One of the trends in the personal finance community is extreme frugality. Included with that trend of extreme frugality is a suggestion of not using cash money to pay for gifts for other people, but to use gift cards gotten as gifts, credit card rewards, and so on.
From a strict economics perspective, this seems ridiculous.* Money is fungible. Keeping a credit card that gives you 1% rewards in gift-cards that “count” as not spending money on your PF blog makes way less sense than switching to a card that gives you 1.5% back directly to your bank account or credit card bill.
However, from a behavioral perspective, this type of budgeting can make a certain amount of sense. Some people really do have problems with spending, and they may have problems with spending more on other people than they do on themselves. For some, a little bit of spending can open the floodgates– if they’ve already dipped into the main account to give a gift, what’s the problem with giving a little more?
For these folks, having this forced budget with money that is outside of the regular income/outgo is an easy way to limit spending. Gift cards and cash-back rewards seem like extra money and can be put into a specific mental account that can help people control their spending. Folks can drain the separate account without feeling like they’ve dipped into the main account, limiting additional desires to spend out of it.
It still doesn’t make sense for cards gotten from Swagbucks to “count” as not spending but money from a part-time job doesn’t count. Being paid in cash vs. something less useful doesn’t have to be the dividing line for your mental accounts.
The problem occurs when you decide on purpose that you want the less useful form of compensation (or less remunerative form of side-work) because you’ll be able to spend that without guilt, or worse, you’ll have blog-cred for using it that you wouldn’t have if you got the cash back and set a separate gift budget.
And bloggers who brag about not spending any money on trips or vacations or shopping because they used “credit card rewards money” are being disingenuous. Money is money. That money could have just gone back into their account to pay off debt or save for a down payment or early retirement or whatever it is that their blog is about. They chose to spend it, and there’s nothing wrong with that, but it still could have been used as, you know, money.
*Exception being one in which you would not use the card anyway. For example, you’re in the situation where you have a $25 Starbucks gift card and you don’t drink coffee, but that’s the favorite coffee-place for someone you owe a gift worth at least $25. From an economics perspective, it’s totally rational to count that $25 card as free money to you, assuming that reselling to get the cash value of the card is too much hassle.