Are Credit Card Reward Programs Worth the Hype?

I am such a willing victim to rewards programs. You have to admit that there is just something innately irresistible in being rewarded for spending money. Y to the ES please!

But as I eventually found out, rewards programs are not all they're cranked up to be. If you're not a heavy credit card user, then the rewards due you are minimal to the point of being ludicrous.

For example, I earn a point for every Php125 (retail: supermarket, gas, drugstore) or Php36 (non-retail) I charge on my RCBC Bankard Mastercard Classic. I charge most of our monthly expenses, thus I rack up around Php15,000 - Php20,000 in charges per month (which I always pay off in full). Assuming that all of my charges are retail charges, I earn between 120-160 points per month (Php15,000 / Php125). In a year, I charge between Php180,000 to Php240,000 to my credit card, so that's about 1440 - 1920 points per year.

I usually avail of a cash credit which I then apply to my outstanding credit balance. And so once a year, with my 1920 points, I get a Php400 credit towards my credit card balance. Here's the rewards conversion for cash credit:
  •     800 points = Php200
  • 2,000 points = Php500
  • 4,000 points = Php1,000
  • 20,000 points = Php5,000
Thus, after spending about Php240,000 in a year, I am "rewarded" with a Php400 credit. It's silly right?

However, if you charge in a month what I earn in a year, then you'll be swimming in rewards points. A friend told me of someone whose family owns a factory, and how they charge their monthly utilities to a credit card, in effect charging close to a million pesos every month. It comes as no surprise then that that family has dozens of free tickets anywhere in the world at their disposal.

That's why I always roll my eyes whenever I read posts detailing what credit card is the best for you. I think that such posts should begin with: If you charge millions of pesos to your credit card every year, then read on. If not, feel free to skip this post and not waste your time.

If you must have a takeaway from this rambling-bordering on bitter post, it should be to not be too picky when it comes to credit cards and to not get one because of the rewards aspect. Really, unless you're a big spender, they're all the same. And most importantly, ALWAYS pay your outstanding balance in full.

If I have my way, I will change the name "credit card" to "convenience card", because that's how you should treat them. It's a convenient cash advance so that you don't have to go to a Bayad Center to pay for an airline ticket or line up at an ATM to withdraw cash for your groceries. It's also a great way to pay for a big ticket item in installment basis. As long as you play it smart, your credit card can be your best friend. However, the moment you miss even one payment date, then it will waste no time in bitchslapping you with all sorts of penalties and finance charges.*

Remember kids, credit cards may seem as if they're the answered prayer to your dreams of traveling, a new wardrobe and living it up. But they're not. Like everything else in life, if it seems too good to be true, be very, very wary or better yet, run the other way.

*Actually, the penalties and interests contained in credit card Terms and Conditions have already been shot down as iniquitous, excessive and unconscionable by the Supreme Court, but even so, pay off your balance in full. I'll write more about this in a future post.

** It really does pay to shop around, even with credit cards. Value Penguin wrote this great post about three local credit cards with cash back options. After I crunched the numbers, it turns out that with one of the cards reviewed, my usual yearly spending may net me a cash rebate of Php7,800.00, compared to my current Php400.00! Where do I sign up?! Read the post here.


Rae said…
Right now, I feel more rewarded with Security Bank Debit Master Card, 5% rebate on groceries ngayon. Tapos merong feeling na parang napprevent ka pa din gumastos kasi actual na pera mo yung nasa account.

I am following Dave Ramsey on youtube. Sobrang against sya credit cards kahit may rewards. Kasi daw, when you swipe via credit card, hindi daw na-aactivate yung pain sensors ng brain. So, we tend to spend more with the card. That said, I still keep the card. Pero I'm happy I'm debt free. Yung rewards ko parang naging pambayad na lang ng annual fee (still need to learn how to negotiate).

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