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.. ;)
What frugal tricks I’ve learned along the way?
I’ve learned that for credit card companies, interest profits and increased merchant fees are much greater than the expense of dishing out rewards. Which is why they provide them.
So I stay away from them. :)
I have run into this problem of maximizing credit card rewards more than once and decided to solve it. Pick2Pay was born to help solve the rewards problem by helping people maximize the rewards for each transaction.
Lets the rewards begin to shower more!
My husband and I use our Amex for everything, including some of our bills, we never carry a balance on it and it doesn’t have an annual fee so we earned almost $700 just using the card last year.
We also use it to track our spending habits and make changes, like creating a plan for eating out.
I am attempting to use my 1% cash back visa for everything. I spent $9.00 last night for milk and frozen pizza at a local pharmacy and I transfered the money from my chequing to the Visa when I came home.
I use my Costco Amex for gas and to shop at Costco and make an estimated payment every time I get a pay cheque.
I have a grocery store Mastercard but I only use when shopping at one of their stores. Not much benefit in using it elsewhere.
I am planning on some big rewards in 2014.
My take home for credit card was rewards was $180 and change. I’m like you in that I prefer to pay for things immediately. It’s just better on my psychos. Owing money keeps me up at night, so I like knowing then when I’ve purchased something, it’s paid for.
I use my credit card pretty sparingly. I’ll buy big ticket items with it to maximize the cash back rewards or sometimes a tank of gas since I get 3 percent cash back on one card. Plus consumer protection on my AmEx card is great, so I’ll use it for plane tickets.
-Christian L. @ Smart Military Money
@Brian – $600 is great! Wow.
@Becky – That’s an interesting way to manage your money – having a card for different purchases. $1k?!
@Christian – Sounds like we’re alike!
My husband and I use credit cards for everything! We pay them off every month – use a spreadsheet to track every charge – “yes, I’d like my receipt, please”). Each card is used for a different type of expense (1 for utilities/bills/set monthly payments, 1 for dining out/groceries, 1 for kids’ activities, 1 for misc, etc.) making it very easy to monitor and stay on budget. If we have a large expense (trip to Disneyland) that we can’t immediately pay off, we transfer it to a no interest card (just be careful of the transfer fees – we found a Discover card with no transfer fee). We try to maximize the Bonus cash back to use a certain card for certain categories, etc. Last year we made about $1000 in cash back, we prefer straight cash to other rewards. The added bonus is that using your credit and keeping it paid off REALLY helps your credit rating so that, when the time comes, you can get low rates on loans for car, mortgage, etc.
My girlfriend and I generally use credit cards for everything. We accumulated $600 in rewards last year and buy what we can through the credit card website to earn extra points. Usually with large purchases, I will transfer funds immediately from my bank account to my credit card. I generally don’t pay any interest this way unless I screw up! Last year I was taking a couple of classes at the local community college and naturally I paid using a credit card because I thought I was going to receive financial aid. Well, it was foolish on my part not to research financial aid more thoroughly, and I wasn’t eligible after all and fell back in debt about $1500 which ended up costing me about $300 in interest. I didn’t have enough bufferage in the bank to pay off my cards.
Love this post; so timely for me. I’ve often been confused and frustrated by credit card rewards programs. Sometimes they seemed too good to be true; sometimes they seemed utterly pointless. In any case, I’ve always had credit cards and always used them regularly (and ALWAYS paid them off in full each month). I recently came across an iPhone app called Smorecard which totally changed my outlook on the whole credit card rewards game. Basically, you tell it which KIND of credit cards you have in your wallet – just the KIND, no account #s or personal information. Then, when you’re standing in line to make a purchase, you open up the app, click the store you’re in (it uses GPS to know where you are) and this app tells you which of your credit cards to use in order to optimize your rewards. It’s awesome. I’ve already seen a huge difference in my rewards “earning”… just used miles from my Chase Freedom card to fly to Vegas for free! Here’s a link to the app’s site (oh, and it’s FREE): http://www.smorecard.com/
@Allison – Great tip about not using the CC at small businesses. That’s very thoughtful.
@Sean – 200k miles! Wow!
@Patrick – Sounds like a cool app. Thx
By starting to dabble in credit card churning my wife and I earned around 200,000 airline miles and chase ultimate reward points.
I use credit cards as much as I can, I do not use it at small family own businesses though, because I know the business takes a small cut due to the transaction fee they incure. Like you, I also pay it off every month.