U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics > Personal Finance
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 12-31-2018, 01:54 PM
 
9,738 posts, read 8,041,405 times
Reputation: 6343

Advertisements

Quote:
Originally Posted by LBTRS View Post
It is better than interest mathematically. 2% interest on $1000 in a savings account would be $20/year. You would then be taxed on that $20.

Credit card rewards of 2% on money you're spending anyway is a win-win as long as you're paying the bill in full each month and not paying interest on carried balances.

2% rewards on every $1000 you spend would be $20 every time you spend $1000. I run about $60,000/year through my rewards credit cards and can easily earn a couple thousand dollars in cash back (I can get more than 2% on my cards) each year on money I spend anyway. I'm not taxed on these reward dollars as I would be on the $20/year interest I earned on the $1000 in the savings account.

These rewards points can be worth a lot more if used in other ways like travel and not taken as cash back.
I have a Wells Fargo cash back card. The reward is applied to my Wells Fargo mortgage each time $25 or more is accrued.
Reply With Quote Quick reply to this message

 
Old 12-31-2018, 02:01 PM
 
1,514 posts, read 1,425,519 times
Reputation: 11062
If the money you are spending to get the 1% rebate is money you would be spending anyway or is being spent on things you need then it's a good deal.


If you're spending money on things you don't need or even want just to use the card to get a 1% rebate, that's not much of a bargain. If you saved the money spent on unneeded things, you'd still have that money plus any interest it might earn.


It's up to you to decide how important the stuff and the rebate are to your quality of life.


It's not just a math issue.
Reply With Quote Quick reply to this message
 
Old 12-31-2018, 03:03 PM
Status: "Excited to move to Vegas!" (set 13 days ago)
 
Location: Beaverton, OR
5,443 posts, read 5,861,458 times
Reputation: 6134
Quote:
Originally Posted by wheelsup View Post
Citibank has a 2% card with no annual fee
Yup thatís what I use. 1% is terrible, ditch that card immediately. You can do much better. I get 3% back on gas from one card, 2% all purchases minimum, 5% movie theaters, 5% Amazon, 5% cell phone, and have a business card for 2% back. Iíve gotten about $3,000 cash back this year alone.
Reply With Quote Quick reply to this message
 
Old 12-31-2018, 03:58 PM
 
Location: North West Arkansas (zone 6b)
2,670 posts, read 1,996,369 times
Reputation: 3665
yes, the cash back is a nice plus, but when I'm looking at a $2k rebate check at the end of the year (or whenever the check comes) , I can't help but think I'm spending too dang much.
Reply With Quote Quick reply to this message
 
Old 12-31-2018, 07:20 PM
 
779 posts, read 286,591 times
Reputation: 316
Quote:
Originally Posted by LBTRS View Post
It is better than interest mathematically. 2% interest on $1000 in a savings account would be $20/year. You would then be taxed on that $20.

Credit card rewards of 2% on money you're spending anyway is a win-win as long as you're paying the bill in full each month and not paying interest on carried balances.

2% rewards on every $1000 you spend would be $20 every time you spend $1000. I run about $60,000/year through my rewards credit cards and can easily earn a couple thousand dollars in cash back (I can get more than 2% on my cards) each year on money I spend anyway. I'm not taxed on these reward dollars as I would be on the $20/year interest I earned on the $1000 in the savings account.

These rewards points can be worth a lot more if used in other ways like travel and not taken as cash back.
Gotta figure the best way to use my credit cards.
Reply With Quote Quick reply to this message
 
Old 12-31-2018, 07:25 PM
 
779 posts, read 286,591 times
Reputation: 316
Quote:
Originally Posted by JonathanLB View Post
Yup thatís what I use. 1% is terrible, ditch that card immediately. You can do much better. I get 3% back on gas from one card, 2% all purchases minimum, 5% movie theaters, 5% Amazon, 5% cell phone, and have a business card for 2% back. Iíve gotten about $3,000 cash back this year alone.
Ok well my Sam's club credit gives 5% back on gas. Maybe I'll ditch some and look for others. Maybe my husband can get a better rating.
Reply With Quote Quick reply to this message
 
Old 12-31-2018, 07:32 PM
 
2,697 posts, read 1,725,690 times
Reputation: 5851
Quote:
Originally Posted by LBTRS View Post
It is better than interest mathematically. 2% interest on $1000 in a savings account would be $20/year. You would then be taxed on that $20.

Credit card rewards of 2% on money you're spending anyway is a win-win as long as you're paying the bill in full each month and not paying interest on carried balances.

2% rewards on every $1000 you spend would be $20 every time you spend $1000. I run about $60,000/year through my rewards credit cards and can easily earn a couple thousand dollars in cash back (I can get more than 2% on my cards) each year on money I spend anyway. I'm not taxed on these reward dollars as I would be on the $20/year interest I earned on the $1000 in the savings account.

These rewards points can be worth a lot more if used in other ways like travel and not taken as cash back.
I prefer to think of it as a cost reduction, rather than making money. Thatís the same way the IRS sees it and the reason the rewards arenít taxable.

Iím essentially paying 98% to 95% for things I want or need. Make no mistake. Itís consumption. In the examples you provided, you still have the original capital AND additional money from interest. If you consume and get rewards...you just have rewards. Youíre only ďbetter offĒ in that example in a short term point in time. The calculation looks worse and worse between the scenarios as time goes on because of course no one gets rich off of consumption.
Reply With Quote Quick reply to this message
 
Old 12-31-2018, 07:33 PM
 
779 posts, read 286,591 times
Reputation: 316
Quote:
Originally Posted by WannabeCPA View Post
You don't have to be good at math to understand how cash back works. I'm also confused. By your question. The way cash back works is that for every dollar you spend with your card, you get a certain percentage of it back. Ex. on a 1% cash back card if you spend $100 you would get $1 back. I really don't see why that's so hard to understand.
I told you my thinking is limited. Here is where my confusion is. I pay my bill in full each month. So it's really 1% or more each month. I know it's a stupid question. But that isn't like 12% a year. Is it? It's like 1% a year. If I'm only earning 1%.
Reply With Quote Quick reply to this message
 
Old 12-31-2018, 07:42 PM
 
779 posts, read 286,591 times
Reputation: 316
Quote:
Originally Posted by Thatsright19 View Post
I prefer to think of it as a cost reduction, rather than making money. Thatís the same way the IRS sees it and the reason the rewards arenít taxable.

Iím essentially paying 98% to 95% for things I want or need. Make no mistake. Itís consumption. In the examples you provided, you still have the original capital AND additional money from interest. If you consume and get rewards...you just have rewards. Youíre only ďbetter offĒ in that example in a short term point in time. The calculation looks worse and worse between the scenarios as time goes on because of course no one gets rich off of consumption.
ok. Here's where I need a simple explanation. I spend $20 and get $.20 back. On 1% interest. Ok I see your point now. Thanks, that kind of clears it up for me. If I put $20 in the bank at 1% interest, at the end of the year I get about $.20 extra. I'm confused again. The answer must be to just pay with the cards that give the most cash back.
Reply With Quote Quick reply to this message
 
Old 12-31-2018, 07:43 PM
 
2,697 posts, read 1,725,690 times
Reputation: 5851
Quote:
Originally Posted by Cindi Waters View Post
I told you my thinking is limited. Here is where my confusion is. I pay my bill in full each month. So it's really 1% or more each month. I know it's a stupid question. But that isn't like 12% a year. Is it? It's like 1% a year. If I'm only earning 1%.
You don’t add percentages.

You get 1% on what you spend. If you spend $100 in month 1, that’s $1 of reward. If you spent $500 in month 2, that’s $5 in rewards...and still 1%.

And don’t get my previous post confused. It’s not actually a real cost reduction as it happens in the real world. You pay the full amount that you spent...and get cash rewards back as extra money refunded to you, just like you would with bank interest.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics > Personal Finance
Follow City-Data.com founder on our Forum or

All times are GMT -6. The time now is 05:10 AM.

© 2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top