Summary
Ivanna Hampton and David Harrell talk about credit card reward programs. Harrell: "I signed up for a Marriott Hotel credit card. That sort of began the journey, or descent, into points and miles" Hampton: "There are credit cards that are associated with airlines and hotels that earn"
Harrell: Once upon a time, people swiped their cards and got nothing back. Some cards will offer 1% for most spend, but then for a specific category such as a grocery store or a gas station, you might earn a few more points per dollar spent.
A proposed settlement, which has not been enacted, would reduce credit card rewards. The cost of that is generally then passed back on to customers. There’s kind of a question of fairness here in that if a business has to raise prices to accommodate these fees.
If you’re not in a position where you have a regular income each month, it’s probably not something to pursue. There are several cards, no-annual-fee cards, that offer you 2% cash back on all of your spending.
Harrell: It’s sort of a mix of both. Some people are able to do things, maybe do travel or vacations that they otherwise might not have been able to. If you’re paying out of pocket, you might not be willing to do that.
Harrell: There’s a price to be paid for the cognitive load of trying to keep track of all of this stuff, either in your head or via spreadsheets. The other is you just pick a 2%-cash-back card, let that cash accumulate, and then maybe use that cash for purchases or invest that cash.
Harrell: Don’t be seduced by the idea of “free stuff” If it’s going to end up costing you more in interest payments or late fees than if you don’ve done those things. Even a credit card where you’re paying a high annual fee, but you would receive far more than that back in rewards.
This commentary is for informational purposes only. The information data, analyses, and opinions presented herein do not constitute investment advice. Before making any investment decision, please consider consulting a financial or tax professional. The author or authors do not own shares in any securities mentioned in this article.
