Burning, shredding, and other ways we throw away credit card rewards points

As of this writing, credit card rewards are a tax-free kick back from various credit card companies for using their services. The various credit card companies offer rewards incentives in an effort to bring you under their umbrella, put their card in your hands, and thus have you spend cash using their services.


They have the ability to make money a few different ways:


  1. Annual fees,
  2. Interest they charge you if your balance is not paid in full at the end of each month, and
  3. Merchant fees (we’ve seen this one as business owners).


If you’re not familiar with merchant fees –


every time you swipe your card, the store owner is charged a negotiated percentage by both the credit card company the customer is using and the credit card machine company the store owner is using. This is sometimes why certain stores only take certain types of credit cards… Chances are that the cards the store doesn’t accept were charging higher merchant fees than their competition.


So you can see that even if you pay your balance in full at the end of each month (and even if you have no annual fee) the credit card companies are still making a buck off of you using their plastic. In order to get more people to use their plastic more often, they frequently offer rewards points. And the credit card companies are essentially betting that you won’t earn and/or use enough rewards points (as a population of people) to turn their profits into losses.


In a recent effort to study how American consumers utilize these rewards points, US News & World Report (US News) recently (April 2017) conducted a survey of over 1000 Americans that use rewards points credit cards.


US News asked a variety of questions to basically tease out how we use these kickbacks, and ultimately whether or not the rewards are worth the downside of using the plastic for the consumer. We can also take a look at the data to determine whether or not the credit card companies made a good bet when they offered us a multitude of rewards points options.



Full disclosure:


a representative from US News & World report reached out to me with a link to this survey and asked if I would review their article and comment in a MikedUp Blog post. Normally, half of these requests are spammy and only about 10% of the legitimate requests are actually interesting. I forget about half of those after sharing the link on Twitter… If you’re following along, that leaves about 2.5% of the ‘cold-call’ emails that actually amount to anything. This survey fell into that 2.5%. This is not a sponsored post, but after reading through their survey, I couldn’t deny the fact that there was surprising and useful information that needed to get out to the financially concerned MikedUp Blog readers out there! So let’s get into it:



Just for reference, here are the most commonly used rewards types:

  • Cash back
  • Airline rewards
  • Hotel rewards
  • Gift cards
  • No annual fee
  • Sign-up bonus


Main takeaways (and remember – these are from the consumer’s point of view)


Cash back is the most commonly cited reward type when asked why a consumer opened the reward card in the first place ~27%.


Travel rewards (21%) and no annual fee (17%) followed, in line as the next most referenced reasons. We can see that intentions are good, but let’s see how the consumers followed through.


45% of people reported to actually use cash back rewards


Airline rewards (19%) and gift cards (16%) were the next most commonly used rewards. Other rewards were also redeemed, yet 25% of consumers reported to not use any form of reward (the survey doesn’t say whether or not that 25% used their cards).


23% don’t use all available rewards on their credit cards


You’ve made the choice to open the card, made purchases using the card, and simply didn’t redeem the rewards points. Almost a quarter of those polled just didn’t click ‘redeem.’ Don’t do yourself this disservice.


20% often carry a balance from month-to-month


Because rewards point credit cards can be so worthwhile to the consumer, the credit card companies often raise the APR (Annual Percentage Rate) of the cards to accommodate the kickbacks. When you break Rule #1 of credit card usage (to not pay your balance in full at the end of the month – with rewards cards or otherwise), you can be throwing away huge chunks of cash every day. $1,000 at 20% APR equates to $200 in interest at the end of the year, or $0.55 / day (using rough math to illustrate this point). Remember – Rule #1: Don’t carry a balance from month-to-month.


On the plus side, 97% earned some rewards last year


A little bit is better than nada… (Name the movie and I’ll be impressed)


People don’t overspend just to earn more rewards


This is a relief. It can be easy to get caught up in the rewards allure, which can give you the impulse to spend more and more. But remember, you aren’t earning dollar-for-dollar here. Spending $100 to earn $5 isn’t an economical way to go about things. You’d be better off just keeping your $100. However, if you are spending as you otherwise normally would and earning rewards because of your normal behavior – that’s a winning scenario.


78% did less than 1 hour of research shopping for and comparing their rewards credit cards


I’m not saying you need to prepare a thesis here, but you owe it to yourself to at least shop around. Read a few blog articles, ask your friends, and at least know the APR, rewards structure, and penalties going into this financial decision (I’ve found that NerdWallet typically has a solid comparison article).





Let’s put out the fires, unplug the shredders, and start redeeming all of those rewards points we spend hours researching and hard-earned dollars earning. Check out US News’ full article for all of the additional details and methodology, but in the meantime, don’t let the credit card companies take advantage of you. See the rewards, earn the rewards, and redeem the rewards. Happy thrifty spending to you.



Thanks for reading!


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I’m glad you’re here. Thanks again and talk soon!


– Mike
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