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June 23, 2015

The Problem With Points

“But what about the points?” Like Rachel Cruze, I get this question every single time I speak on the topic of money. The question usually goes like this . . . “I have a credit card, but I just use it...

“But what about the points?”

Like Rachel Cruze, I get this question every single time I speak on the topic of money.

The question usually goes like this . . .

“I have a credit card, but I just use it for the points. I pay my card off every month, so I get the benefit of the points but never pay any interest. Isn’t that okay?”

Well first of all, I am not like you. When I had credit cards, I was one of the over 100 million Americans that do not pay their card off every month. I’ve seen what kind of damage I can do with a credit card, so I cannot have one.

But even if you think you are the exception to the rule because you really do pay yours off every month, I hate to tell you, but points are still a problem.

Here’s why:

  1. The credit card companies invented the point game. Let’s be honest. The credit card companies are not running a charity here, people. They are not trying to help you out of the goodness of their sweet little hearts. They spend billions of dollars every year advertising their card and their point system to you because they are making billions and billions and billions off of you. They didn’t invent a game that they are going to lose. They invented it because they win. They know that the more they tempt you with points, the more you will spend, and the more they win.
  1. You spend more when you swipe a card. Research shows that when you swipe a card instead of paying cash, you spend almost twice as much. When McDonald’s installed their debit and credit card machines years ago, their average sale went from around $4 to almost $8—just because people could swipe a card. So even if you pay your card off every month “just for the points,” you still spend more because you don’t feel the transaction like you do when you have to hand over cold, hard cash. It’s also the reason that now you can just swipe your phone to pay for things. The more that merchants can remove you from feeling the transaction of spending your hard-earned money, the more you will spend.
  1. Points make you focus on the wrong thing. When you have a budget and pay cash, your focus is on staying below your limits. When you use a credit card for points, your focus is on earning more points. Think of it this way: It’s the difference between playing basketball or golf. When you play golf, the goal of the game is to get as low of a score as possible. That’s how you win. When you play basketball, your goal is to get as high of a score as possible. That’s how you win. The credit card companies with all of their point incentives are pushing you to manage your money like a game of basketball—racking up points and keeping your eyes on the next reward level to “win.” But if you want to win the money game, you’ve got to play golf. Your focus has to be to spend less in order to win.

When we use a card “just for the points,” we start playing for points. Whether we realize it or not, we become more focused on racking up points to get the next “reward” (and therefore spending more) than we are sticking to our budget. It’s a tricky game that takes our eyes off of the amount we’re spending and onto the amount of points we’re gaining.

And let’s get real. You aren’t going to build wealth in your lifetime by some points and flier miles. There’s not a millionaire in the world that got there from points.

So ditch the card and start paying cash. It may be hard at first. Sure, you’ll have fewer points in your account. But I can promise you that you’ll have something better: a whole lot more money.

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Leave a Comment

  • Couldn’t agree more! Are there people that can get all the benefits of credit cards without any downside? Sure. But I’m not in that handful of people (out of millions). I’m not the LeBron James of consumerism.

    Can you imagine the self-esteem needed to think that you are? 🙂

  • Ren says:

    When my kids were in college, we put their tuition, etc. on the AirTran (now SouthWest) credit card. $8000 = one one-way trip to and from their college. During the 8 years of tuition payments, I hardly think we ever paid for plane fare. There were no interest charges because we paid the bill in full every month. It worked for us, and I would do it again. Saved us LOTS of money.

    • Brilliant idea, Ren, which led me to a thought: What if you use credit cards for transactions you aren’t going to “feel” anyway? Like utilities bills, booking planes and hotels online, and other similar transactions. If you’re a “Cash is King” person, use it for groceries and other in-person transactions, but then use credit for everything else. Best of both worlds? Possibly.


  • Deborah says:

    While I agree with you for the vast majority of people, I do this myself and have been very successful at it. I charge pretty much everything. I operate on a budget and I deduct every charge from my checkbook, so there is plenty of money to pay the bill. When I have enough points, I get a large cash card, which I promptly spend (the entire amount) towards my normal grocery bill. The amount of the card, in turn goes directly into my savings account. The credit card is more secure than my debit card, I can easily track my charges and my liability is greatly reduced. It’s a win-win for me.

  • Jen says:

    Yes!!! Just yes! I always have a hard time explaining this one to friends who love their CC for the points. Thanks for putting it into words 🙂