Are you using a rewards credit card in your daily purchases? If you’re not, then you’re literally leaving free money on the table.

The points you earn depend on your credit card. For example, you might earn 3 points for grocery purchases, 2 points for gas purchases, and 1 point for all other purchases. Other rewards system gives you back a dollar for every x dollar spent.

Then, there are the additional perks. For example, if you spend $1000 within the first three months of opening a new credit card, then you’ll earn 10,000 bonus points.

The redemption also depends on the particular provider. Check out NerdWallet for the best rewards cards to sign up for.

But It’s Debt!

Some money experts out there may say it’s foolish to take what amounts to a loan on a credit card to buy groceries and gas. In fact, some money experts believe the cash envelope system is best if you’re on a tight budget.

It is, if your money discipline is poor. The envelope system is simple. Every month, you take out an allocated amount of dollars, say for food and entertainment. Everything you buy, you pay for in cash. When you run out of cash, then you have to stop spending for that period. It’s a simple and effective to control your spending and enforce your budget.

Still, if your money discipline is good, then rewards credit cards are a better deal. Of course, good discipline means paying off the current balance every month. That way, you avoid owing interest.

What is a bad idea is opening a rewards credit card for a very specific thing, like a Southwest Airlines Visa card. Unless you use that particular product a lot, then you’re just putting all your eggs in one basket.

The nice thing about a generic rewards credit card, like one from your bank or federal credit union, is that it gives you a lot more things than just deeply discounted airfare.

“Churning”

More seasoned users of rewards cards do something called “churning”. In this system, they may have as many as 30 or 40 open credit cards. While having this many credit cards may sound like a bad idea (it can be) and may sound like it could ruin your credit, it can actually help increase your credit rating.

But only if you have the discipline to manage all these credit cards. Churning is a practice I recommend against, because all it takes is messing up one time to ruin your credit. And of course, for some people it’s almost a full time job managing this many rewards credit cards. They play games, like transfer the balance from an old card to a new card, gaining points in the process.

Honestly, your time is better spent working on and improving myself, learning a new skill, writing, or doing whatever gives you joy. Churning for the sake of getting rewards points to go on a free vacation paid for by rewards points is not very rewarding.

After all, you can instead use this time to learn new, marketable skills, which helps you make more money to help pay for the vacation. I’d say that’s a better use of your time and efforts.

What Rewards Credit Card Should I Get?

The better question is what kind of rewards credit card you should get? It depends primary on how you spend money. I’m in a part of my life where travel for business is quite frequent. In the first 5 months of 2019, I’ve traveled overseas three times. Then, there were the domestic travels. As a a result, I opted for a Chase Preferred Sapphire card. This card gives you more points for travel-related purchases, like restaurants and airfare. The term “travel” is quite loose. I can go to a restaurant just down the street from my home, and it still counts as a travel purchase.

I have a second card that awards me more points for gas and groceries. So, whenever I go get gas or buy food for the week at my local supermarket, I use this card.

Don’t Be Afraid to Spend Those Points!

My first rewards-style credit card was through my credit union. I had this card for over ten years and amassed over 120,000 points (that I knew of). I never even knew I had such a card until some 10 years later, when I started playing the rewards credit card game. By then, who knows how many other points have expired before I was able to spend them.

Another factor which kept me from spending those points was the fear of losing out. It sounded silly as these points were just an idea, a system of arbitrary rewards values doted out by the credit card. Yet, I was afraid of losing these imaginary points. I was afraid if I spent it on this thing then I wouldn’t have the points to spend it on that other thing.

As a result, it took me a while to get over this money energy block. What really helped was by this time I was moving over to a new credit union. This meant closing down old accounts and moving spending to new ones.

So I had to use up my points anyway. As a result, I took three mini vacations in January of 2019. The airfare and half the lodging was paid for by rewards points. It felt good to finally be able to let go of my money energy blocks and spend money. While I was on vacation, my net worth grew by a thousand dollars through a particular good market bull run, which informally paid for the vacation.

I thought this was so cool, to make money while I was having fun. I was at the BMW M School, driving around a track, learning how to improve my driving skills. At the same time money was being made, and I didn’t have to do anything to make it, all because I had the right systems already set up.

Conclusion

Getting a rewards credit card is just another system of making money. It’s like putting money in a high-yield savings account, investing money into a 401(k) or brokerage account, putting money into real estate, or running a business.

The credit card companies are able to offer you rewards because other people are none so wise as to pay off their current balance for the month, incurring interest as a result. They are unwittingly paying for the rewards. So, if you’re going to use rewards credit cards in this way, make sure you’re disciplined enough to pay off the current balance every month.