On Rewards Cards

A trap that I’ve fallen into is thinking I can earn when I spend, and to some extent that’s true. When I spend money using a rewards credit card such as the Chase Sapphire Reserve, I get rewarded with points. It’s classical conditioning in its purest sense. These points can be redeemed for travel and cash back. But am I actually earning when I spend?

The answer? It depends. I am earning when I use a rewards card to pay for necessities such as a doctor’s appointment. But what about for unnecessary purchases like another drink at happy hour? I will be rewarded for spending. But is spending the best way to earn money back?

Definitely not. It’s far more effective to save a dollar than to try and earn a dollar in rewards.

An example:

• you get 3 reward points per dollar spent that can be redeemed for 1.5 cent / point
• and that a happy hour drink with tip and tax comes out to $12

If you buy a drink, you’re down $12 but you earn 30 points (or 45 cents in rewards).

If you don’t buy a drink, you’re out the drink but you’re up $12 or 800 points. And how much do I have to spend to earn a dollar in rewards? $22.22.