If you find yourself spending more on average and being constantly surprised at how huge your bills are compared to before you had a credit card, then you’ve lost at the game.
No matter what the points or rewards are, spending less is worth more.
I’ve been constantly surprised at how huge my bills are, and it’s because I’ve fallen into the trap of spending in the name of rewards/points.
The key here is to spend the same as before and minimize costs as much as possible, which is what I’ve learned.
Sorrell said:
Yeah, that’s why they give rewards. You have to be strong-willed enough to not fall into that trap. If you can’t, then credit cards aren’t for you.
I used to buy catfish nuggets from the grocery store. It’s $4/lb.
AMEX Offers enticed me to buy Wild Alaskan wild-caught halibut. It’s $145 for 6lb, and then $30 statement credit.
There’s a reason banks make so much money from credit cards… We’re all living in a casino, and the house always wins.
Many folks in this sub are the rare gamblers who can beat the house, but the majority are funding their rewards through overspending, paying interest, etc.
This is part of why cashback is king, in my opinion. Points are a lot more nebulous, and many points cards lead you into paying for things you otherwise wouldn’t.
Pace said:
This is part of why cashback is king, in my opinion. Points are a lot more nebulous, and many points cards lead you into paying for things you otherwise wouldn’t.
This. I actually found myself spending noticeably less month-on-month after I switched to a cashback setup from a completely points-based setup.
Absolutely. This is why it’s always a good idea to state that one should use credit cards for things they would pay for in cash or normally use a debit card for. If your overall spend changes just because you use credit cards, you aren’t using them wisely.
@Zaren
I completely agree, but humans are not logical beings at their core and often can’t fully execute this logic at the time of purchase.
IMO, having a budget to track your spending over time is key. CCs are insidious things, and as much as I don’t follow much of what Dave Ramsey preaches, I do believe he’s right in that many people shouldn’t use CCs because they lack the impulse control to handle them properly.
I’ve always been of the mindset that if it’s money you were going to spend anyway, then absolutely put it on a credit card (assuming no extra fees for paying monthly bills with a credit card). This is how you win the game. Replace all transactions that you would use cash for with credit because you should already have the cash to pay the credit card with this approach.
The ‘gamification’ of spending is hard to beat. I minimize it by building rewards around essential spend.
My Amex BCP is good for groceries and gas. Those are things I always need, and they usually cost about the same. My next card will be the US Bank Cash+, good for 5% on utilities. After that, a good 2X/2% card.
This is one way to do it; for now, while I’m new to the game, I’m trying to stack the odds in my favor by removing the impulse to spend on discretionary categories.
Just remember that it’s not just because you get a credit card that you start to spend more. Often, you’re spending more because of inflation and other life factors like taking out a mortgage, car repairs, having children, etc.
If you’re honest in your purchases and pay on time, you may benefit, but there’s also a higher chance you’ll take advantage of paying over months and paying the occasional interest. Track how much you pay in interest and how much you make in cash back or perks to see its total worth and cost.
Vey said:
This is why I use YNAB now. It helps me keep track while using all the cards I want to maximize rewards without losing a sense of how much I’ve spent.
Love YNAB. Having set budgets regardless of what card I put down and not having to do card math has made switching to using CCs exclusively SO much easier (without falling into the trap, of course lol).
I see a problem when someone says credit cards save money. Numerous psychological studies have concluded that credit cards make us spend more (even if you think otherwise). It becomes a net zero/negative game if you’re oblivious to this fact.
I see it as a tool that makes spending psychologically less painful and fun with miles and points.
With proper goal setting, I ensure SIPs/Insurance/Emergency funds are in place as savings. I spend the remaining income with credit cards without guilt using budgeting apps and enjoy the travel that comes with miles.
The problem when you see credit card rewards as savings is because it skews your perspective on what is saving vs spending.
This is why I count cashback when I redeem it, not when I earn it. Counting cashback as in ‘This card gives me 4% off restaurants, so this $50 meal is really $48’ leads to a spend more, earn more mentality, and leads most to double count the cashback at redemption.
The key is optimizing your existing spending for the greatest gains possible (and being able to pay your credit card balance off each and every month to avoid interest).