Credit Card Rewards | Useless Junk or Plastic Gold?

Print Friendly

This is the last post in a series on credit cards.

In the first post, I asked if credit cards cost more than cash.  Then we introduced credit card fanaticism.

One of the biggest points of disagreement with plastic revolves around credit card rewards.  Some claim they are useless junk, and others say they are plastic gold.

Today, we’ll uncover the truth (from my experiences) …

Air Miles Credit Card Rewards = Junk

I spent a good part of my first 2-3 years of marriage trying to accumulate airline rewards points.  I specifically focused on getting NWA World Perks points.  We ‘cycled’ everything through the plastic.  By using credit cards and other strategies, I was able to accumulate a pretty decent amount of points with Northwest – without ever flying.

The biggest problem with airline miles and points is that they are only valuable in theory. Almost every time I’ve tried to redeem airline points, the flights I want are not available with the points I have.  While I accumulated enough points to fly round trip to Europe (four times), I have not yet used any of those miles (six years later).

The problem with airline miles credit cards is twofold.

  1. Availability.  Unless you want to book 364 days and 6 hours in advance, you will probably find that the seats are all sold out.
  2. Award seats are inflexible.  I could use them to fly if I left before 4 a.m. on a Wednesday and returned between 11:45p and 11:55p on a Sunday.

On my travel blog, I shared some recent frustrations trying to book travel with my points.

Honesty, at this point today, I think each and every one of those points was a useless waste of time and effort – my air miles are plastic junk. Perhaps when (IF!!!) I actually use them, my opinion will change.

One exception is the Southwest credit card which gives you enough bonus points to get a free flight.  And guess what?  With Southwest you can usually actually redeem your points.  For an ongoing basis there are better cards than the Southwest credit card, but for the sign-up bonus you can’t hardly beat it.

Hotel Credit Card Rewards = Plastic Gold

Within the last two years, I’ve wised up and focused most of my rewards points on hotels.  For me, I’ve found they have the most lucrative rate of return.

Hotel points are much, much, much more valuable than air mile points and cash back rewards.

Why are hotel points more valuable than air points or cash back?

Remember all those air points that I earned that were theoretically valuable?  Well, I have accumulated and already used a bunch of hotel points for some serious dollar savings.

Here are just a few examples:

Chase Priority Clubs Credit Card Rewards

One Card + One Purchase = $470.00 worth of rewards

To show you that you can actually get something of value from credit rewards, I  want to share how we got $470 worth of rewards from just one account.

My wife applied for the Chase Priority Clubs card.

Bonus: 15,000 priority clubs points + $20.00 credit.

Action: Made one purchase for $11.00

Action: Stayed two nights at the Holiday Inn Avon in Christchurch, NZ and one night at the Crown Plaza in Queenstown, NZ.  Each night was a Point Breaker offering, so each night cost us 5,000 points for a total of 15,000 points (same as our bonus).  Savings = $450.00 USD.

Action: After the vacation, she called and canceled the card.

Action: Chase sent us a check for $9.00

I also got the same card in my name, and this June I’ll be using 5,000 points to say at the Crowne Plaza hotel in Port Moresby, PNG.  The hotel costs over $250 USD per night.  At this value, each point is worth 5 cents or a 5% cash back.

AMEX Starwood Credit Card

This has by far been the best credit card I’ve owned.

In fact, my family is planning a trip to Sydney, Australia in June.  We’ll be staying five nights at the Four Points Darling Harbor. Because of our family size, the two rooms for five nights cost us 56,000 points.  The cost of those rooms would be $1,700 USD, so that represents about 3 cents per dollar spent or a 3% cash back.

In the last two years, we stayed 13 free nights in hotels.  Once we get through this summer travel, our total will be up to 19 nights free hotels in the last two years.  Most of those points come through hotel credit card rewards.

If you want to learn more about how to get free Starwood hotel nights using the Starwood credit card, just read this full detailed post.

Cash Back Credit Cards = Neither Junk Nor Gold

I call the cash back cards the old faithful cards.  You guarantee use – it is cash after all.  They provide a reasonable return on your spending dollars and ultimate flexibility.

We just got the Schwab credit card that gives us 2% cash back on every purchase (it’s a good thing too. FMF just posted 4/26/10 saying that the Schwab card is no longe available to new customers).  A nice rate of return, but extra nice considering the 0% foreign exchange credit card fee.  Since most companies charge between 2.7-3% to use the card overseas, our Schwab card will save us 5% overseas compared to other options.

Depending on your occupation you may find better card offerings.  Here’s a list of the best military credit cards.

Now this is the time for my credit card warning. If you use a credit card, you must have spending guidelines.  You do spend more money with a credit card than cash, but a credit card has nice added benefits that might make it worth the extra money.  If you are in credit card debt no amount of rewards will ever make it worth it.

What is your favorite rewards credit card?  Do you think people really come out ahead by getting credit card rewards, or is it just a ploy?  What is more valuable air points, hotel points, or cash back?

Comments

  1. Scott F says

    We love our Southwest Airlines Visa. We have gotten so many free flights (easily over a dozen) and have only once ever had one not available and that was understandable — we were booking during the New Year’s holiday and didn’t try until after Thanksgiving to book it. Other than that, we have gotten on every flight we have ever wanted. In fact, we are leaving this Friday on 2 free flights on Southwest! The only downside with this card:
    1) $50 annual fee. So don’t use it unless you are going to use it enough to get at least one flight out of it per year.
    2) Southwest doesn’t fly everywhere so it may not get where you want to go. However, it may get you to a major hub on the other side of the USA and then you get on your flight with a different airline. It is a lot cheaper to fly to Alaska from Seattle than from Miami. Take a free SW flight from Miami to Seattle, then take a different airline from Seattle to Alaska and save several hundred dollars right there.

    • says

      Scott,
      Good point. Southwest does have same valuable rewards that you can ACTUALLY USE. If I were to suggest one airline points card that would be the one. Thanks for the comment.

  2. says

    A card that I’m trying to get approved for is the PenFed cashback rewards card. It gives 5% cash back on gas, and 2% on supermarket purchases.

    I DO think people come out ahead using credit cards. I personally don’t buy anything out of the ordinary with the cards. Since almost everyone needs gas and groceries, I think the card is helpful in reducing some of your expenses. Since I don’t travel a lot, airline miles and hotel stays don’t really appeal to me.
    .-= Darren´s last blog ..How To Find The Right Financial Planner Using 10 Questions =-.

    • says

      Darren,
      I’ve seen guys like FreeMoneyFinance crunch their rewards numbers and they say the flat 2% works out better than the 5% for gas, 2% for supermarkets, and 1% for everything else. I guess if you used a TON of gas you might be better off with the PenFed card.

  3. says

    Excellent post. Frequent flyer miles work best for “upgrades on international flights”. And yes, the ideal time to book a flight is actually 11 months out. It needs planning and will appeal to only certain people. Just like coupon cutting requires planning and shopping for stuff only “during certain times” and frankly speaking only appeals to some but not all!

    By the way, I’ve always earned more than 2% on my blue cash (even with the tier)…guess I charge a lot of gas, supermarket and good old cvs to it!!
    .-= Mr Credit Card´s last blog ..Family Reward Travel: A Case Study =-.

    • says

      @Mr Credit Card
      I do think that buying or upgrading for first class international tickets is the best dollar value for credit cards. However, I don’t fly first class, ha!

  4. Arthur @ FinancialBondage.org says

    All the reward stuff is gimmicks, smoke and mirrors to get us to play their game. Use credit cards and get into debt. And pay fees.

    Ask yourself. why do they work so hard to get us involved? Answer. they win we lose -Dave Ramsey

    • says

      @Arthur
      In the post I shared how I had a credit card, made one purchase and got $11 back as well as $450 worth of hotels. Using that example, I paid no fees (in fact I’ve never paid a fee in 10+ years of having a credit card) and got a reward. How is that a gimmick?
      I do agree that they work hard to get us involved because it is generally profitable. But, I think if you are disciplined and ‘work the system’ you can get some nice rewards. In my opinion, I won and they lost. Do you think they won in my case?

  5. Anthony says

    I have a Shell MasterCard. I actually just received it, so I’ll see if it’s useless junk or plastic gold, in the next few months. I only buy Shell gas in the first place, and the card gives me 5% on Shell gas. I intend on only using the card for gas, so hopefully, the ROR is 5% flat. There’s an annual fee that’s waived if you have 9 Shell purchases in the previous year.

    Sounds good on the surface. Hopefully, it will net me the 5% that I expect…

  6. says

    For a small business owner, there is the possibility to maximize broke credit cards. Yet besides to be able to utilizing features and functions that are in particular made for enterprise charge cards, you might also need the opportunity find paid. And simply because companies are sometimes facing bigger bills, getting them to your company prize bank card includes getting even bigger rewards.

Leave a Reply

Your email address will not be published. Required fields are marked *