Thursday, June 13, 2013

Rewards: Be careful what you're signing up for!

Getting credit card rewards is like getting little pieces of a dollar bill in exchange for spending money.
Well, until you become a high roller anyway.

Read this if: 

1) You are thinking about getting a new credit card. 
2) You wonder if all those rewards you get with cards is really worth it. 


When I got my first credit card, one of the things I really focused on was researching what rewards came with the cards. I realize now that while getting rewarded for spending sounds like a great idea, there are many traps to get caught in if I'm not careful. Here are three to start with. 

The "5% Cash Back Sounds Amazing!" Trap 

I have yet to see an offer for 5% cash back rewards that doesn't come attached with the words "in rotating categories." This means that every quarter of the year, for example, you'll get 5% cash-back on restaurants, and the next quarter you'll get 5% back on entertainment. I don't like this system because it seems to me that we would tend to spend more in those categories just because of the 5% incentive. 

The way my brain works, I'll always forget what category it is anyway. 

The "Well, I'm Just Going To Get Points Back Anyway" Trap 

There have been a couple of instances where I was facing a decision to buy something and, quite honestly, the only reason I tipped towards the "yes, buy it, buy it now" side was because I knew I would get some kind of reward back. Shame on me, I know. :'( 

The "How Many Dollars Is a Point Anyway?" Trap 

Some credit card companies have a "point" system instead of cash back, so then you have to worry about the conversion rate (believe it or not, it does vary depending on how you spend them sometimes. I have had experiences where one point was worth one cent somewhere but less than a cent somewhere else…). 

The Bottom Line 

I'm not saying credit cards are evil. But swiping is so easy, and knowing that you'll get something back, no matter how little, is that much more incentive to spend. And if you're really getting significant amounts in rewards, well then, you're spending at least a hundred times as much to get those rewards. 

So is it really worth it? What do you think? Let me know in the comments. 


As always, contact me with questions or suggestions! You can either comment directly on the post or send me an email to 

Photo credit: photosteve101 via photopin cc


  1. Replies
    1. Short and simple, I agree. :) Thanks for reading and commenting! :D

  2. It truly depends on your spending habits, as a college students my expenses are not as immense as someone who takes care of a family. My parents but a lot from costco and we did the math and it was actually beneficial for them to take out the high reward cash back with maintenance fees card. They have the American Express. I believe the charge for yearly fee for Costco card with American express was about $50-80 for the high reward card but we got 3% (cash back, no points) on gas and 2% i think on items in store. Due to there being 3 cars in the family as well as them having 4 kids, the cash back form the card covered the yearly fee as well as getting back an average of about $100-150 per year.

    So in all I think it really depends on your spending habits.

    1. True, I agree. It all depends on the category of a spender.

    2. That's a great idea for people who are wondering about rewards - doing the math can really help. Great comment, I'll be sure to share with everyone in a later post! Thanks for reading and commenting! :D

  3. I agree, I think it all depends on your spending habits. And I think this applies to anything that offers you rewards as incentives, not just credit cards. You should always calculate the costs and benefits and see if this will really be worth it in the long run. And don't fall into the traps. Like, the AMC Movies Rewards membership is $12 a year, which is not that expensive. You get one free movie ticket for every $100 you spend. You should be smart and not just go spend $100 on movies just to get that one free movie ticket. Other things like Amazon Prime. Is it worth it to pay $80 a year for membership? It is if you really do want the benefits and you actually buy stuff from Amazon like at least 20 times. Other things, such as Papa John's Reward points, where you get 1 point for every $1 you spend, and 25 points gives you one free pizza. That's just about buy 2 large pizzas, get one free. Since this is a free membership, don't just go and buy 2 pizzas every time just to get that one free pizza if you really don't need to. Be smart and just let it accumulate naturally, it's free after all.

    It all depends on if the benefits are actually beneficial and if the benefits outweigh the costs. Be smart, and don't fall into the traps.

    1. Great comment, I love seeing all the math people are doing. :D Thanks for reading and commenting! :D

  4. I honestly don't think college students need credit cards. No credit is good credit. It is sooo easy to mess up your credit record. I'm not getting a credit card until I get a career and not a job. I just stay away from credit cards.

    1. You're right that no one NEEDS a credit card. I like your thought process. :) Thanks for reading and commenting! :D