Are Your Credit Card Rewards Really Saving You Money?

I freaking love talking about credit card rewards. My roommate got his first rewards card recently, and I was so genuinely excited to talk about it with him, I think I scared him a little bit. But it’s true; I think credit cards, when used responsibly (and not giving in to the “shop til you drop” mentality they sometimes try to market to you), are one of the most exciting tools of personal finance. Sure, they’re not going to help you build wealth the way long-term investing might, but that kind of delayed gratification is not as imminently satisfying as seeing enough points add up in your account to cover the cost of a plane ticket.

I personally use credit card points to buy everyday things, which I’ve written about before. It’s not the most exciting way to use them (or even the most cost-effective way to monetize them, probably), but it’s a great trick for saving money and helping me curb my spending elsewhere. It’s convenient, and it allows me to not have to budget for shampoo and moisturizer — and also not give myself the feeling that I have extra savings left over, because I never budgeted for these things in the first place. Plus, I’m lazy, and it’s very convenient.

The point is, I can’t imagine not taking advantage of my credit card points. I think the “free money” mindset some people get into with them is dangerous, yes — but it’s also totally avoidable. Focusing on paying off your credit card balance in full every month is most important. But after that, not taking advantage of points that are given to you just because you spend money (AKA are a person) is, in my opinion, a bad money move.

That’s why I was shocked when I came across this article on Business Insider. Apparently, not all cardholders are taking advantage of their points. Pulling from this survey from Bankrate, the article found the following:

While 38% of people regularly redeem for freebies like cash back and airline tickets, the report found that 31% of cardholders have never redeemed rewards at all — not once.

That means that almost a full third of Americans with rewards cards aren’t using the cards to their advantage. And don’t believe for a second that the credit card companies themselves aren’t benefiting:

Credit card companies count on this. It’s part of the reason they can offer such lush sign-up bonuses and still turn a profit.

Elite travel cards like the Chase Sapphire Reserve or the American Express Platinum offer some of the industry’s most generous sign-up bonuses, and their profitability projections depend on cardholders not taking full advantage of the perks. Recent research by UBS suggests these companies expect about 20% of rewards to go unused.

The survey also found that over 32 million cardholders haven’t changed their primary account in over a decade. The first credit card I ever got is now three years old; I simply haven’t had enough time to allow it to gather dust, or even for the thrill of having one in the first place to wear off, frankly. Maybe in a decade, I’ll have forgotten about my preoccupation with credit card points. But based on how much I feel like I benefit from points, I can’t imagine not taking advantage of them now.

Out of curiosity, I just logged into my credit card account to check out my points usage from last year. My annual fee for my credit card is $95; in order to make my card “worth it,” for reasons beyond the fact that I need some sort of credit in my name to help me keep increasing my credit score, I’d need to spend at least that much in points, and preferably more. Looking at my points activity for 2016, I can see that I used 10,000 points towards an Amtrak gift card, and then about 7,000 points towards home and personal care supplies on Amazon.

That all comes out to about $160 worth of things I would have needed to buy anyway. After accounting for my annual fee, that means I got about $65 just from being a cardholder and user. And these were all points accrued last year, when I wasn’t even using my card regularly. Now, I swipe much more often, because I’m more in control of my budget, and confident in my ability to pay the card off in full each month.

But just because I’ve figured out how to make rewards work for me, at least for now, it’s important to note that there is still some danger in depending on credit card rewards. Because they don’t gain value over time, the most cost-effective way to take advantage of them is to “cash them in regularly,” according to Bankrate.com credit card analyst Robin Saks Frankel. Not a very sexy option, of course. Unless you think being on top of every corner of your finances is sexy (*raises hand*). Ultimately, reading this article and more of the findings from the Bankrate survey was eye-opening for me, as it pointed out that not every single person has the same priorities as I do when it comes to credit card usage and rewards. But I still think it’s a responsible choice to take advantage of points when you receive them, even if it is just to get cash back or buy some cleaning essentials.