up the rewards) – there are more losers. The house (credit card companies) come out on top in the end.
It's free money – why not use your credit card for every purchase?
My wife and I have this discussion now and then.
“Why don't we use the credit card for all of our purchases,” my wife may ask.
“Because it messes with my budgeting system,” I reply. “I like to pay for things immediately.”
Of course – neither of us is right or wrong. We could be earning more reward money by using our credit card for all purchases. And, we could just lock-up the cards and use only debit, straight-up cash or checks (if you recall – I still swear by the check register).
For me – I have PTSD whenever I use a credit card due to my past failures with 'em. I racked up some $20k in debt in my early 20's and it took me 5 years to pay 'em off. I don't want to ever go through that again. So some of my trepidation with credit is valid and cautiously optimistic.
What is your take on using credit cards to get rewarded? Do you use them sparingly OR do you use your cards whenever and wherever you can to maximize your rewards? I'd also be interested to know what your take was from 2012.. ;)