7 Mind-Blowing Reasons Why Credit Card Reward Points are Bad

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Did you know that, in the last 12 months, 50% of all credit card users carried a balance on their card? Yep, a crazy, yet unsurprising statistic according to this post here on forbes.com.

But people aren’t just using credit cards for the convenience or the larger line of credit for spending. Nope, most are playing a dangerous game with the credit card companies just to get credit card reward points.

The even crazier thing is that people are paying hundreds in interest just to justify those reward points. Some pay their card off completely, and may get a few points, but most people keep a balance. And that makes this quest for credit card reward points completely pointless.

So today’s the day to stop playing games and collecting points. In this post we’re going to look at:

What credit card reward points actually are.
7 mind-blowing reasons why credit card reward points are bad and…
What REAL millionaires do instead of collecting credit card reward points.

Alright, let’s get to it!

What are credit card reward points?

Credit card reward points are “rewards” that are earned by consumers by using a cash back credit cards and are given out in the form of points toward vacations (and other things), airline miles toward flights, or actual cash back.

The concept is simple and most of the earning is pretty straightforward. You pay with a credit card and you get points or miles. At least this is real and you can ACTUALLY get points, miles, or cash back. I’ve gotten points on an old card in the past, as well as family and friends who have redeemed their points. That’s just about the only positive-ish thing I’m going to say. It all sounds great at first, but there’s definitely more to the story.

Credit card reward points are offered by HUGE credit card companies. They don’t give you reward points because you’re loyal or because they want to reward you. No way, they’re in it for the money. They make billions and they want you to spend. The more you spend, the more they make. So they came up with “credit card reward points” to trap you in this game. The game that only they win.

Because it’s not worth it. These points, miles, or whatever they hell they are, always have a catch to them. They might not be worth very much, they might get cancelled, or your points could change value out of nowhere. It’s all a ploy…a big joke to them. And they’re scamming millions of people out of hard-earned dollars, all while giving out “rewards” to make you think this game is worth it.

You spend. They make billions. Then they build tall skyscrapers. At the end of the month, they give you a few dollars back. You feel rewarded so you keep doing it. The cycle continues. Absolutely ridiculous.

It’s like trading dollars for pennies. I’m not gonna’ do that. You shouldn’t either. Here are my 7 reasons why credit card reward points are bad.

7 mind-blowing reasons why credit card reward points are bad

1. It’s all a game

Have you ever stopped to think about why credit card companies give you points? I mean, really think about it. It’s because the whole thing is a big game. They know people will play it, especially if they offer an incentive (points) for playing. You play the game, you get points.

The entire credit card scheme is just a big game to the credit card companies and they’re continuing to get rich off of people who aren’t really that savvy. They use their credit cards to get points, while still paying heavy interest payments, and then maybe get a free flight two years from now. So you’re really losing money.

Even if you pay with your card, immediately pay it off, and get the points, you’re still playing a dangerous game with snakes (the credit card companies). You might game the system, but they’re still making money. So they still win.

They’re called POINTS for a reason. Quit the playing the game and go win by building real wealth.

Check out this post here for, “17 Great Ways to Pay Off Your Credit Card Debt Right Now.”

2. It’s only a few points

When it’s all said and done, you’re only getting a few points overall when you spend money with your credit card. If you really break it down, you’re typically only getting back about 1-2% percent of what you spend. So when you spend $100 dollars, you get about $1-2 dollar in points.

So not much. And it takes a LONG time to build these up to cash in for anything of value. If a typical vacation costs $1,000 dollars, cashing in for a vacation would cost you $1,500 or $2,000 dollars (because credit card company rewards typically cost more).

So if you get 2% cash back, you would have to spend $75,000-100,000 dollars to get that amount of cash back for a low-quality vacation. Do you really want to spend $100,000 dollars to get cash back for a crappy vacation?

Some people will say, “but I’m going to spend that money anyway.” Maybe true, but this will probably take you YEARS to do and save up the cash back.

It’s not worth spending $100 just to get $1 dollar back!

3. Reward points can change in value

Yep, at any time, a company can change its reward point structure to change the value of your reward points. And it’s normally in their favor. So if you’re about to cash in for a flight with 40,000 points, the company could change the required points to 80,000 points and completely screw you.

It’s simple math sometimes. If inflation causes gas and everything else to go up, you can bet your reward point cash-in cost will go up. That means that the amount of money you have to spend will increase. That sounds like a scam to me.

Also, don’t fall for the first year bonus. You might get a decent amount of rewards in the first year, but after year 1, the rewards drop off and you get next to nothing for your money spent. Some cards offer an introductory bonus if you spend a certain amount of money (like $3,000 to $5,000 dollars). Once the bonus period ends, your rewards drop and the card is basically useless.

4. Reward points can be cancelled

Credit card companies are clever. And a lot of the time, they put contract-voiding language into their card contracts. I remember signing some vague, lengthy contract when I got my last and final credit card a few years back. Did I read the fine print? Heck no. Who really does?

But you should. Because most include cancellation of credit card points in that contract for certain reasons including: if you pay late or don’t pay, if they’re not used within a certain time period, or if you close out your credit card. The credit card card companies control the points. So don’t be surprised if you wake up and find out you don’t have any.

Hey, you signed the contract, right?

5. Interest

Points don’t matter at all if you’re paying interest on your balances. Seriously, if you keep a balance and pay interest, that interest is going to cost you more than the value of points you might be earning.

There are a small group of people who “churn” reward cards just to get the points, pay the cards off, open more cards, and put in a serious amount of hours just to make a few hundred dollars in rewards. Again, a small group. Most people keep balances but spend money just to get the reward. Paying dollars to get pennies back in rewards just isn’t a very good wealth building strategy.

Now you know. So do something about it! Check out my 10-step guide here on how to stop living paycheck to paycheck.

6. Annual fees

Annual fees can be an absolute killer to your credit card rewards if you have a credit card with this kind of fee. These fees are due every year and sometime cut into your reward points that have been earned. I would hate to have earned $300 dollars in points and have that taken by a $295 dollar yearly fee. But a lot of cards have it. Some will waive it for the first year then jack it right on up to $95, $295, or $495. Whatever they charge, people still pay it every single year. Don’t pay these fees. Ditch the cards and use that fee money to save up for a real reward.

7. Encourages you to spend more money

Lastly, as you’ve probably noticed in the sections above, rewards credit cards encourage the average spender to spend MORE money. It’s all part of the game to earn points. The more you spend, the more you earn. You want to earn more points, right? I don’t. You shouldn’t either. Because you might get a crappy vacation 6 years from now, but you’ve probably sacrificed your future with 6 years of overspending just to get it. It’s NOT worth it.

If you want to go on an awesome vacation, or buy something really awesome, just save up for them. Figure out how much it costs and work towards the goal of whatever the thing is that you want to buy. You don’t need credit card reward points to do that for you. Because you’re just making the credit card companies rich. All the while, you stay poor and in debt.

REAL millionaires don’t use them

But here’s how you break the cycle. And here’s what REAL wealthy people do. Not mega billionaires or the ultra wealthy. Just people like you and me who saved and invested to build wealth over time.

REAL, Average Joe, everyday millionaires didn’t get rich by using credit cards and earning a few points. Nope, their wealth was built by staying out of debt, not using credit cards, living below their means, getting their home paid off, and steadily investing over the course of 30-40 years. That’s how they did it. Not credit card rewards. Just hard work, discipline, and consistency.

So now you get to make a choice: do you want airline miles or wealth? Debt slavery or debt freedom. Crappy vacations and cramped flights or awesome vacations paid for in cash? The choice is yours.

For more reasons why credit cards are bad, check out this post: “37 Reasons Why Credit Cards are Bad (and Ruining Your Life!)“

The final say

So look, here’s my overall plea to you as a potential credit card reward point addict: please don’t fall for the trap. You might get a few reward points or miles but it’s NOT worth it. You might be able to cash in some airline miles, get a second-rate hotel room for a couple nights, or earn enough cash back for a steak dinner. Whatever the reward, it’s not worth all the trouble you’ll have to go through to get it. It’s just not.

Instead of credit card rewards, just save up cash. It’s much easier and much less stressful that way. And I promise you that it will be more rewarding when you do that.