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Old 05-14-2008, 11:03 AM   #1
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Credit Card "Rewards"

I'm looking at the WorldPoints catalog that came in the mail. With our Mastercard, we get one point for every dollar we spend. When we get 25,000 points, we can trade them in for a check for $250. That is, 100 points equals $1.

From the catalog, a $25 iTunes gift card costs 6,250 points. IOW, $62.50 for a $25 gift card.

I guess people go for this, because they are too impatient to accumulate 25,000 points, they see it all as free money, and/or they just haven't thought it through.

Similarly an 8GB iPod Nano goes for 32,000 points ($320) but only costs $179 on Amazon.com. Big "stupid" tax.

The 1% back must cost Mastercard a lot less than 1% to provide.
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Old 05-14-2008, 11:06 AM   #2
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The points system is genius. They can change the conversion rate at any time.
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Old 05-14-2008, 11:09 AM   #3
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Al, your examples are the reason the only CC rewards program that make sense to me is cash back - like PenFed's Visa card.
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Old 05-14-2008, 11:15 AM   #4
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Never understood these point systems. Although, I do have a card or two that do that. I usually just use a "current month cash back card" like the PENFED VISA card. USAA has a Master Card that is point based and every once in a while they will come out with a "make three charges within a certain period of time for a certain minimum dollar amount" and we will give you a $50 credit. They did that recently so I dig the card out go put the charges to qualify and then "retire" the card again.
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Old 05-14-2008, 11:16 AM   #5
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Al, your examples are the reason the only CC rewards program that make sense to me is cash back - like PenFed's Visa card.
And still better, cash back awarded monthly - like Penfed's Visa card.
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Old 05-14-2008, 11:31 AM   #6
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There is a whole field of study that focuses on how consumers make financial decisions in different circumstances. No doubt the perception of the points as "free money" influences many to make questionable decisions in redeeming points.
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Old 05-14-2008, 11:55 AM   #7
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Yeah, I think most of them devalue your points if you buy gift cards...Citibank's is even worse and does not give an easy option to turn thank you points into cash...
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Old 05-14-2008, 02:11 PM   #8
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Still managing a 2.4% benefit ratio by using my points to buy tickets to Hawaii on AA. I've never even looked at the cash back offers, what % do you usually get back.
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Old 05-14-2008, 02:32 PM   #9
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It's definitely alluring. You just click on "iPod," and it appears in your mailbox.

The one mistake I made was using the $400 airline credit for $25,000 points ($250). Turned out you had to go through their travel agent, and the flight I got for $400 could have been purchased for < $250 on priceline.com.

For ours we get back 1%.
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Old 05-14-2008, 02:42 PM   #10
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Still managing a 2.4% benefit ratio by using my points to buy tickets to Hawaii on AA. I've never even looked at the cash back offers, what % do you usually get back.
1% is typical to good. If you search you can find cards that offer higher percentages on certain types of purchases. The two I have and like are my PenFed Visa which is 5% gas, 2% supermarket, 1% everything else, and my Costco AMEX card, which is 3% travel, 2% eating out, and 1% everything else (I think -- I don't actually use my AMEX much.) Also I believe the Costco card just added a cash back percentage on gas purchases. I like the PenFed card better too because it is an automatic cash back credit on every monthly statement; the Costco card sends you a check attached to your statement once a year in February.

Right now I just use the PenFed card for gas; for everything else I have just started cycling through a number of cards that are offering 0% on purchases for a while; in the meantime my money is earning 4% at Alliant and IndyMac.

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Old 05-14-2008, 02:58 PM   #11
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The Costco/Amex rebate for gas is now 3%.
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Old 05-14-2008, 03:14 PM   #12
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Penfed is 1.25% on everything else, not 1% if you're talking about the Platinum card.

Charge a brazillion dollars, and we're talking about some real money, here.

-CC
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Old 05-14-2008, 03:26 PM   #13
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I always take the Cash back option. The one exception is the Discover card (who I think pretty much pioneered the cash back concept) use to allow you to trade you reward points on a 2:1 or 3:2 basis for selected merchants gift cards.

In contrast Worldpoint rewards are almost almost always a rip off, take the cash.
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Old 05-14-2008, 03:49 PM   #14
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Penfed is 1.25% on everything else, not 1% if you're talking about the Platinum card.

Charge a brazillion dollars, and we're talking about some real money, here.

-CC
Yes, that's the card I have; thanks for the correction.

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Old 05-14-2008, 06:00 PM   #15
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Too bad I don't qualify for the pen fed card. Damn maybe I should join the army.
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Old 05-14-2008, 06:03 PM   #16
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Too bad I don't qualify for the pen fed card. Damn maybe I should join the army.
You do qualify (not kidding). See the penfed.org website on how to become a member.
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Old 05-14-2008, 06:08 PM   #17
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Oh I see 300$ for a lifetime membership or 20 a year

Thanks
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Old 05-14-2008, 06:13 PM   #18
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Not $20 per year or $$300. You pay a one time $20 fee to join and don't renew your membership after the first year. Once you are a member of the CU, it doesn't matter if you are no longer a member of the other organization.
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Old 05-14-2008, 06:19 PM   #19
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Oh well hell thanks a lot going to do that now.
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