JPMorgan, BofA and Others Explore Buying Card Network to Raise Debit-Card Fees

Points can also be used as an excuse to spend more. Consumers tend to spend about 15% more on a card than they otherwise would with cash. Considering it takes spending $10k to get $200 in points on a straightforward 2% back card, a year’s worth of points can be wiped out pretty quickly by increased spending.

Points are also often locked to an idealistic dream and aren’t cashed in (ex. travel). Other times they get lost on a technicality. For example, my mom had a GM card and spent on it for years as a way of getting extra money for a future car. She wanted a Saturn, which was a subsidiary of GM. When she went to go get the car, she was told Saturn didn’t count. Maybe she should have read the fine print years earlier, but this kind of things happens a lot, and rules also shift over time.

For travel cards, they are generally locked to a particular airline. Most airlines are basically credit card companies that use the airline to advertise the card. Most of their profit comes from the cards. It’s hard to know what if a person is getting a deal or not with point, since it makes the math so fuzzy. Timing and watching for deals will generally get someone a better flight deal, and it probably won’t be with the airline from their card. I have a travel card that isn’t tied to an airline, but only use it for recurring bills these days to avoid most of these traps. There is a yearly fee on it though, so the rewards from the first $2,500 spent just go to pay the fee, effectively.

These card companies don’t give points as charity. They make people use the card more often (increasing swipe fees), increase spending, and often don’t have to pay it all out at the end of the day. So they win multiple ways while the customer loses.

Even without pitting cash vs card, it seems like card users are losing, many are losing even when they think they’re winning.

I’m sure you can point to someone who is actually winning, those people who make a hobby out of playing credit card games, but they are the exception, not the rule. I might be on the winning side, but I call it a wash. I’m not getting enough in points to really care, and mostly ignore them. Every few years they might offset a few nights in a hotel, but if I use that to justify a more expensive hotel, then I just fell into a trap.