Yesterday was the end of one of our credit card billing cycles, which made me excited…absurdly excited if you can believe it. You see, it’s one of those rewards credit cards, and at the end of the billing cycle we get to cash in the rewards we earned on that card. Personally, I have had my eye on a $25 gift card from Foot Locker for weeks now.
At 1st glance, credit card reward programs – whether they are airline miles, cash, or merchandise – seem like a bad idea for credit card companies until you consider…1. Credit card companies make gazillions of dollars off of interest charges and late payment penalties. The money they are spending on these customer rewards is peanuts by comparison. 2. Most people don’t even know their cards have a rewards system, and many that do are too lazy or incompetent to figure out how to cash them in. Take my wife’s 89 year old grandmother for example, who we just recently started logging into her account and checking her rewards balance on her behalf. 3. The rewards offer an incentive for those cardholders who do actually know what the deal is to use their card more often…which brings us back to the whole making gazillions of dollars off of interest charges again.
I’m sure there’s other stuff to consider as well, but that’s a good start at least. Now, we happen to pay our credit card bill in full every month, thus avoiding giving the credit card companies any extra money, so we are getting the full benefit of these rewards. But even a nerd like me that gets super-pumped about this stuff has to admit that these companies are playing psychological warfare with me, and they are winning.
You see, if I spend $1,000 using a particular credit card one month, it might only yield $20-25 in rewards (if I’m lucky). Now, when I do get my $25 gift card in the mail to Foot Locker or Panera Bread or Home Depot or whatever, my hype level is off the charts. However, I happen to have another rewards credit card that’s attached to my bank account, and that card gives you an extra incentive to deposit the rewards you earn right into your savings. Because it gives the best benefit overall, that’s what I do. If I spent $1,000 using that card, I would also probably earn in that same $20-25 range in rewards. However, a free $25 to Outback Steakhouse? I feel like a kid on Christmas morning. $25 into my savings account? I mean, I’ll take it because $25 is $25, but Christmas it is not.
And that’s where they get you, because on the 1st card I mentioned I have the option to apply that same $25 to my credit card balance. Have I ever done it? Hell to the no! A free meal or money off a fresh pair of sneakers sounds amazing. Reducing my card payment from $1,000 to $975 that month sounds meh…even though that would probably be the most financially responsible thing to do. If you are getting the gift card for something that you would have to buy whether you had the gift card or not, that’s one thing. But would I go out to eat or buy that new shirt if I didn’t have free money? Probably not, or at least not as often…and yet I’m going to continue to do the admittedly stupid thing, and opt to get a gift card every time. Because meh sucks, but Christmas morning is awesome every single time.
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