Reader Mailbag: Credit Card Rewards

Reader Mailbag

Guess what happens when we get questions from readers? We answer them! So if you have your own question, click here and shoot it off to us. We’ll do our best to get back to you and give you an answer that isn’t totally incorrect.

Depending on who you ask, credit cards are considered either a good thing or the devil reincarnate. Johnny and me, well, we think they’re a-okay — with a few stipulations. First, pay them off in full each month. Second, milk the heck out of your reward points. Third, do not change your spending habits now that you have a shiny plastic card and the lure of “free” rewards. Johnny and I go through stages of putting all of a certain kind of expense on one credit card, depending on the kinds of rewards we’re gunning for. I just got a airline rewards card, and we got 50,000 points (over two round-trip flights) by spending a certain amount in a three-month period. And we just got a new AmEx card that will give us $300 if we spend $1000 in the first three months. That same card will give us 5% cash back if we put our telecom bills on it, so we’ll be using it for that, too. It’s a take, take, take relationship. We refuse to give anything back to any of those credit card companies.

We recently got a great question from an OFB friend and reader who wonders where to draw the line with accruing reward points:

Hi! Long-time listener, first-time caller…

Anywho, I wanted to bounce something off you. Is it wise to start paying my regular bills on a credit card (then paying back immediately, as I know I have that money budgeted?) to accrue the rewards points? This sort of seems no brainier but idk if I’m not aware of an issue.


And here’s our response:

Thanks for the message! Johnny and I are all for accruing reward points on our credit cards! And paying regular bills on your credit card should’t be a problem if you pay your card off in full every month. That said, there is one caveat. Some bills will charge a credit card fee of 3 to 5 percent. In almost every case, it’s not worth paying a fee just so you can get credit card points. That’s just the kind of trap credit card companies want to get you to believe — that spending more on their cards is worth the rewards. So if your bills don’t have a credit card fee, go for it! Otherwise, we don’t recommend it.

Hope that helps!

So what we’d like to know from you is 1) Whether you use credit cards, 2) What you pay for with said credit cards, and 3) What kind of rewards you accrue. Basically, where do you draw the line with your credit card use?

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  • Reply moneystepper October 9, 2013 at 7:59 am

    Yeah, I use credit cards for rewards. I agree that its a no brainer. Just make sure you pay off the amounts every month and avoid fees. I love my free flights and hotels that I earn through using my CC!!

    • Reply Joanna October 10, 2013 at 1:17 am

      Totally. Paying it off in full each month is key!

  • Reply Alison Jordan October 9, 2013 at 9:37 am

    I use a rewards card for our recurring household expenses then pay off the card in full each month. Except for the water & electricity because they charge a fee for using CC. My rewards card is with the same bank as my mortgage… The cash rewards dollars are automatically applied to our mortgage principal each time $20 accrues. 🙂

    • Reply Joanna October 10, 2013 at 1:18 am

      How cool! I had no idea that was even a possibility. Johnny and I will have to look into that when we own a home.

  • Reply J.Mill October 9, 2013 at 9:58 am

    Good advice and good warning! We use credit cards for nearly everything. Just like you guys, we got some neat offers for using the card a certain dollar amount in the first few months. Our monthly budgets naturally met those spending minimums so it was an easy way to get money back immediately on a new credit card. We have few credit cards and having this new card with a larger credit limit gave us a better credit score and better rewards. We rarely open new cards so this was a smart thing to do in our case.

    • Reply Joanna October 10, 2013 at 1:19 am

      Good point. We recently got a new card with a higher credit limit, and I think it will definitely impact Johnny’s credit score positively. So weird how that works.

  • Reply Kasey @ Debt Perception October 9, 2013 at 10:00 am

    I still have credit card debt so I currently try not to use my cards at all until they’re paid off, then I plan on maximizing my rewards. I’m trying coerce my no-credit hubby to open a credit card to build his credit. Our bank is currently offering an airline rewards card with 60,000 points for spending $3000 in the first 3 months. Hubby’s initial thoughts were to buy a laptop and pay for my hearing aid. Err, I don’t think he’s ready yet. We’ll have an official talk about it this weekend and I’ll try to explain to him that we’d use it for every day purchases of things we’ve budgeted for so we know we can pay it off right away. I hope he gets that. 60,000 points can pay for $600 worth of plane tickets!

    • Reply Joanna October 10, 2013 at 1:29 am

      It sounds like you have a good plan in mind, Kasey. And that’d be awesome to get that airline rewards card! Now to just get your husband on the same page with your thinking! 🙂

  • Reply Chris October 9, 2013 at 10:34 am

    Only recently did I decide to take advantage of my rewards card. It’s only 1% back so it’s nothing special. All I did was start using my credit card vs my debit card. I put everything on it and pay it a month ahead (as soon as my billing closes I pay) which gives me a little leeway. I haven’t branched out into any other reward card systems. I suppose I could as long as I do it with a plan. Having a plan for your credit cards is always rewarding (pun intended).

    That being said, it’s easy to get carried away if you’re not really paying attention. So stay on it!

    • Reply Joanna October 10, 2013 at 1:31 am

      We’ve been really please with some of the airline rewards we’ve been able to get. If you end up looking for another rewards card anytime soon, I’d recommend looking into them!

      And it’s good you have a plan and pay it off quickly. That’s the only way to go!

  • Reply Brian October 9, 2013 at 11:22 am

    We use several credit cards (we churn the). We pay for almost anything we can with credit cards. I used to use a certain ice cream flavored reload card and then paid other bills using that Amex bluebird account, but that is getting harder to do. We usually accrue airline miles and hotel points since we love to travel

    • Reply Joanna October 10, 2013 at 1:33 am

      Johnny’s been thinking about churning, but we’ve yet to actually try it. Our favorite rewards cards have definitely been our airline rewards cards, too!

  • Reply GIna Helton October 9, 2013 at 12:36 pm

    To play the devil’s advocate here: there is the argument that if you use plastic, you spend more. Studies show that if you use cash, you are more aware of your spending and will tend to spend less. If you can still be strict with your spending and follow your budget, while using credit cards for your personal benefit, then more power to you.

    There is another argument that if you are against debt as a principle, you shouldn’t be supporting credit cards companies in any sense. That is another considerations, if your values are strongly against debt and the culture of debt in general.

    Just a few points to throw out there to consider 🙂

    • Reply Joanna October 10, 2013 at 1:47 am

      I’ve heard that argument, Gina. And I do think it’s true if you’re not careful. It’s a good thing to remember for sure!

      I definitely respect the viewpoint you put forth on credit card companies, but I don’t know if I totally see eye-to-eye with you. I agree that their tactics and practices are nefarious. I agree that society’s general acceptance of carrying debt is the greatest threat to our nation’s economic wellbeing.

      But all consumers have a choice. This same argument could be used with alcoholic beverages. Just because some have a propensity to drink too much or choose to disregard moderation and discipline in their drinking shouldn’t mean a worldwide boycott of alcohol companies. They target youth, advertise raucous nights, etc. But at the end of the day, the burden of choosing to drink responsibly falls on the individual.

      Me not using credit cards would actually have the opposite effect. By weeding out their responsible cardholders, all they’d see is profit. So if anything, mooching the rewards off credit card companies is a way of attacking their business model.

      And thanks for playing devil’s advocate! I always like hearing differing view points!

      • Reply Gina Helton October 10, 2013 at 1:44 pm

        I didn’t say that was my opinion on credit cards, just that is one viewpoint argued. At first I did not understand it at all and did not agree with it, but then I considered it. I can see both sides. We still choose not to use credit cards on a regular basis for our own personal reasons. I cannot say that I am against people using them for rewards purposes, as long as they have the control to pay them off monthly. Good discussion here though!

  • Reply Insourcelife October 9, 2013 at 3:41 pm

    We put everything we can on credit cards as long as there are no fees associated with using a card. All cards are paid in full each month. We do it for the points and get anywhere from 1% to 5% back in cash. It’s really all BS since retailers just jack up the prices a bit to compensate for credit card processing fees they are charged by Visa/MC/Amex, but might as well participate unless retailer offers a discount for using cash/debit and it’s more than the cashback.

  • Reply Emily @ evolvingPF October 9, 2013 at 4:23 pm

    There are two exceptions to our rule of putting everything possible on credit cards, and it’s when we don’t want to force the vendors to pay the fees:
    1) local small businesses
    2) missionaries/charities

  • Reply E.M. October 9, 2013 at 4:54 pm

    I use my credit card for cash back/rewards as well. I pay off the balance in full every month. For the most part, I charge my usual expenses on it. I don’t use it to finance any huge purchases unless I can pay it off that month. Recently I was visiting my parents and my mom likes to pay cash, but she had run short. I purchased everything with my card and she paid me back, so it was like getting free points!

  • Reply Rob October 9, 2013 at 5:58 pm

    Hi guys, like many others commenting here, we too use (a few) cash back reward no-fee credit cards, always paying off the monthly balance in full to avoid service charges. In fact, even if we have the cash on hand, we’ll still use the credit cards instead, on just about everything (except house taxes and utilities) on both small and large purchases. As mentioned, the processing cost to vendors from the credit card companies is factored into the cost of these purchases so we might as well use them.

    A few other benefits from using credit cards: (1) online purchasing history, (2) credit cards have their own insurance that can be used at times (eg. car rentals), (3) credit card charges can be voided and money promptly refunded by the credit card company if goods / services are not received as promised, (4) regularly fully paid up monthly credit card balances benefit one’s credit history, and less I forget: my former employer (from whom I recently retired) is a national retail chain and all purchases made to their retail store master card entitles me to a significant employee discount on the total balance, tax included. Not too shabby, eh? 🙂

    • Reply Joanna October 10, 2013 at 2:23 am

      We use them for pretty much everything, too, even if we have cash on hand.

      And you make some great points about other credit card benefits! Sometimes I hate that they give me an online purchasing history because it holds me so accountable! And the insurance is a huge perk, too! Basically, all of your points are great ones. Thanks for the reminders, Rob!

  • Reply Tarynkay October 9, 2013 at 8:23 pm

    @Gina Helton

    I have seen those studies mentioned before and always wonder- could spending more on cards vs with cash be a generational thing? My husband and I have used debit/credit cards our entire adult lives. The statements have always been available online almost instantly, so we have accountability as to where each penny was spent. But when we have cash, we always think of that as “extra” money and there is no automatic record of where it goes, so we would just blow through it quickly.

    We put everything possible on Amex, pay the bill off in full every month, and take advantage of the cash back rewards- they just take whatever amount off our balance at the end of the month. I figure that since we never carry a balance and pay no fees, we are getting free money from them. Since they are not profiting from our business, I don’t mind taking advantage of them.

    • Reply Joanna October 10, 2013 at 2:26 am

      I think the same way you do, Tarynkay! I totally feel more accountable with a credit card because it leaves a paper trail. I’m sure some people don’t feel that way, but our CC statements help keep us in line!

      It sounds like you guys have a great method for your credit card use! Free money is always nice!

  • Reply Karen Nazzy March 18, 2015 at 2:45 pm

    I’ve snow-balled slowly over the last few years until we get to tackle the current student loans, but definitely rely on debit/credit cards for all purchases. Can you tell me when’s the best time to pay the balance off on the credit card to still get your reward points, but avoid the finance charges? I paid a balance on my Citibank card before they sent me an invoice, but when the invoice came, I still had to pay the finance charges. Or, maybe, I just have a crappy card? Any advice/help is appreciated!

    • Reply Joanna March 22, 2015 at 6:41 pm

      You’ll get the reward points no matter what… reward points come automatically as you spend money on the card. You’ll always pay an interest fee if you don’t pay the card in full each month, so just be sure to be making those monthly payments in full. Hope that helps!

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