Comments on: The Illusion of Credit Card Rewards Programs

By: Holly

Holly — Sat, 18 Jul 2009 00:35:11 +0000

I am a late poster as well…I write each cc purchase in my checkbook (I know, still not the same as cash. That way I get to watch my account balance dwindle. The cash back is just a perk.

By: Julie

Julie — Fri, 10 Jul 2009 03:20:29 +0000

I just discovered this website & post and wanted to share my 2cents, albeit late. I believe it is a simple truth that CC users spend more than cash users, on average, if for no other reason than that cash users sometimes refrain from buying simply b/c they don’t happen to have enough cash on them when they want to buy something. Of course there are exceptions, this is a general statement, so take it for what it is. For us CC users, it’d be an interesting experiment for us to leave our cards at home for a month and compare our total spending in that month vs. other months.

But while I DO think that I’m a bigger spender with a CC than with cash only, I don’t think my piddly 1-3% rewards has made me an even bigger one. Having said that, I’m glad that I can use my rewards card to pay for upcoming big expenses, like tuition. I’d have to make these expenditures no matter what and the $1000+ cash back I’ll get will not be insignificant in my budget.

By: Matilda

Matilda — Sat, 16 May 2009 14:37:33 +0000

I’m flummoxed! You spend more money just because you have a credit card???? That’s your problem. I have a “friend” who has had all her credit cards taken away/canceled, and now she’s overdrawing with the debit card, and she’s bouncing checks. It’s her problem, not the credit card’s problem. A tool is a tool is a tool. All these “averages” quotes are just that: averages. That means half the people are, on a descending scale, are actually spending less with a card, while half are on the ascending scale and spending more. So sure, my “friend” shouldn’t ever have anything but cash, and when it’s gone, she should eat stale bread and drink water because nothing else will get it through her head that she has a finite amount of money. I, however, am not that person. If anything, like Ms Ferret, I’m deterred by the thought of seeing my purchases there in black and white on the credit card bill. When I have cash, I think that no one (i.e. my husband) will ever know what I’m spending. The point is, “know thyself.” If you can’t handle credit cards, then don’t. If you can handle them, why not get some cash back, some miles or nights, or whatever? Stop being so intransigent. We are all individuals and, if we know ourselves, we can make individual choices that are right for us.

By: SJ

SJ — Tue, 12 May 2009 23:50:46 +0000

The fundamental question is whether the fact you are spending credit will trick you into purchasing things that you wouldn’t otherwise.

For people who are anal about pennies then I’m pretty sure they aren’t. For someone less anal abt budgeting and future planning; tougher call.

So the questions isn’t if credit makes you spend more but if 1. manner of payment matters 2. how good you are at stickin to a budget.

If paying with cash makes you underspend to the point you are miserable then uhh not good lol. If paying for cash lets you treat cash as 0 value… also bad.

Judge yourself and viola~~~

By: Funny about Money

Funny about Money — Tue, 12 May 2009 16:33:44 +0000

I’m with TMN on this issue. However, I may be weirder than the average kitten about budgeting. For credit card spending (which, since I do not carry money around, includes everything except regularly recurring bills such as utilities), I have a strict budget and do not overreach it. For unexpected expenses that exceed budget, I use savings set aside specifically for the purpose.

In those circumstances, it would be silly not to use a rewards card, since you’re getting something for nothing.

But sometimes that “something” isn’t worth using the card instead of a different method. For example, if you buy a kitchen appliance from a store that offers a 12-month-no-interest deal and you have the cash to pay for the thing, it may be more to your advantage to put the money in a high-return savings account and let it accrue interest for a year than to charge it on your card for the sake of the 1 percent kickback.

Personally, I find I spend less with a credit card than with cash. Cash flows through my fingers like water, and at the end of the day I have no idea where the money went. Credit card receipts and statements allow me to keep close track of what I spend and where, and that is a big first step in keeping a grip on expenditures.

By: TStrump

TStrump — Sat, 09 May 2009 23:06:53 +0000

I have a cash back credit card and while I do like using it and getting my rebate back each year, it is true that I would probably spend less without it.
It’s just too easy to spend when I carry it around.
At the end of the day, the rebate I receive is probably negated by the extra spending I do. I think credit card companies know and love this fact.

By: kitty

kitty — Thu, 07 May 2009 16:19:52 +0000

@Master Po: “Kitty – Gotta disagree about your point 1. I too have noticed that when I’m charging it I will tend to say WTF and buy a little more than if I had to pay cash on the spot.”

Plural of anecdotes isn’t data. You noticed you are charging more, but I noticed that I am careless with cash while at the same time I am always mindful about the final bill with CC. Especially on vacation – I spend more in cash-only countries than credit card countries even when the former countries are cheaper. Your personal experience doesn’t show that ‘everyone spends more” just as my experience doesn’t show “everyone who pays in full doesn’t spend more”. What they DO show is “maybe some of those who pay in full do spend more” and “not everyone spends more”.

Counter-examples are valid if you are trying to disprove a supposition that “this works in every case”. Then a single case where it doesn’t work is enough. I.e. if I had claimed that nobody from those of us who pay in full is spending more with cards your personal example would be a good counter-example. But this was not what my point 1. said. It simply said that you cannot tell anything about individual behavior from the data about averages and that those who carry balances can easily account for these averages. It doesn’t say if all people who pay balances in full overspend or not, simply that data doesn’t prove that everyone spends more only that the total is higher. I.e. “it is true on the average” is not the same as “it is true in all cases”. For example, “on the average people get fat when they get older”,”my mother got fat when she got older”. You cannot conclude from these two statements that “everyone gets fat when he or she gets older”. There are people who don’t.

I noticed that most Americans don’t learn the concept of proof in school. I noticed in in college when I was a TA – I was really surprised in how many exams of CS majors I had to simply cross out the solution that required a proof and write ‘this is not a proof” when people would show how what they were trying to prove in a couple of special cases.

As to personal case – I think the fact that I do consistently have over half of my net income left at the end of the month – and this is after max 401K contribution – shows that I don’t need to worry about overspending. I also see my parents who have used credit cards their whole life yet clip coupons, and rarely make as much as one non-essential purchase. But… our personal experiences don’t prove anything about everyone. They do show that “not everyone overspends” — see the difference. Providing a counter-example is a valid form of disproving a supposition “this is true in all cases”. But it is not a proof of “it is not true in all cases”….