Credit Card Rewards Are Nice, But Don’t Overdue It

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credit card rewardsJohn wrote a great post this week on ways to maximize your credit card reward points.  He made some great points on how to get those awesome rewards which can result in free travel and free places to stay.  Don’t get me wrong, I love earning my credit card rewards, but I also know that not everyone is like John and I.  Since this is a site about growing your wealth, I wanted to talk about the subject of earning credit card rewards, but doing it in a way which doesn’t slow your wealth creation.

More Rewards = More Spending

While you can get more points by signing up for another card or getting a card for your spouse, these only work if you plan on hitting the required spend threshold. Some cards give you points after your first purchase, then others make you spend x amount in x time.  Think the US Airways Card and the Hawaiian Airlines credit card, respectively.  When you have to meet a required spend limit, then it means you have to use the card.

People like myself, who have been in credit card debt before, understand that you shouldn’t use your credit card to buy things you can’t afford. I use my credit cards for every purchase.  What keeps me on track is I use them just like I would my debit card. I don’t buy more crap just to get rewards.  I spend on the things I normally would.  The rewards are just that, rewards.  I am rewarded for my regular spending.  Yes, I can get more rewards, but I would have to specnd more.  I am not willing to do that at this time.

Credit Card Rewards Are Just Rewards

I have learned a lot about credit card churning and the process of earning those sweet rewards. I have learned a ton from my good blogging friend, Holly.  She is good at churning cards and keeping those rewards flowing.  She is also really good with her money.  She how that ties together?  If you are good with your money, then you can be good with credit card rewards.

The one thing you should remember is credit card rewards are just rewards.  You have to spend money to make money, right!  The credit card company is rewarding you for spending money on your credit card.  Their hopes are you will not make your full payment each month and then they will get you with interest.  Think of it this way.  If you have a cash back card, like the Discover it card, then you can earn 1% back on all your purchases. I am not going to talk about the rotating 5% categories as those are different every quarter.  Let’s say your credit card has a 12.99% interest rate on it.  If you don’t pay off your entire balance at the end of the month, who do you think has won?  Your 1% cash back, or Discover’s 12.99% they are charging you on the balance?  Let’s just say you lost big time.

Most people who don’t pay off their cards each month don’t realize this math.  While it is simple to see who is losing out, you can only be successful getting rewards if you can manage your money appropriately.  Don’t be jaded by the fact that you are getting free money by spending.  It is not free.  It can cost you if you don’t make your payments in full.  The reason why banks give out these rewards is because there are far more people who don’t pay off their balances each month than there are who do.  I used to be one who would only pay the minimum balance. Now, I pay everything in full each month. I changed how I used credit cards and I am enjoying my rewards.  That doesn’t mean I would still do it if I found I was spending more than I should be.

Credit cards don’t control my life, I control them.  I choose when I use them and where. I am in control of my spending and that’s why I love earning rewards.  It is just a nice way to get something back from the credit card company after giving them so much money for so many years.

Credit card rewards are great, but don’t overdo them.  You can fall into the debt trap quickly if you are not careful!

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  1. Could not agree more sir! As you know, I’ve been on the debt side before and now enjoy the benefits of earning rewards. That all goes back to a complete shift in how I view money and spending. Rewards can be great, but it has to be done in balance. Otherwise, you’re highly likely to run into overspending or just plain debt. In that event, it’s just not worth it. But, if you can, then it can be a nice way to swing some free trips or cash back.
    John recently posted…Barclaycard Arrival Plus World Elite Mastercard Review: A Must Have CardMy Profile

  2. Great advice, Grayson. Credit card rewards are great, but only if you are good with your money and don’t pay interest on your spending. I haven’t gotten into the credit card rewards game yet because I just got out of debt I’m don’t think I have complete control of my money yet. I rather wait a year or two and really feel comfortable managing my money and not earn rewards than jumping in now and risking going back into debt.
    Aldo @ Million Dollar Ninja recently posted…Living On Campus Costs More than Off Campus (Infographic)My Profile

  3. I agree 100%, Grayson! I enjoy my credit card rewards, but it is very easy to slide into old or bad habits and spend more to get rewards too. It only works when you buy what you intended and pay the balance every month. Otherwise you are just better off doing it the old-fashioned way and saving for your vacations. It may take longer, but at least you are creating new debt and new problems. You have to good willpower and remember that credit card companies don’t offer these awards for you, they do it entice people to spend more. Like you said, it’s important that you are the one in control and not the other way around.
    Shannon @ The Heavy Purse recently posted…Debunking 3 Popular Myths That Keep You in DebtMy Profile

  4. Yes, it won’t pay if your bill is overdue. I think the word you want is overdo, meaning don’t do it too much.

  5. My cousin who owns lots of credit cards and at the same time every purchased he made, he uses his credit cards because of the credit card rewards. Until one time, he noticed that he was drowning of his credit card debts, thankfully he still had time to fix everything.

  6. Completely agree! Credit cards can be great if you know how to manage them. While we have a few credit cards, we only actively use one – a Chase one that gets rewards (though I’m looking into getting a new one). We pay off the balance in full every month and don’t use it for day-to-day stuff…just little things here and there.

    Thanks for the insight! Hope you have a wonderful weekend!
    Sarah recently posted…How to simplify your budget and save more moneyMy Profile

  7. Great advice Grayson. I am now looking for credit cards that give more reward points on groceries and gas. My current cc’s reward points is on travel, which I don’t normally do so I might as well look for one credit card that really works for me. Thanks Grayson!
    Jayson @ Monster Piggy Bank recently posted…WTF Toys for KidsMy Profile

  8. I enjoy the rewards, but I don’t spend to get the rewards. They really don’t offer me something I can’t really get on my own and I don’t want to spend to earn a small item. I have already found a successful spending and saving plan and I don’t want to adjust something that works for me for a reward. Credit cards aren’t bad, but if you spend to just get rewards you are walking on the edge of the cliff. Credit cards aren’t stupid, they dangle rewards to get more business. If it didn’t get them more money they would stop offering rewards.
    Lance @ Healthy Wealthy Income recently posted…I Could Learn About Finances But Cats Are Too FunnyMy Profile

  9. I agree. I churned 4 cards this year and I know first hand that it takes a lot of discipline and tracking to make sure you hit those spending requirements. If you’re a novice you should take it slowly. I’m done churning cards for this year as I don’t want to over do it. Plus I want to stick to something I can handle and I think 4/year is good enough for me.
    Practical Cents recently posted…What are Escrow Accounts and Escrow Analysis?My Profile


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