According to a recent report from Bankrate.com, about one in three rewards credit cards holders did not cash in any rewards points in 2020.
That’s not surprising, given how many people save their points for air travel. Not much of that last year; only 11 percent of the 2,449 cardholders surveyed cashed in for flights.
On the other hand, 30 percent of those surveyed redeemed points big-time, to the tune of $300 or more worth of gift cards or actual spending cash.
When times are good, rewards points are a savvy consumer’s way of getting the most bang for the buck. And when times are not so good? That $300 cash-in can be a fine budget-booster.
“You could use it to defray big expenses or for small, everyday items to make your life better,” says Ted Rossman, a credit card analyst at Bankrate.com.
To paraphrase the credit card commercial, “What’s in your (virtual) wallet?” That is, what kinds of rewards points are languishing, rather than being given something to do?
According to the report, 59 percent of U.S. residents have at least one rewards credit card. I’m in that group, except that all of my plastic is rewards plastic. This just makes sense to me: If I’m going to spend the money, why not get points for it?
The downside of rewards points
Let me qualify that statement a bit. No one should ever spend money just to earn credit card rewards points. Please don’t make me explain why.
Unless there’s no way around it (e.g., “Outta insulin, no cash in hand”), no one should use credit cards for stuff they can’t afford. I shouldn’t have to explain that, either.
And if you don’t trust yourself not to go hog-wild with a line of credit? Well, maybe you shouldn’t have a credit card. Personal finance writer Mary Hunt once told me that available credit tends to create “emergencies.” In other words, if your only tool is plastic then all your problems start to look chargeable.*
That’s why some people stick to cash and/or debit. However, a thief who gets your debit card can drain your account. Even if all they do is go on a shopping spree, that money is gone until the bank or credit union investigates. In the meantime, how would you pay your bills?
Cash or debit don’t help you build a credit score. They also don’t provide the protections and advantages that credit cards can.
The upside of rewards points
What kind of protections and advantages? Stuff such as extended warranties, free FICO score access, the ability to “lock” a card instantly if it goes missing, dark Web monitoring, purchase protection and virtual card numbers for online shopping.
Thus the responsible use of credit doesn’t just help you build a credit score. It can add a layer of protection, offer perks and, if you choose the right card, earn you rewards points.
(You can earn rewards points in other ways, too; more on that in a minute.)
If you can resist overspending, then sign up for at least one card** and lock it away whenever it’s not in use. Make this a straightforward, no-fee rewards credit card*** and pay the balance in full every month. About two-thirds of consumers (66 percent) zero out their rewards card balances every month, according to Rossman.
“As long as you’re paying in full and not having any interest charges, you’re making money,” Rossman says. “Gas and groceries alone could save you hundreds of dollars a year.”
(Pro tip: Making a payment every week works, too, if you’re afraid you’ll overdo things.)
Other rewards points sources
I pay for most birthday and holiday gifts with rewards points from three rewards credit cards and from a handful of other sources:
Swagbucks: Points for Internet searches, watching short videos, completing offers (including, maybe, buying stuff you were going to buy anyway), playing games and being part of “team challenges.”
Shopkick. This app is really fun. You scan UPCs of certain products at supermarkets, drugstores, warehouse clubs, makeup shops, Hallmark stores and other retailers. Here’s the beauty part: You don’t have to buy them; you just take their pictures, although you get additional points if you do buy. (If you download the app, I hope you’ll consider using my referral code: WIN358965.)
MyPoints: Click on the e-mails, take a survey, watch some videos, do a little shopping or even pledge to help various causes (such as making a donation to the Red Cross). As a woman of a certain age, I’ve found the surveys are easier to qualify for than some of the other rewards programs.
Inbox Dollars. Very similar to Swagbucks and MyPoints.
Fetch Rewards. Scan register receipts and earn rewards points. Easy enough. I like this one a lot. (If you join and want to use my referral code, it’s E6CK1.)
Ibotta. Another scan-the-receipt app, which gives you money to buy specific items. Sometimes it gives only a dime and other times you’ll get the full purchase price. Add in coupons and/or any store special deals and you’ll earn money. Click on the link to download the app and, if you’re so inclined, use the referral code gtotprb when prompted.
Note: Some of these offer PayPal as an option, so it’s not only gift cards you can earn. And if a program doesn’t have PayPal? Use the cards for gifts, to buy stuff you need (e.g., socks and underwear), or put it out among relatives, friends and co-workers that you have a gift card to sell.
The bottom line
Again, in an ideal world no one should buy things they can’t afford. But you can’t exactly ignore the need for that insulin. When your E-ZPass is outta ammo it needs refilling now, so you can get to work. Your babysitter needs weekly payment, even if you’re paid twice a month.
Work those rewards points, whether they’re from rewards credit cards or other sources. The budget you save may be your own.
Readers: Do you have one or more sources of rewards points? How do you use them: to meet financial goals, to buy gifts, to enjoy a few treats (or basics) of your own?
*I recall with great fondness Hunt’s assessment of that notion: “If you can eat it, drink it, wear it, watch it or listen to it, it’s probably not an emergency.”
**Personally, I think you need two credit cards. At least.
***If you’re hung up on which cards to get, there’s a “Need a credit card?” widget on this very website. Any plastic obtained through that widget mean a finder’s fee for me – a fee that helps keep the blog lights on.
For those who don’t mind sharing a little personal information, you can join loyalty programs – pharmacy, hotel, airline, pet store, etc. and accrue loyalty points for your purchases. Pay for those purchases with your rewards card and earn rewards points. Make those purchases via a rebate/coupon portal and add rebate/discount points. It’s a triple-dip in the points pool. Then periodically make it a point (pun intended) to redeem all those points!
I’ve spent, gifted and donated* rewards earnings.
*I love the option to donate points directly to worthy charities.
I like the triple-dipping myself — and if you can use coupons and/or store deals, you can either get things for free or even earn money on them (in addition to those rewards points).
Some of the items aren’t things I can use, but I either put them in someone’s gift bag/holiday stocking, or donate them. I’ve sent some things along to the food bank that way.
Thanks for reading, and for sharing your tips.
We have two rewards cards, one that gives cash/credit and one that can be redeemed for travel points or gift cards. We usually redeem for gift cards to give at Christmas as an extra gift for the kids, who are now grown. This year they ended up being for restaurants, a grocery store, and Disney. In the past, our kids got gift cards for a general department store and we told them it was in place of underwear or socks😊.
Hey, it’s not Christmas unless someone gives you socks or underwear — or the mains by which to obtain them.
I use Ibotta and Fetch, and my “travel cash” back credit card changed their rules during the pandemic so you could redeem for other purchases besides travel – so i have been taking full advantage of that!
I have also been scoring some very good deals via CVS Carepass program — combine sales with CVS Q’s and Manufacturing Q’s and have gotten some very cheap shampoo and other needed items! Shipped to my door for free with Carepass!
I’m a millionaire! (OK, just in points). I have lucre in Chase, Hilton, Hyatt, Marriott, Delta and Alaska Air. (Ooops forgot Southwest).
I used points to fly first class to Hawaii and spend a week. The only thing I paid for was a rental car.
I think I am the only frugal person who like home improvement. We charged (and promptly paid back) a $13,000 foundation repair. We have lived here 30 years and possibility have another 30 to go. The house is paid for, but she is cracking like I am. Next up is the AC unit. Did I mention I get hot flashes?
I pick which one of my cards has the best payback. My daughter’s college allowed us to use credit cards without a premium.
I am making plans for when the pandemic is over. I will fly to Seattle and Vancouver. Next is the Keys.
Someone who likes home improvement should consider a Lowe’s card, which gives a 5% discount.
Another benefit of your weekly payment pro tip is a higher credit score, since that will keep your balances lower than allowing balances to build for a month before paying.
Here is a funny: last time we bought a new car – I know I know – the car salesman came back and asked how my hubs and I got such a high credit score. I answered because we pay our bill on time. Forgot to add we live below our means.
Due to Covid I cancelled my Mileage plus card as it charges an annual fee and hubs and I don’t see ourselves traveling soon. So we use one card to pile on the purchases i.e. groceries and were able to get our daughter two high dollar gift cards for her birthday.
I use Fetch and just cashed out for a $50 Visa gift card. I used it to buy something (?) as I realized it would be a looong time before we go out to eat again and we didn’t do much before Covid.
I wish I could do the Walgreens and CVS deals that the coupon queens on Youtube get. I’m not vaccinated so I’m not going anywhere.
No, the big expenditures could not have been put on a Lowes card. Most of the costs were labor. BTW. I remembered when I saw Ali’s post, I used my charge card when I bought my car also. They only let me put $5,000 but that was a free night at a nice hotel. I negotiated FIRST, then pulled out the card.
I use my rewards points at Christmas; sure helps!
As do I. Sometimes for birthday gifts, too. And I’ll cash some in soon to buy any gardening stuff we might need.
Here is our strategy:
Savor One Rewards Card: 3% back on dining, 2% back on grocery stores, 1% everywhere else. This is our daily spend card since we eat out a lot.
Chase Ink Business Bold: 5% back on cell phone, internet, and cable bills. You can get cash back, but we use the points for Southwest flights when we go on vacation.
Amazon Rewards Visa: 5% back on all Amazon purchases.
Target Red: 5% back on all Amazon purchases.
Chase Freedom Plus: 1.5% back on all purchase (don’t use this one much).
Using this strategy, we generate about $1,500 a year in cash back for normal spend!
If you have a Fidelity account you can get a Fidelity Visa card. 2% deposited into your Fidelity account for anything you buy. I use my Sam’s card for travel and eating out (3%), gas (5%) and in Sam’s club stores (3%).