collect credit card points

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5 Reasons to Collect Credit Card Points

I’ve been writing about some intricacies of the points & miles game through credit card points, but haven’t touched on the reasons why you should do it. In my opinion, it’s one of the more lucrative things you can do on your free time.

 

Reason 1: Save Money

First reason is obvious. Saving money is the name of the game. Why use your own money when you can use the banks’ money to fund the biggest parts of travel expenses like flights and hotels?

With the potential savings from credit card points, you can use your cash to fund activities on the ground like tours, food, and etc. From those purchases, you can still earn more points by using the correct credit cards, which can help fund your next trip, especially when you’re working towards a signup bonus!

Or, that saved money can be used to invest in assets instead to make your money grow in the future! Collecting credit card points can be an excellent way to offset costs to have new experiences while building wealth for long-term financial security at the same time.

 

stonks
Travel and invest at the same time?

 

Reason 2: Better Security

Although not completely related to credit card points, paying with a credit card is much safer than debit or paper cash. With credit cards, you’re paying with a bank’s money first before you pay off the balance in full with your own money in their own system.

If your credit card gets stolen or have fraudulent charges, the banks are much quicker to act compared to debit where you have to fight tooth and nail to get a charge reversed, or with cash… well, good luck with that! And of course, paper cash and debit don’t earn you rewards, and although some debit cards are now starting to offer rewards, they aren’t as lucrative as credit card rewards.

 

that's rough buddy cash debit
Lost your debit or cash?

 

With that said, I haven’t remembered the last time I use cash or debit to buy anything in the US. The only time I’d use a debit is to withdraw cash in countries where credit card acceptance may not be as prevalent.

 

Reason 3: Build Discipline

Collecting credit card points can build discipline. In order to get value out of credit card points, credit card debt must be avoided. Paying off your credit card balances in full every month is something that many people still struggle with. In fact, the average credit card debt in a US household is around $8000.

It takes some organizational skills to keep track of the due dates of different credit cards and self-control to not spend above your means, since that would defeat the purpose of saving money through credit card points. There has been several studies done on the behaviors and psychology of spending with credit cards where consumers end up spending more than they would if they pay with cash instead. But, as long as you don’t fall for this common trap of thinking “it’s not my money”, then you can be rewarded well for responsible use of credit.

 

Reason 4: It’s Fun

If you’re into video games, especially ones that involve strategies, credit cards should appeal to you. Maximizing returns on spend based on the resources you have (money) takes knowledge of different cards and building to fine-tuning a card setup that will work best for you.

The game also evolves constantly, so there will be times where you have to take a step back and change strategies to find other opportunities for outsized value.

But, the reward is worth it if you love to travel! Whether you want to try out a first class seat in the air, stay at the fanciest hotels, travel around the world, or treat your loved ones for a nice vacation, the points are there to serve you!

 

Reason 5: The System is Rigged Against Cash

This is a big and important point I want to bring up about credit card rewards system that not many people really think about. The sole existence of digital payments has influenced the prices on the products we buy every day.

Payment processors like Visa and MasterCard are companies that need to make money to keep their operations moving. Their biggest source of revenue is through swipe fees where whenever you swipe with your credit or debit cards, Visa and MasterCard will take a small cut of around 2% of the transaction. Imagine how much money they’re making with hundreds of millions of transactions happening everyday!

Who ends up paying for the swipe fees? Well, all of us. Merchants have to raise prices on the products they sell to compensate the swipe fees, and us consumers must pay for the higher prices. After all, merchants can’t simply discriminate cash and card users, that’d be bad for business. We, as consumers, know very well how cards are more convenient to carry than paper cash and a bag of coins.

However, the ones who are hurting the most are those who pay with debit or cash. As I’ve mentioned before, they’re paying for the higher prices, but aren’t rewarded for doing so either. The trend of cash and/or debit usage also skews toward households with lower income.

 

us households banking status 2017
38% of households making <$40,000 year don’t have access to credit cards. (Source: Federal Reserve)

 

It’s valid to say that credit card rewards are forms of wealth transfers where those who are better off have the spending power to hit some of the most lucrative signup bonuses while those with lower spending power can only technically break even with a simple no annual fee, 2% cashback card because of the swipe fees.

The sad truth is that the system works because of the majority’s ignorance, but it’s not my place to discuss the morality of this predicament, and I don’t know of a good solution to better this situation. Whether we like it or not, we’re forced to play this game, and I want to be on the winning side and also teach you how to be on that side.

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