I recently read an article on CNN/Money’s website titled “Credit card rewards are a real rip off“. The page starts with a legitimate gripe, “You got burned with frequent flier miles, which were nearly impossible to redeem and hardly worth the hassle, so credit card issuers turned to other kinds of incentives to entice you to charge more.” Now, I’d be hard pressed to argue with that. I typically use the miles to upgrade to first class on longer flights for a more comfortable ride, but rarely have been able to use miles to get the original ticket, too few seats are available per flight, and tend to get booked well in advance.
But CNN goes on to trash other reward programs as well, suggesting that “though rewards do spur consumers to spend more, the study found that confusing rules and restrictions make most reward cards more trouble than they’re worth.” Really? Let me share my card reward experience:
I use Amex Open. It rebates 5% on gas from dollar one. I calculate the rebate at $600+/yr on just that. Same 5% on any office supply store purchases.
A Fidelity Mastercard that gives 2% (they changed to 1.5 for new applicants, but I kept the 2%) into a 529 account. My child is 10 and we will have a full semester of college paid free with the cards rebates. We only charge what we can pay in full each month.
There is responsible credit card use. We prove that. If one will be too tempted and run the card up on purchases they cannot pay in full, they should use cash only. Me, I’ll enjoy the rebates.
Joe
(Well, just when I finished setting up this post, the mail came, and Amex advised me, that due to the high cost of gasoline, they were reducing the gas rebates down to 3% on this card. Still, that’s cash back in my pocket, just no so much.)
I’ve had a credit card to stack miles for over a decade and I’ve used them for about 5 international trips and some 4 domestic trips. The last time was last October, when I redeemed miles for an international trip due to a family emergency to travel 2 days later (for a fee of mere $100 due to the short notice).
Sorry to hear of the emergency, but it’s good to know that you were not also impacted financially. I bet that trip would have cost a cash customer nearly $800-$1000. Thank you again for visiting.
Joe
We use the old 529 Mastercard from Fidelity for all our purchases. We pay off the bill every month. Almost everything goes on that card: gas, groceries, phone bill, cell phone bill, cable bill, and anything else. I even put business expenses on the card and then submit an expense report. Rewards go to our son’s 529 account at Fidelity. We get back the entire $1,500 per year (and so we use other rewards cards as well, mainly a 1.5% cashback Amex). Both my parents and my wife’s parents use the Fidelity 529 rebate cards as well, and they go into our daughter’s 529. Unfortunately, the mastercard had been stopped, so they use the 1.5% Amex cards. But every quarter, we get combined about $800. It’s real money. And everyone pays off the bill each month.
$3200 per year! It would take more than $5000 gross to save this much money. This is more than most people are saving for their retirements, and you’re getting it for free. For all the stories of bad deals, and the Dave Ramseys who will tell you that ‘there’s no responsible use of credit cards”, you seem to be doing very well. Congratulations!