Ask the grumpies: How to best use credit card rewards?

CPP asks:

What is best to do with accumulated credit card reward points? The fact that AmEx keeps nudging me to use them to pay my bill makes me think that is the worst thing I could do with them.

That’s probably a better question for Holly at Club Thrifty.

I’m seriously lame with my CC points and don’t try to maximize them in any way.  I just take the cash back option, and not even the “correct” cash back option since I’d get more cash back if I switched to a card for “high spenders” rather than the citicard I have that limits to $300 cash back/year.  I like our citicards because they don’t have the ridiculous points system, they just give 1% cash back.  It’s easy with the lowest mental load.  Because really, my time is worth more doing real work than it is chasing the optimal credit rewards (which always eventually disapparate and then you have to chase the newest optimal system).

I have heard that the best use of points is usually for travel, but that’s going to depend a lot on your card’s specific situation.  You’ll need to sit down and see how much of a return they give you for points for each of the different options they provide you.  Cash back should be your baseline and then you should see if there’s an amount of travel that you prefer to same number of points for cash back, or whatever your other options are (do you get a bonus for applying the cash back to your bill rather than to them cutting a check?).

So, that’s really a non answer from us.  However, we know that some our readers must know better than we do.

What should CPP do with his AmEx CC rewards?

24 Responses to “Ask the grumpies: How to best use credit card rewards?”

  1. zenmoo Says:

    I tend to cash my points in for gift cards at Christmas. We can cover most if not all of our Christmas shopping with vouchers. This helps both manage how much we spend on presents by giving a ‘limit’ and even out cash flow (we have a lot of big annual bills due in January)

  2. Comradde PhysioProffe Says:

    Your post inspired me to get offe my lazy f*cken asse and do some investigating! Here is what I have discovered so far:

    (1) An AmEx gift card is 0.5 cents per point.

    (2) Store-specific gift cards are 1.0 cents per point.

    (3) They have specials on some store-specific gift cards–such as Saks–which are 1.25 cents per point.

    (4) If I use points to pay offe charges on my card, it is 0.6 cents per point.

    (5) They have an Amazon program (we buy a shittetonne of shitte from Amazon), but the only way to really know what the rate is would be to sign up for the program. They do have a screen shotte showing how the program works, and the example there is 0.7 cents per point.

    So it looks like if you shop a lot at a certain store, that is the best thing to do.

    • nicoleandmaggie Says:

      Glad we could be of use. My citi-card is 1 cent back per $100/spent (up to $300, with quarterly 5% back specials on specific types of purchases), and I think Capital One has that option as well. I don’t know how your card accrues points, but if you really want to optimize, you might be able to find a more generous rewards card.

    • becca Says:

      I linked my citi and amazon.com account to see how much in gift card my points would get and it came out such that cashback on the card was worth significantly more than amazon card. However, it was absurdly easy to link them, since I’d already used that citi card to pay for an amazon order before it prompted me to do it. I can’t imagine AmEx would make it hard to link.

      My rewards program sorts all their options into categories, including a category of gift cards that are “on sale”- ones that equate to more money for your points than you can get with straight cashback- that is the easiest way to figure out to to maximize your points. However, I don’t shop at Kohls (NB: for people paying attention, it seems like in order for a gift card to be “on sale” with my rewards program, the company’s stock has to have tanked due to poor sales figures. I’m sure someone cleverer than I has noticed this already, but I thought it interesting). There may very well be an occasional good deal in the skymall like ridiculously large assortment of stuff you can buy directly with points, but that is WAY high on my cognitive load and many of the items are the platonic ideal of skymall type unnecessary purchases.

      I can also get a bonus (more cash for the same amount of points) if I use my citi for a student loan payment- they cut a check to Sallie Mae for me. That’s how I usually use my points. Very boring, a little time consuming, but efficient.

      My citi started as the drivers rewards card, which I really liked, but now it’s some genericky 1% (with occasional useless bonuses). I do use the chase freedom, because when it’s gas 5% season (as it is now), I get a good boost there. It makes my commute less painful psychologically, far beyond it’s monetary value. I know this is irrational, but since it works to keeping me happier I count it as a win.

      • Norwegian Forest Cat Says:

        Whoa, you can get a rewards “bonus” to pay off student loans with Citi/SM??? I might have to keep that in mind if that sweet sweet NIH student loan repayment application I submit this year doesn’t make it past the cut…I’m not thrilled to be a customer of my current bank and wouldn’t mind switching to a marginally less soulless bank (although that’s hard to do, it seems).

  3. Astra Says:

    I spend mine on Amazon. Books are a staple item, right?

  4. See Debt Run (@seedebtrun) Says:

    I have used credit card points in the past to get discounted/free travel and it is absolutely worth it..

    With that said.. Credit cards can be a bit of kryptonite to my budget, and at the current point, I am avoiding them like the plague.

  5. Sapience Says:

    I usually do cash back, even though I usually use the cash back to pay for plane tickets to fly back to see my parents at Christmas. I’ve tried using the points for travel directly, but it seems to only be the better deal if I’m traveling internationally. The system built in to my rewards program usually tells me that the cheapest domestic flight is about 25-50% more expensive than what I can find elsewhere online. But it does somehow manage to find me international flights at the prices I find elsewhere online, and the points conversion for travel seems to be the equivalent of about a 1.5-2% instead of the 1% for getting cash back. It’s how I managed to afford to go to Europe on a research trip a few years ago when I was still a grad student.

  6. Bardiac Says:

    I get money applied to my mortgage. Not much, but it wouldn’t be much in any case.

    However, I think it’s ethically important to remember that the points money comes from merchants, and using credit cards to make small purchases from small merchants costs them money. For me, it’s worth thinking about how you feel about your local merchants.

    • Debbie M Says:

      I’m seriously considering switching to cash just for this very reason next year when I start getting my pension and will thus be richer than I am now.

      Interestingly, though, my local food coop published an FAQ where someone asked how they’d rather get paid. They said cash and checks require more labor (for counting the money or adding up the checks) and credit cards cost them more directly, so we should really just use whatever we prefer. I find that answer highly suspect, but I’m not sure. On the other hand, my auto mechanic will give a discount for cash, so I know he prefers that. So I may ask around.

      • nicoleandmaggie Says:

        The amount of labor per transaction is fixed, so it makes sense that little purchases might prefer the credit card in terms of labor saving, but the transaction cost on a big purchase like for the mechanic is smaller than the 5% fee. It’s also going to depend on what the fee structure is for the credit card companies– whether or not there’s a set fee no matter the size of the purchase or if it’s a straight percent. Good idea to ask around!

      • Debbie M Says:

        Interesting. So I’ll research the fee structure for my cards as well.

  7. chacha1 Says:

    My husband has AmEx cards that are linked, uses them for his daily business expenses etc, and thus accumulates a lot of points. We hoard them and then use them to pay for airfare on the rare occasions we travel by air.

  8. First Gen American Says:

    When I did my research on this a few years ago, the capital one cash back card was the best. Citi had annual cash back limits. Not sure it still is the best but I have been happy.

    I get credit on my balance…cuz its easy to do. Easy does have value.

    • nicoleandmaggie Says:

      Easy has LOTS of value, yes!
      #2 has one card that links to amazon and one card that gives me frequent flier miles. I just booked a trip to a conference this fall on miles (some of which came from the credit card and some of which came from flying).

  9. Debbie M Says:

    I mostly use the cash back. I don’t travel much and the travel rules look annoying. Sometimes there’s a gift card discount, but never for places I absolutely know I will be going (local grocery store, Target, local community college, local property tax office, etc.).

    I have the Chase Freedom card–I hate the way I keep forgetting what the 5% categories are. Also because I have a Chase checking account I get an additional 0.1% + 10 cents per purchase, though I just got notification that this will be ending in a little over a year. At that time I will close my checking account and may also get rid of the card.

    I also have Capitol One’s Quicksilver. This is my favorite. It pays 1.5% on everything, and you don’t have to wait until you have $25 bucks in rewards to get the money–you can get it every month. I just use it as a card credit because money is money.

    And I just applied for an Amex card, mostly for the $250(!) I’ll get if I can find $1000 to charge on it over the first three months, which I’m pretty sure I can, though I haven’t had an American Express card since I was a student decades ago, so I don’t know how widely accepted it is. Plus it’s like the Freedom used to be with extra cash-back in categories I’m always using.

    Of course the important thing is not to maximize your points by maximizing your spending.

    • Ana Says:

      AmEx is pretty universally accepted these days. there are a few restaurants, ethnic stores that don’t, so I have a mastercard (USAirways, worth it for the 2 $99 companion tickets/year—which this is the last year they are doing, boo!). We get cashback and use it towards our bill. Yes, easy has a LOT of value. especially if there are quirks and time limits and things you need to keep track of.

  10. J Liedl Says:

    My bank loves my money and they offered me a higher tier of rewards on my no-fee credit card so I shifted all of my regular monthly spending over to that. Now I can get a gift certificate most every month: I either get them to a group of restaurants where we love to dine, the pharmacy chain where Eldest stocks up while she’s away at university or Starbucks so she can feed her habit without out-of-pocket expenses. I checked and it’s definitely a better bang for my buck than the “pay towards your CC bill” option so I’m sticking with the gift cards.

  11. Astra Says:

    The reason we got AmEx cards was because my husband and I both travel a lot and our credit card company kept putting holds on the cards until we called to verify that it really was us in, say, NYC. It was infuriating. We called and asked them to stop and they said for another $5/mth they would text us when they did. Great, that will work just great when I’m in Germany. So we switched to AmEx which is much more customer service oriented.

  12. J.B. Says:

    Amazon sometimes lets you buy things with points – I got things on kiddo’s teacher’s wish list. Shipped to her house at no cost to me.


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