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I prefer to think of it as a cost reduction, rather than making money. That’s the same way the IRS sees it and the reason the rewards aren’t taxable.
I’m essentially paying 98% to 95% for things I want or need. Make no mistake. It’s 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. You’re only “better off” 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.
I'm only comparing it to interest because that is what the OP asked about. We're talking about the actual interest/rewards and not the original money that was saved or spent. Rewards are not in any way interest.
What I said only applies if this is money you're spending anyway. This money is leaving your possession anyway, a proper comparison would be to not using a rewards card. You are "making money" by using the rewards card because you would not have this extra money if you didn't use the rewards card and just spent the money. I know why the IRS doesn't tax these rewards but that doesn't change the fact that they are not taxed.
It would always be better to cut consumption and save the money, however, that isn't what the OP asked about. I was explaining the difference between interest/rewards and not advocating spending money that wasn't being spent anyway.
In general you want a credit card that does not have an annual fee and the largest cash back you can get. Some cards give 5% for different items in different quarters. The 5% for gas is good so use that card for gas. Look for a 2% card for everything and that is good. Some give 3% on groceries but most items are 1%. Be sure you pay the card off every month of the cc interest will wipe out any savings.
The problem with your understanding of the % is you get 1% back on the money for one month vs 1% back for savings for 12 months. It is the time value of money. But you can forget all about the comparison. The cash back is better than the savings.
To check on your credit score and get suggested credit cards try credikarma. https://www.creditkarma.com/auth/logon
It is free and has been around for years. It might also help you understand credit scores. Your husband can get his own account too.
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.
Exactly!
Best CC offers reward behavior that was going to occur anyway, hence they are called just that.
There are all sorts of *rewards* out there and each card continues to up their game. Everything from supermarket/grocery shopping, to restaurants, to airline/travel, utility payments, etc... But again best of the offers gives you points or cash back for something you'd do anyway.
Some people like cash back, others points; chose your poison and spend wisely.
In general you want a credit card that does not have an annual fee and the largest cash back you can get. Some cards give 5% for different items in different quarters. The 5% for gas is good so use that card for gas. Look for a 2% card for everything and that is good. Some give 3% on groceries but most items are 1%. Be sure you pay the card off every month of the cc interest will wipe out any savings.
The problem with your understanding of the % is you get 1% back on the money for one month vs 1% back for savings for 12 months. It is the time value of money. But you can forget all about the comparison. The cash back is better than the savings.
To check on your credit score and get suggested credit cards try credikarma. https://www.creditkarma.com/auth/logon
It is free and has been around for years. It might also help you understand credit scores. Your husband can get his own account too.
If you travel and eat out a lot the cards with fees like the chase sapphire reserve which I have can be well worth it . We got over 2k in just points not to mention they paid for my tsa precheck ,act as our trip insurance, give us primary auto coverage when renting and a 300 dollar travel credit a year .
We pay 450 for the card but right off the bat get 300 back as a travel credit so for the 150 bucks we get a lot .
When you book trips through chase’s Expedia portal all points get a 50% boost too
I believe Citicard is 1% for purchases and another 1% on payments so you get two percent but it's not after you pay your bills.
Err.... wut?
You get 1% on the statement closing date. You get another 1% when you pay your credit card bill in full 25-ish days later. 1% + 1% = 2%.
If you want to split hairs, if you apply the cash back towards your balance, it behaves like a charge was credited back so you don't quite get the full 2%. If you opt for a cash payment, it's the full 2%.
I have lots of years where I push $50K+ in business travel through my card plus all my personal activity.
OP, it is not interest, stop thinking of it as such. It is a REBATE. So you spend say $100. and they rebate you $1.00. Even if you did that every month it would still be only a 1% rebate not a 12% one.
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.
You're confused because you're comparing % rebates with % interest, but they are not the same and not comparable. So, stop trying to compare them.
If you are using a card that offers a 1% rebate, the issuer will rebate 1c for every dollar you spend. That's it. Some offer points or miles, but I like cash. Find the card that offers the best rewards for you for the way you use the card.
Some point deals like chase’s new sapphire banking account actually do give you points that are considered interest . They give you bonus points for opening the account and taking a sapphire credit card ..
Those points are considered a form of interest and not a rebate so you will get a 1099 for them for about 600 dollars for the 60,000 points
You get 1% on the statement closing date. You get another 1% when you pay your credit card bill in full 25-ish days later. 1% + 1% = 2%.
If you want to split hairs, if you apply the cash back towards your balance, it behaves like a charge was credited back so you don't quite get the full 2%. If you opt for a cash payment, it's the full 2%.
I have lots of years where I push $50K+ in business travel through my card plus all my personal activity.
I'm not sure what you are confused about. Your bolded statement said EXACLTY the same thing i said earlier.
However, you don't have to wait until your billing has ended for that month to make a payment. You can always make a payment, for up to current balance, at any time during the billing cycle.
So, when you make a purchase you get 1% and then when you make a payment you get another 1%. So, if you make a purchase of $200, you get $2 for purchase and when you pay that $200, you get another $2, a total of $4. Or, if you only make a payment of $100, you get $1 for payment side so a total of $3.
I always get a statement credit and it's the full 2%. This is how it works on MY Citicard, if Citicard has other cash back rewards program, then I can't comment on that.
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