Cash Back and Rewards Cards - Just Say No?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
Topic Author
AnnetteLouisan
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Cash Back and Rewards Cards - Just Say No?

Post by AnnetteLouisan »

I wasn’t going to admit this to you all, but I guess it’s time.
I don’t use cash back or rewards credit cards. I use an Amex green charge card with a $55 annual fee (grandfathered) and I don’t even do membership rewards. I have some bank debit cards with a credit feature but I never incur interest.

My reasoning is that I want to limit any incentives to spend. I used to have certain airline and hotel loyalty cards from when I traveled a lot and I used to have an Amex corporate card at my old job. My Amex was involved in the foreign currency transaction fee litigation and my reimbursement was FAR less than expected. One of my travel cards - to which I dutifully submitted flight and hotel receipts for years - changed its terms and my miles expired unused, which turned me off. Another one had so many blackout dates and high taxes that by the time I redeemed it wasn’t a good feeling.

So these days, card terms have changed a lot and 2-5 percent cash back is common. I believe I personally would spend more and justify it due to the rewards. I used to overspend and it took a long time to get away from that by limiting how much advertising I consumed. I also would spend precious time thinking about it. As I head into my late 50s and later on 60s, when I don’t expect to be smarter or less impulsive than I am today, is there really such an advantage to using these cards? I’m giving up what $1,000/yr max? My annual spend is around 40k right now including my home. I do understand that for skilled arbitrageurs of these cards and for frequent travelers or big spenders they make sense. But for me?
Last edited by AnnetteLouisan on Sat Nov 20, 2021 2:03 pm, edited 3 times in total.
Bigt3142
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Re: Card

Post by Bigt3142 »

If having a credit card with rewards causes you to spend more, then do not use a credit card. I'd go to a debit card and never think about it again. You are most likely spending more than you will ever gain in rewards. It only makes sense to use a credit card for rewards if you were going to spend that money anyway.
Afty
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Re: Card

Post by Afty »

I think using a 2% cash back card is a nice middle ground. There’s no gaming the various categories or optimizing your points, which might address your concern about encouraging overspending. Also there are no games about point values; cash is straightforward.

Back of the envelope, if your annual spend is $40k including your house, let’s say you put 50% of that on a 2% cash back credit card. That’s $400/yr. So not a huge amount, but not nothing either.
regularguy455
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Re: Card

Post by regularguy455 »

You’re leaving tax free money on the table.
Quaestner
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Re: Card

Post by Quaestner »

I like my rewards card. It’s a simple 2% cash back that doesn’t require much thought. Does it lead me to spend more than a non-rewards payment method would? Perhaps. But I don’t worry, or need to worry about it. You know yourself and have a system that works for you. You seem aware of the behavioral benefits and possible finance costs of your plan. However, if you need it, I give you permission to experiment with a simple rewards card if you want to (or to maintain your current system)!
terran
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Re: Card

Post by terran »

If you believe it will make you spend more then you're probably making a good choice. That's not a problem for me, so I'll take the free money for spending I would do anyway.
Jack FFR1846
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Re: Cash Back and Rewards Cards - Just Say No?

Post by Jack FFR1846 »

This is a behavioral characteristic and your awareness of it in yourself is a good thing. For you, Dave Ramsey would be a good guide for credit card use, which might be as far as cutting them all up and using cash.

Plenty of Bogleheads (myself included) don't have this behavioral characteristic and spend only what they would normally spend in cash with rewards credit cards. I could certainly stop using rewards (and other schemes), but I'd give up 10's of thousands of dollars a year, which I see no reason to do. I never spend more just because I get back rewards. I will take particular cards, like this quarter Chase Freedom and Discover and tape "Wal Mart" on them so DW and I both remember that when we are in Wal Mart, we get 5% back on either of these cards. Anywhere else, we use a 2% card. My wife goes to Wal Mart for the specific groceries that are cheaper than any other grocery store. We do take note and pay attention to prices, always.
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Dottie57
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Re: Card

Post by Dottie57 »

Afty wrote: Sat Nov 20, 2021 1:31 pm I think using a 2% cash back card is a nice middle ground. There’s no gaming the various categories or optimizing your points, which might address your concern about encouraging overspending. Also there are no games about point values; cash is straightforward.

Back of the envelope, if your annual spend is $40k including your house, let’s say you put 50% of that on a 2% cash back credit card. That’s $400/yr. So not a huge amount, but not nothing either.
I use a 2% cash back. I know what I need to spend and don’t spend to generate 2% cash back on the item bought. :

I use the money to buy more more shares of my MMF at fidelity. The only income I have to devote to more investing now that retirement is here.

I stopped doing rewards programs at restaurants. I was eating at Panera too often when tired at night.
mindboggling
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Re: Cash Back and Rewards Cards - Just Say No?

Post by mindboggling »

The two credit cards I use most of the time are both cash-back cards. The amount of cash that I receive back is almost imperceptible. It doesn't change my life in any way. I wouldn't notice if there was no cash-back. On the other hand checking in to a hotel with a premium card doesn't get anyone better treatment. Heck, where I live most local businesses don't even take Amex.

My annual spend is only around 40k, unless my house or car is crying for maintenance.
In broken mathematics, We estimate our prize, --Emily Dickinson
JBTX
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Re: Cash Back and Rewards Cards - Just Say No?

Post by JBTX »

AnnetteLouisan wrote: Sat Nov 20, 2021 1:22 pm I wasn’t going to admit this to you all, but I guess it’s time.
I don’t use cash back or rewards credit cards. I use an Amex green charge card with a $55 annual fee (grandfathered) and I don’t even do membership rewards. I have some bank debit cards with a credit feature but I never incur interest.

My reasoning is that I want to limit any incentives to spend. I used to have certain airline and hotel loyalty cards from when I traveled a lot and I used to have an Amex corporate card at my old job. My Amex was involved in the foreign currency transaction fee litigation and my reimbursement was FAR less than expected. One of my travel cards - to which I dutifully submitted flight and hotel receipts for years - changed its terms and my miles expired unused, which turned me off. Another one had so many blackout dates and high taxes that by the time I redeemed it wasn’t a good feeling.

So these days, card terms have changed a lot and 2-5 percent cash back is common. I believe I personally would spend more and justify it due to the rewards. I used to overspend and it took a long time to get away from that by limiting how much advertising I consumed. I also would spend precious time thinking about it. As I head into my late 50s and later on 60s, when I don’t expect to be smarter or less impulsive than I am today, is there really such an advantage to using these cards? I’m giving up what $1,000/yr max? My annual spend is around 40k right now including my home. I do understand that for skilled arbitrageurs of these cards and for frequent travelers or big spenders they make sense. But for me?

It is an individual thing. You probably know yourself better than anyone else.

I play credit card bonus and cash back games, which probably net me several thousand dollars every year, plus some bank account rewards in addition . I can say with a high level of confidence that I don't spend more than I would with a regular card. I may put things on cards, like taxes, that I otherwise wouldn't but I'd still have to spend those.

If I were to switch to going with cash wherever possible and maybe debit card might I spend less? Perhaps. Probably. The friction of dealing with cash and occasionally running out or a lower bank balance may be a disincentive. If everytime I made a purchase my hand would get shocked I'd probably spend less too. Adding friction and obstacles to spending may decrease spending but it also increases hassle and irritation.

Now is the incremental effort chasing rewards beyond a straight 2% card worth the time and attention? I can't answer that. It really depends on what that extra time is being diverted away from.
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LilyFleur
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Re: Cash Back and Rewards Cards - Just Say No?

Post by LilyFleur »

I used to use my Costco Visa quite heavily (3% for travel and restaurants, 4% for the first $7,000 spent on gas). But I realized I got out of the habit of shopping at Costco in 2020, and it's easy to impulse buy at Costco. Because the rewards from the Costco Visa have to be spent at the warehouse, it all benefits their business model. It worked in the past for me when I bought more food at Costco, but this year I like just getting the 2% cash back from my Citi Mastercard. My single largest monthly expenditure is my health insurance policy, and being able to use a 2% card to pay it seems to make it less painful. I don't really view the cash back as extra money to spend. I just see it as a way to discount what I already spend on.

I am not sure how it is now, but there have been posts on this forum cautioning people against using debit cards. Something about it being more risky if stolen than a credit card.

I don't use my credit card to pay property taxes because a fee is charged which means I don't net anything. It was the same situation with my son's tuition. I was honestly quite surprised that Blue Shield would let me pay with a credit card, as Blue Cross would not.

I also like being able to see all of my healthcare expenses at the end of the year quite easily for my credit card online. I download the information as a spreadsheet, and it's a matter of editing the spreadsheet when I am working on my tax deductions.
sycamore
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Re: Card

Post by sycamore »

terran wrote: Sat Nov 20, 2021 1:51 pm If you believe it will make you spend more then you're probably making a good choice. That's not a problem for me, so I'll take the free money for spending I would do anyway.
+1

I don't need to increase spending unnecessarily to hit a bonus - spending on necessities for the family is more than enough to reach any bonus level.

Another habit that likely means having a CC is not a problem -- I spend time to research that I'm not overpaying. Some would say that's not the best tradeoff of time vs money, which is a another good topic to think about.
makingmistakes
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Re: Cash Back and Rewards Cards - Just Say No?

Post by makingmistakes »

Jack FFR1846 wrote: Sat Nov 20, 2021 1:58 pm
I could certainly stop using rewards (and other schemes), but I'd give up 10's of thousands of dollars a year, which I see no reason to do.
Surely that’s a typo … 10’s of thousands per year in rewards and other schemes??!! 😳
arf30
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Re: Cash Back and Rewards Cards - Just Say No?

Post by arf30 »

I got my parents signed up for the capital one quicksilver card. It's "only" 1.5% cash back but it's an automatic statement credit so you don't have to log in and redeem anything, or even think about it. Seems silly to use a non rewards card when these zero effort cards exist.
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anon_investor
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Re: Card

Post by anon_investor »

regularguy455 wrote: Sat Nov 20, 2021 1:35 pm You’re leaving tax free money on the table.
+1. We have the discipline not to spend more than we need to and enjoy the free cash back, which we invest. It is literally free money.
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KlingKlang
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Re: Cash Back and Rewards Cards - Just Say No?

Post by KlingKlang »

LilyFleur wrote: Sat Nov 20, 2021 2:33 pm I used to use my Costco Visa quite heavily (3% for travel and restaurants, 4% for the first $7,000 spent on gas). But I realized I got out of the habit of shopping at Costco in 2020, and it's easy to impulse buy at Costco. Because the rewards from the Costco Visa have to be spent at the warehouse, it all benefits their business model.
For years I was also under the impression that you had to spend your Costco Citi VISA rewards at Costco, but it turns out that you can just take your check to the customer service counter and get cash for it.
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AnnetteLouisan
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Re: Card

Post by AnnetteLouisan »

anon_investor wrote: Sat Nov 20, 2021 3:03 pm
regularguy455 wrote: Sat Nov 20, 2021 1:35 pm You’re leaving tax free money on the table.
+1. We have the discipline not to spend more than we need to and enjoy the free cash back, which we invest. It is literally free money.
The truth is, maybe I have the discipline, too. I’m just not sure. I generally build in extreme guardrails into everything I do to protect myself from myself. I’m not a gambler or a compulsive spender, but I get into habits once I find something I like and then find it hard to stop. As with the taxable account I’m hesitant to open, I’m probably hurting myself more than helping. The ideas of a free gift, reward, sale, discount or money back are enticing. And they are designed to be that way.
Jags4186
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Re: Card

Post by Jags4186 »

AnnetteLouisan wrote: Sat Nov 20, 2021 3:19 pm
anon_investor wrote: Sat Nov 20, 2021 3:03 pm
regularguy455 wrote: Sat Nov 20, 2021 1:35 pm You’re leaving tax free money on the table.
+1. We have the discipline not to spend more than we need to and enjoy the free cash back, which we invest. It is literally free money.
The truth is, maybe I have the discipline, too. I’m just not sure. I generally build in extreme guardrails into everything I do to protect myself from myself. I’m not a gambler or a compulsive spender, but I get into habits once I find something I like and then find it hard to stop. As with the taxable account I’m hesitant to open, I’m probably hurting myself more than helping.
I don’t understand why if you would be willing to use an American Express without rewards but you wouldn’t be willing to use an American Express (or any other card) with rewards. If for no other reason at the end of the year you take whatever cashback/points/etc. that you earn and you buy yourself an extra Christmas present, or donate it, or save it, or whatever.
Afty
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Re: Cash Back and Rewards Cards - Just Say No?

Post by Afty »

KlingKlang wrote: Sat Nov 20, 2021 3:08 pm
LilyFleur wrote: Sat Nov 20, 2021 2:33 pm I used to use my Costco Visa quite heavily (3% for travel and restaurants, 4% for the first $7,000 spent on gas). But I realized I got out of the habit of shopping at Costco in 2020, and it's easy to impulse buy at Costco. Because the rewards from the Costco Visa have to be spent at the warehouse, it all benefits their business model.
For years I was also under the impression that you had to spend your Costco Citi VISA rewards at Costco, but it turns out that you can just take your check to the customer service counter and get cash for it.
You can even ask for a check. A small optimization is not to apply it to your purchase, but to charge whatever you buy so that you get the 3% cash back on your purchase that day.
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anon_investor
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Re: Card

Post by anon_investor »

AnnetteLouisan wrote: Sat Nov 20, 2021 3:19 pm
anon_investor wrote: Sat Nov 20, 2021 3:03 pm
regularguy455 wrote: Sat Nov 20, 2021 1:35 pm You’re leaving tax free money on the table.
+1. We have the discipline not to spend more than we need to and enjoy the free cash back, which we invest. It is literally free money.
The truth is, maybe I have the discipline, too. I’m just not sure. I generally build in extreme guardrails into everything I do to protect myself from myself. I’m not a gambler or a compulsive spender, but I get into habits once I find something I like and then find it hard to stop. As with the taxable account I’m hesitant to open, I’m probably hurting myself more than helping. The ideas of a free gift, reward, sale, discount or money back are enticing. And they are designed to be that way.
We might be extreme, but we track every penny spent. We look for sales, etc. We maximize cash back rewards. We invest every pay check in our taxable (tax advantage accounts all maxed out already). The cash back to us is free money, we have to pay for groceries and cell phones anyway, right? Might as well get 2.62%-3.5% cash back (tax free).
tibbitts
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Re: Cash Back and Rewards Cards - Just Say No?

Post by tibbitts »

Jack FFR1846 wrote: Sat Nov 20, 2021 1:58 pm This is a behavioral characteristic and your awareness of it in yourself is a good thing. For you, Dave Ramsey would be a good guide for credit card use, which might be as far as cutting them all up and using cash.

Plenty of Bogleheads (myself included) don't have this behavioral characteristic and spend only what they would normally spend in cash with rewards credit cards. I could certainly stop using rewards (and other schemes), but I'd give up 10's of thousands of dollars a year, which I see no reason to do. I never spend more just because I get back rewards. I will take particular cards, like this quarter Chase Freedom and Discover and tape "Wal Mart" on them so DW and I both remember that when we are in Wal Mart, we get 5% back on either of these cards. Anywhere else, we use a 2% card. My wife goes to Wal Mart for the specific groceries that are cheaper than any other grocery store. We do take note and pay attention to prices, always.
Just so the OP doesn't feel too left out, even among Bogleheads maybe about .1% receive "tens of thousands of dollars" in credit card rebates (including brokerage or bank bonuses etc.) per year. And those that do have to really work at it, unless of course their spending patterns are very non-Boglehead-like. I'll guess that just because it's a hobby and enjoyable for them, Bogleheads who aggressively pursue cash back, bonuses, etc. underestimate how much time and effort those activities require.
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AnnetteLouisan
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Re: Card

Post by AnnetteLouisan »

Jags4186 wrote: Sat Nov 20, 2021 3:21 pm
AnnetteLouisan wrote: Sat Nov 20, 2021 3:19 pm
anon_investor wrote: Sat Nov 20, 2021 3:03 pm
regularguy455 wrote: Sat Nov 20, 2021 1:35 pm You’re leaving tax free money on the table.
+1. We have the discipline not to spend more than we need to and enjoy the free cash back, which we invest. It is literally free money.
The truth is, maybe I have the discipline, too. I’m just not sure. I generally build in extreme guardrails into everything I do to protect myself from myself. I’m not a gambler or a compulsive spender, but I get into habits once I find something I like and then find it hard to stop. As with the taxable account I’m hesitant to open, I’m probably hurting myself more than helping.
I don’t understand why if you would be willing to use an American Express without rewards but you wouldn’t be willing to use an American Express (or any other card) with rewards. If for no other reason at the end of the year you take whatever cashback/points/etc. that you earn and you buy yourself an extra Christmas present, or donate it, or save it, or whatever.
When I had frequent flyer cards and hotel loyalty cards, there was a certain seductive siren song that really catered to my insecurities. Who doesn’t want to be glamorous and fashionable, part of the jet set, wining and dining, being seen and in the know?? Of course this is ABSURD, but this is how these cards market, and to some extent I fell for it. I traveled more, stayed in high end hotels within the luxury hotel chains like LHW, received free meals and upgrades and started reading travel magazines. I was in a “silver” category on one airline due to business travel.

The funny secret is that none of this is really that costly, a lot of high end hotels have high vacancy rates and low cost options, and I earned well and was moderate in my other costs, so I don’t regret seeing a lot of the world this way in my 30s. But you end up getting exposed to so many high end marketers and in my 40s and 50s I just didn’t have these priorities anymore. I stay home a lot now, especially during WFH, and enjoy the simple pleasures of home cooking, soft music and a good book. Having gotten a higher spend life out of my system helps me keep costs low today even as I earn more and have more wealth than I did then.

I avoided online shopping for about a decade after it was invented, concerned about obsessing and overspending, but once I started it was just a very practical lower cost convenience so that worked out.

I am also a little obsessive (over 1,000 posts on here in the space of 2 months?), and I think I’d obsess about how to maximize my card and I don’t want to spend time that way. If I get a taxable account and do well with a fund or two, would I get carried away? Maybe and maybe not but there’s only one way to find out.
Wanderingwheelz
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Re: Cash Back and Rewards Cards - Just Say No?

Post by Wanderingwheelz »

makingmistakes wrote: Sat Nov 20, 2021 2:47 pm
Jack FFR1846 wrote: Sat Nov 20, 2021 1:58 pm
I could certainly stop using rewards (and other schemes), but I'd give up 10's of thousands of dollars a year, which I see no reason to do.
Surely that’s a typo … 10’s of thousands per year in rewards and other schemes??!! 😳
Some people are business owners. Using a 2% credit card to pay for business needs can get well into the 10s of thousands per year in cash back. Think about a contractor or a retailer, for example.

My wife and I don’t run up huge business expenses compared to some, but we surpass $10,000 in cash back each year on the business card. That’s only $500,000 charged in a year.
Jags4186
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Re: Cash Back and Rewards Cards - Just Say No?

Post by Jags4186 »

makingmistakes wrote: Sat Nov 20, 2021 2:47 pm
Jack FFR1846 wrote: Sat Nov 20, 2021 1:58 pm
I could certainly stop using rewards (and other schemes), but I'd give up 10's of thousands of dollars a year, which I see no reason to do.
Surely that’s a typo … 10’s of thousands per year in rewards and other schemes??!! 😳
I just cashed out over 1mm Membership Rewards points for ~$11,000. I earned those points over say the last 18 months. Doesn’t include another 1-2mm points I have sitting around elsewhere.

I earn the points faster than I can use them. The promotions that have been around since COVID have been insane.
Last edited by Jags4186 on Sat Nov 20, 2021 3:54 pm, edited 1 time in total.
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AnnetteLouisan
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Re: Card

Post by AnnetteLouisan »

anon_investor wrote: Sat Nov 20, 2021 3:33 pm
AnnetteLouisan wrote: Sat Nov 20, 2021 3:19 pm
anon_investor wrote: Sat Nov 20, 2021 3:03 pm
regularguy455 wrote: Sat Nov 20, 2021 1:35 pm You’re leaving tax free money on the table.
+1. We have the discipline not to spend more than we need to and enjoy the free cash back, which we invest. It is literally free money.
The truth is, maybe I have the discipline, too. I’m just not sure. I generally build in extreme guardrails into everything I do to protect myself from myself. I’m not a gambler or a compulsive spender, but I get into habits once I find something I like and then find it hard to stop. As with the taxable account I’m hesitant to open, I’m probably hurting myself more than helping. The ideas of a free gift, reward, sale, discount or money back are enticing. And they are designed to be that way.
We might be extreme, but we track every penny spent. We look for sales, etc. We maximize cash back rewards. We invest every pay check in our taxable (tax advantage accounts all maxed out already). The cash back to us is free money, we have to pay for groceries and cell phones anyway, right? Might as well get 2.62%-3.5% cash back (tax free).
The logic of this is why I’m still considering it. And my tax bracket is such that tax free money is an absolute boon. At my co-op, many people charge monthly maintenance on their card. I even heard some folks pay taxes with their card for the cash back, but I don’t know if that is even possible.
Last edited by AnnetteLouisan on Sat Nov 20, 2021 5:26 pm, edited 1 time in total.
MindBogler
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Re: Cash Back and Rewards Cards - Just Say No?

Post by MindBogler »

AnnetteLouisan wrote: Sat Nov 20, 2021 1:22 pm My reasoning is that I want to limit any incentives to spend.
This is the root of the problem. Using rewards cards should have nothing to do with incentivizing spend. One should only spend what one would normally. The idea, at least for me, is to maximize the benefit with completely normal behavior. These small rebates and bonuses add up over time and can be significant. For example, we are taking a 10 day vacation here soon that is completely paid for by Chase travel points.
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AnnetteLouisan
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Re: Cash Back and Rewards Cards - Just Say No?

Post by AnnetteLouisan »

The card companies believe that the rewards programs increase “customer engagement” with the card, which leads to higher fee revenue for them. I am susceptible to flattery and as a formerly semi poor person who still isn’t sure how to do relative affluence right, the appeal of identifying with some mysterious marketing created idea of the upper crust through card usage… well, it’s like alcohol which I also don’t do for similar reasons.

I guess it’s about one’s view of oneself as a nerves of steel, smart and purely rational person with an iron will. Much as I’d like to be that person, I’ve made too many mistakes to still believe I am, if I ever did. In other words, it’s not you, the rational card user, it’s me. Dave Ramsey has a pretty funny rant about card rewards programs.
Last edited by AnnetteLouisan on Sat Nov 20, 2021 4:06 pm, edited 2 times in total.
tibbitts
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Re: Cash Back and Rewards Cards - Just Say No?

Post by tibbitts »

Wanderingwheelz wrote: Sat Nov 20, 2021 3:50 pm
makingmistakes wrote: Sat Nov 20, 2021 2:47 pm
Jack FFR1846 wrote: Sat Nov 20, 2021 1:58 pm
I could certainly stop using rewards (and other schemes), but I'd give up 10's of thousands of dollars a year, which I see no reason to do.
Surely that’s a typo … 10’s of thousands per year in rewards and other schemes??!! 😳
Some people are business owners. Using a 2% credit card to pay for business needs can get well into the 10s of thousands per year in cash back. Think about a contractor or a retailer, for example.

My wife and I don’t run up huge business expenses compared to some, but we surpass $10,000 in cash back each year on the business card. That’s only $500,000 charged in a year.
That's a good point; I've known business owners who collect large amounts of miles/points for employee travel for example. The employee typically gets the miles/points for the actual trip (direct from an airline, for example), but the employer gets the miles/points for the card usage by purchasing the travel.
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anon_investor
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Re: Card

Post by anon_investor »

AnnetteLouisan wrote: Sat Nov 20, 2021 3:54 pm
anon_investor wrote: Sat Nov 20, 2021 3:33 pm
AnnetteLouisan wrote: Sat Nov 20, 2021 3:19 pm
anon_investor wrote: Sat Nov 20, 2021 3:03 pm
regularguy455 wrote: Sat Nov 20, 2021 1:35 pm You’re leaving tax free money on the table.
+1. We have the discipline not to spend more than we need to and enjoy the free cash back, which we invest. It is literally free money.
The truth is, maybe I have the discipline, too. I’m just not sure. I generally build in extreme guardrails into everything I do to protect myself from myself. I’m not a gambler or a compulsive spender, but I get into habits once I find something I like and then find it hard to stop. As with the taxable account I’m hesitant to open, I’m probably hurting myself more than helping. The ideas of a free gift, reward, sale, discount or money back are enticing. And they are designed to be that way.
We might be extreme, but we track every penny spent. We look for sales, etc. We maximize cash back rewards. We invest every pay check in our taxable (tax advantage accounts all maxed out already). The cash back to us is free money, we have to pay for groceries and cell phones anyway, right? Might as well get 2.62%-3.5% cash back (tax free).
The logic of this is why I’m still considering it. Any my tax bracket is such that tax free money is an absolute boon. At my co-op, many people charge monthly maintenance on their card. I even heard some folks pay taxes with their card for the cash back, but I don’t know if that is even possible.
I plan to pay for my taxes on my CC this year. The processing fee is 1.99% but I get 2.62% cash back, so I will pocket the spread.
SnowBog
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Re: Cash Back and Rewards Cards - Just Say No?

Post by SnowBog »

Taxes can be paid on CC, but there's a service fee (don't remember how much but around 2% so you'd need > that to make sense).

For myself, I keep it simple. I need to spend money to live, and I prefer to charge as much a of that as possible (0% free loan until paid off at end of month, fraud protection, built in tracking of expenses).

By using an unlimited cash back card such as Fidelity 2%, Citi 2%, or better if you can find one, I don't I spend any more or less than I was going to spend anyway. I just simply get "free money" that shows up in my account (or lessens balance, etc.).

I also have 5% cards at places like Target and Amazon. When I'm shopping around for something, I may factor that in... If the item is $100 at Amazon, Target, or another store (where I'll only get 2%), I'll default to buy it from where the "effective price" is the least. But this would be something I was going to buy anyway - the cash back only helped find the cheapest place to do so.
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AnnetteLouisan
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Re: Cash Back and Rewards Cards - Just Say No?

Post by AnnetteLouisan »

There’s something called friction that was discussed on another thread. It’s more or less what gets in the way between wanting and spending. Studies indicate that cards decrease friction by a lot, and rewards do even more. I seem to recall that I was much more focused on price and value in the past than I am today, when cards make it all so easy.

Again, who is stronger, little old me, or the science and marketing genius of the credit card industry? If you have a chance to bet on that one, the odds are pretty high it’s not me.
SnowBog
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Re: Cash Back and Rewards Cards - Just Say No?

Post by SnowBog »

Ultimately, you need to know yourself...

For myself, I know that I make $X, save $Y, and have $Z left for expenses (or if you want to break that down further $zz for my "wants" after taking out essential expenses).

I know how to keep my expenses within $Z (or $zz). And no amount of marketing, cash back, etc. is going to change that.

Having said that, I know people who proudly talk about "how much they saved" getting things on "sale", often things they would have never purchased if not for the "great sale". They haven't connected that they were "spending" money, and actually "spent too much" money - in their pursuit of "savings". And then they wonder why they never have any money, don't have adequate retirement savings, etc. For these people, sure I'll accept cash back is another "trick" to get them to spend more. But I'm happily not one of those people [or at least not anymore]...
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billthecat
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Re: Cash Back and Rewards Cards - Just Say No?

Post by billthecat »

I dunno, I try to keep it simple...I get:

Groceries - 5%
Utilities (plus other categories I don't bother with) - 3.8%
Gas - 3%
All else - 2%
We cannot direct the winds but we can adjust our sails • Warning: you will succeed at whatever you focus on, good or bad
LittleMaggieMae
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Re: Cash Back and Rewards Cards - Just Say No?

Post by LittleMaggieMae »

What do you use your Amex Green card for? How much is your monthly credit card bill? Multiply your yearly credit card spending by 1% and 2% to see if the amount in rewards makes a difference to you.

Would replacing it with a card that gives you 1% or 2% cash back on all purchases and then NOT CHANGING how you currently think about charging things on your Green Card be a difficult thing to do? Instead of thinking "I'm getting a reward!" think about whatever it is you think about when you use your Green Card (which seems to help you keep from over spending).

There are also Credit Cards that give fixed % on grocery or gas (BoA 123 card - 2% on groceries and then set the 3% category to gas and then 1% on everything else. I hear BMO has a similar card). I could get by with my BoA 123 card and then another back up card - if and when I simplify my Credit card accounts. There's no special thinking about which card to use to get the "biggest reward" - if I'm at the gas station pumping gas - BoA card. If I'm at the Grocery - BoA card. If I need to pay the Vet Office for a Cat Repair - BoA card. If I need to pay my city's water bill on line thru their no fee for credit card payment site - BoA card. All I have to think about is how much I'm spending and how I will pay it off when the bill comes. The thought of how much "rewards cash I'm getting" never enters my mind.

I have to buy gas and groceries. It's hard to pump more gas than fits in my car (I dont' EVER go into the little store). I'm very religious about sticking to my grocery list and being able to charge my purchase doesn't sway me to "impulse buy". I don't get a lot of rewards/cash back - but I get something. My credit cards don't cost me anything.
Last edited by LittleMaggieMae on Sat Nov 20, 2021 4:48 pm, edited 2 times in total.
SnowBog
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Re: Cash Back and Rewards Cards - Just Say No?

Post by SnowBog »

Ultimately, this is one of the "little things" in life. A good view is "don't sweat the small stuff".

Whether you add a cash back card or not...
Whether you stop to pick up loose change on the sidewalk or not...
Whether you move cash in banks around for an extra 0.1% interest or not...

These things aren't going to have a material impact on your retirement.

The big things are living below your means (which translates into savings rate), and making reasonable investments are far more important.
Last edited by SnowBog on Sat Nov 20, 2021 5:01 pm, edited 1 time in total.
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anon_investor
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Re: Cash Back and Rewards Cards - Just Say No?

Post by anon_investor »

billthecat wrote: Sat Nov 20, 2021 4:43 pm I dunno, I try to keep it simple...I get:

Groceries - 5%
Utilities (plus other categories I don't bother with) - 3.8%
Gas - 3%
All else - 2%
Where do you get?
Groceries - 5%
Utilities - 3.8%
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billthecat
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Re: Cash Back and Rewards Cards - Just Say No?

Post by billthecat »

anon_investor wrote: Sat Nov 20, 2021 4:49 pm
billthecat wrote: Sat Nov 20, 2021 4:43 pm I dunno, I try to keep it simple...I get:

Groceries - 5%
Utilities (plus other categories I don't bother with) - 3.8%
Gas - 3%
All else - 2%
Where do you get?
Groceries - 5%
Utilities - 3.8%
Groceries is 5% on Chase Freedom Flex. But only the first year (I have about 10 months to go).
Utilities - well, it's a strange little card. I think when I originally got it, it was a Cathay Bank business card. I think it changed hands, first to First BankCard and now FNBO (First National Bank of Omaha). The web site is terrible, and I don't know how one would go about getting it today. But I get 3.8% back on specific business-oriented merchant category codes, including water, cable, gas/electric, trash, telecom, office supplies, etc., etc. Other categories like gas and dining get less.
Last edited by billthecat on Sat Nov 20, 2021 5:09 pm, edited 1 time in total.
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Doom&Gloom
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Re: Cash Back and Rewards Cards - Just Say No?

Post by Doom&Gloom »

SnowBog wrote: Sat Nov 20, 2021 4:47 pm Ultimately, this is one of the "little things" in life. A good view is "don't sweat the small stuff".

Whether you add a cash back card or not...
Whether you stop to pick up loose change on the sidewalk or not...
Whether you move cash in banks around for an extra 0.1% interest or not...

These things aren't going to have a material impact on your retirement.

The big things are living below your means (which translates into savings rate), and making reasonable investments are far more important.
+1
If you have any doubts about your self-discipline and even have to ask this question, don't. Simple enough.
02nz
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Re: Cash Back and Rewards Cards - Just Say No?

Post by 02nz »

OP, thank you for financing the thousands of dollars I've gotten in rewards (on spending I would've done anyway) from American Express. :happy
mpsz
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Re: Cash Back and Rewards Cards - Just Say No?

Post by mpsz »

AnnetteLouisan wrote: Sat Nov 20, 2021 1:22 pm One of my travel cards - to which I dutifully submitted flight and hotel receipts for years - changed its terms and my miles expired unused, which turned me off. Another one had so many blackout dates and high taxes that by the time I redeemed it wasn’t a good feeling.
I'd suggest a cash-back card rather than a travel card if you've had this experience. The miles-and-point game is still "earn & burn" - earn your points and burn (use) them as quickly as possible, because they are constantly being devalued or changes made to programs. With COVID still working its way through the system we'll definitely see continued devaluations over the coming years.

Cash does not expire or have blackout dates (assuming you redeem it).

Perhaps a card that has automatic cash-back redemption? I know that you can set a Capital One Quicksilver (1.5%) to automatically issue a statement credit once it hits a certain balance.

Sticking with your existing card is not a bad call. It is, however, not optimal. Do what works for you.
UpperNwGuy
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Re: Cash Back and Rewards Cards - Just Say No?

Post by UpperNwGuy »

AnnetteLouisan wrote: Sat Nov 20, 2021 1:22 pm I wasn’t going to admit this to you all, but I guess it’s time.
I don’t use cash back or rewards credit cards. I use an Amex green charge card with a $55 annual fee (grandfathered) and I don’t even do membership rewards. I have some bank debit cards with a credit feature but I never incur interest.

My reasoning is that I want to limit any incentives to spend. I used to have certain airline and hotel loyalty cards from when I traveled a lot and I used to have an Amex corporate card at my old job. My Amex was involved in the foreign currency transaction fee litigation and my reimbursement was FAR less than expected. One of my travel cards - to which I dutifully submitted flight and hotel receipts for years - changed its terms and my miles expired unused, which turned me off. Another one had so many blackout dates and high taxes that by the time I redeemed it wasn’t a good feeling.

So these days, card terms have changed a lot and 2-5 percent cash back is common. I believe I personally would spend more and justify it due to the rewards. I used to overspend and it took a long time to get away from that by limiting how much advertising I consumed. I also would spend precious time thinking about it. As I head into my late 50s and later on 60s, when I don’t expect to be smarter or less impulsive than I am today, is there really such an advantage to using these cards? I’m giving up what $1,000/yr max? My annual spend is around 40k right now including my home. I do understand that for skilled arbitrageurs of these cards and for frequent travelers or big spenders they make sense. But for me?
I used to think like you, but then I got smart and realized that I was walking away from 2% or more cash back on every single transaction. I got out of debt and then swapped out my no-rewards credit cards for 2% cash back credit cards. The 2% cash back has not encouraged me to spend more because I also have a monthly budget and monitor it every few days. I subsequently added a few more cards so I can get 3% cash back on groceries, dining, gas, drug stores, and travel. I'm not spending more. (By the way, forget miles and points, especially if they expire. Cash back is always reliable, and it doesn't encourage you to hit an award target such as a flight to Europe.)
Jags4186
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Re: Cash Back and Rewards Cards - Just Say No?

Post by Jags4186 »

anon_investor wrote: Sat Nov 20, 2021 4:49 pm
billthecat wrote: Sat Nov 20, 2021 4:43 pm I dunno, I try to keep it simple...I get:

Groceries - 5%
Utilities (plus other categories I don't bother with) - 3.8%
Gas - 3%
All else - 2%
Where do you get?
Groceries - 5%
Utilities - 3.8%
FYI, you can get 5% back on utilities with the US Bank Cash+ up to $2000/quarter. You can get 5% back on groceries with the Citi Custom Cash up to $500/mo. If you spend more than $500/mo on groceries, just get two :wink:
Last edited by Jags4186 on Sat Nov 20, 2021 5:22 pm, edited 2 times in total.
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AnnetteLouisan
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Re: Cash Back and Rewards Cards - Just Say No?

Post by AnnetteLouisan »

Little Maggie Mae -

I wasn’t using it much after I stopped traveling, but I was warned about the lack of security around debit cards and during Covid my Amex became vital as I shifted to online payments for most things.

These days, I have an Amex monthly range of 400–1200 (1200 is an extreme outlier like if I have to pay for something for my dad who doesn’t use cards) but usually around $625/mo. I use it for my phone expenses, tax prep expenses, wsj monthly charge, annual dues and donations, doctor bills, home services like housekeeper and exterminator, and Walmart and Amazon spendings.

So with 2 percent cash back we’re talking around $12/mo? And that’s if I get it on everything.
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anon_investor
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Re: Cash Back and Rewards Cards - Just Say No?

Post by anon_investor »

Jags4186 wrote: Sat Nov 20, 2021 5:19 pm
anon_investor wrote: Sat Nov 20, 2021 4:49 pm
billthecat wrote: Sat Nov 20, 2021 4:43 pm I dunno, I try to keep it simple...I get:

Groceries - 5%
Utilities (plus other categories I don't bother with) - 3.8%
Gas - 3%
All else - 2%
Where do you get?
Groceries - 5%
Utilities - 3.8%
FYI, you can get 5% back on utilities with the US Bank Cash+ up to $2000/quarter. You can get 5% back on groceries with the Citi Custom Cash up to $500/mo. If you spend more than $500/mo on groceries, just get two :wink:
That US Bank Cash+ card looks interesting. You can also get 5% cash back on a 2nd category which includes cell phone bills.
Jags4186
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Re: Cash Back and Rewards Cards - Just Say No?

Post by Jags4186 »

anon_investor wrote: Sat Nov 20, 2021 5:23 pm
Jags4186 wrote: Sat Nov 20, 2021 5:19 pm
anon_investor wrote: Sat Nov 20, 2021 4:49 pm
billthecat wrote: Sat Nov 20, 2021 4:43 pm I dunno, I try to keep it simple...I get:

Groceries - 5%
Utilities (plus other categories I don't bother with) - 3.8%
Gas - 3%
All else - 2%
Where do you get?
Groceries - 5%
Utilities - 3.8%
FYI, you can get 5% back on utilities with the US Bank Cash+ up to $2000/quarter. You can get 5% back on groceries with the Citi Custom Cash up to $500/mo. If you spend more than $500/mo on groceries, just get two :wink:
That US Bank Cash+ card looks interesting. You can also get 5% cash back on a 2nd category which includes cell phone bills.
I get 5 UR with the Chase Ink Cash on cell phone and home internet. What I’ve typically done with the US Bank Cash+, since my utility companies charge to use CC, is make a $2000 payment to the gas and electric company ($3.95 fee). That covers about a full years worth of utilities. Then next quarter I make a $600 or so payment to the water company ($1.95 fee) which again covers about 1 year. I rarely use the card other than that.
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AnnetteLouisan
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Re: Cash Back and Rewards Cards - Just Say No?

Post by AnnetteLouisan »

I think those cash back cards have interest rates associated with them, don’t they? I never do anything that has even a potential 18 percent or more rate. Inevitably it will snag me. You know FidelityZero? I’m AnnetteZero.
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anon_investor
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Re: Cash Back and Rewards Cards - Just Say No?

Post by anon_investor »

AnnetteLouisan wrote: Sat Nov 20, 2021 5:32 pm I think those cash back cards have interest rates associated with them, don’t they? I never do anything that has even a potential 18 percent or more rate. Inevitably it will snag me. You know FidelityZero? I’m AnnetteZero.
You pay $0 interest if you just pay them off each month. You can even set up auto pay so you won't forget. I have had credit cards for over 20 years and never paid 1 penny in interest. I pay them off every month before the due date.
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JoMoney
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Re: Cash Back and Rewards Cards - Just Say No?

Post by JoMoney »

OP, I have similar concerns as you. I do think playing the credit card rewards game does change my spending habits, nudging me into a reason to ok spending on things I might not otherwise. I've been considering putting myself onto a cash/debit card spending for awhile, but haven't been able to convince myself to pull the plug on rewards cards yet. I think it might help my diet if I did as well (I tend to eat out a lot.)

FWIW, all the cash back rewards cards I use don't have any interest as long as you pay the balance in full each statement.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Jags4186
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Re: Cash Back and Rewards Cards - Just Say No?

Post by Jags4186 »

AnnetteLouisan wrote: Sat Nov 20, 2021 5:32 pm I think those cash back cards have interest rates associated with them, don’t they? I never do anything that has even a potential 18 percent or more rate. Inevitably it will snag me. You know FidelityZero? I’m AnnetteZero.
Go check out the interest rate on your AMEX.

I’m not really sure what the point of the post is. You’ve shared the following:

You are in a high enough tax bracket that tax free income would be nice (suggesting high income, little need for extra money)
You only spend $600-$1200/mo (suggesting low expenses)
You’d only receive roughly $144 - $288/yr in cashback, which seems immaterial to someone in your situation.

My suggestion? Cancel the Green card and get a free card from your local credit union or bank that offers no rewards. You’ll be $55 better off every year with no worries about overspending to earn points.
Last edited by Jags4186 on Sat Nov 20, 2021 5:46 pm, edited 2 times in total.
UpperNwGuy
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Re: Cash Back and Rewards Cards - Just Say No?

Post by UpperNwGuy »

AnnetteLouisan wrote: Sat Nov 20, 2021 5:32 pm I think those cash back cards have interest rates associated with them, don’t they? I never do anything that has even a potential 18 percent or more rate. Inevitably it will snag me. You know FidelityZero? I’m AnnetteZero.
I haven't paid a penny of credit card interest in seven years. That's why I have a budget. When they send me those blank checks with zero percent interest, I put them straight into the shredder.
Last edited by UpperNwGuy on Sat Nov 20, 2021 5:45 pm, edited 1 time in total.
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