Thursday, October 28, 2010

Why I am Cutting Up My Rewards Credit Cards

First, it was the Continental Chase rewards card. They gave me 20,000 airline miles just for signing up, but little did I know that it would take FOREVER to get to the 50,000 miles to get a free flight. This usually meant spending a lot before getting our free flight! We are frequent fliers and I thought this would be easy, but I also didn't read the fine print. An $80 annual fee! Multiply that by two since my husband also had a card, and we were paying $160 in annual fees! That was my mistake. I simply got caught up in the "rewards" and didn't realize these rewards would cost anything. I cancelled both cards about two years ago. I always make sure to ask about the annual fee before signing up for anything now. We did get our "free" flight but to me it wasn't free.

Next, it was the Upromise card. Now, I did like this one, and still do. BUT, my problem with it was that even though we paid our balances off each month and got the 1% back, I just simply did not keep track of my purchases that well. It wasn't against their card, but each time the end of the month came around and I had to enter in our finances, I was not a fan of trying to subtract everything from that account from what we had in our bank account. It was a headache, but we did earn a little over $600 in about a year from that card. If you total up the gas rewards, 1% back, and online purchases, our savings did add up. But, there were times when I wouldn't mind spending a little more, because we would get the rewards. Not a good idea.

Rewards cards are tricky. Even though it is nice to get the "rewards" promised, its a mind game. You are made to think "I can spend more because I am getting the rewards!" Its also much harder to keep track of what you are spending when you are using credit cards and not your bank card. You have to do double the work to keep track of exactly how much money you have in your bank account at the end of the month, and that did get exhausting. I also wasn't 100% sure the numbers were correct, and that wasn't good enough for me. I wanted to know what we had to the penny.

About two weeks ago, I decided to quit using my rewards credit cards and plan to just use cash and my bank card only. I can't even begin to tell you how much I feel like I have already saved. One, I like when I can get cash out of an ATM because it tells me the balance on the receipt. We also get reimbursed for ATM fees, so this is an added bonus. Two, handing cash over is just, well, a little harder than swiping a credit card! There have already been times where I simply didn't buy something because I didn't want the cashier taking my cash! The bank I use has their own rewards system, so I won't be without my rewards, they just won't be earned using credit cards.

I also made it a goal to keep much better track of the checks I am writing and keeping those recorded in my register, which I have been very bad about in the past. This is very helpful because before, I just wrote checks without recording. The checks wouldn't clear until a month later and by then I had forgotten that I even wrote the check. Not financially smart. But, I am getting better!

I got the idea to use cash from a few friends using the "Dave Ramsey Envelope System." I did read about this but I am not sure I want to use that system just yet. I want to take baby steps and eventually plan out a strict budget and maybe use this system in the future. Right now I am happy with how my current method is working and hope to perfect it a little more with time.

Some say they don't like to use cash, because they can't keep track of what they are spending. Be sure to keep your receipts so that you can keep track. It's easy to be able to sort them at the end of the month to see what you have been spending on. Read my article here on saving your receipts.

Do you use a rewards card or do you prefer to use your bank card and cash? Do you use the Dave Ramsey Envelope Method? Please let me know if you do, and how it works for you!


  1. Our debit cards earn rewards. And because we use them for everything, it's worth it for us to pay the annual fee, $25 each I think. We got cash back when we opened the account this summer, so this year's fees were technically free. And we've already earned $100 worth of gift cards. Sometimes the gift cards take less points than the cash equivalent, so we went that route. Really a great thing for us :)

  2. We use no credit cards and the Dave Ramsey cash envelope system (on his envelopes you can write exactly what you spend and deduct - I just put all receipts back into the envelope). There is a certain level of freedom that I feel knowing that if I need to spend the cash on groceries from the food envelope, that I can see what I have available right in front of me, and see just how few "$20's" I can use...almost like a game for me! It's helpful to use small bills so that when you're at the store and buy a toiletry and food item, you can pull some from both envelopes. If not, it can be time consuming going back and adding cash to the food envelope when your grocery bill included a roll of paper towels for example. It works for us, and like you said, cash purchases STING! I never want to break big bills and I keep the "change" separate and treat myself to coffee/Sonic drinks with it! :)

  3. I use my CC. I LOVE THEM, but I do hope that if people are not ready for that to use the ATM card, my bank offers rewards points on the debit card no fees.
    I never do CC that have fees, that's just silly to me. Only rewards that let me cash out in Gift cards or cash.
    I have to say I can keep track of what I spend on a CC. I think that is KEY!
    I like my cards b/c come christmas Last year I got over $200.00 in Gift cards and I NEVER carry a balance. So it was like "free money"
    When I did Financial planing for younger guys I always told them get a $300.00 credit card, don't let them talk you into a larger amount. This helps build credit, get rewards, and at $300.00 a month there is not much trouble you can get into.
    I think it depends on what you are confident in. Not to get caught up in the rewards hype and think about what you really are getting for using the product.
    The best time for me to use CC is when I am making a HUGE purchase. A few years ago I had the money in my savings for the down payment on my car. I put the down payment on my CC and as soon as I got home from the dealer I paid off the card from the money in my savings. That was a HUGE chunk of rewards I got for doing one extra step ( log on to my computer at home and transfer funds from Savings to CC)

  4. i'm your newest "hop" follower (and a newbie blogger)

    Love your blog.

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  5. We have an American Express card which gives us miles. First, we got 50K miles for joining (a flight), we already had miles because we are frequent fliers so we were halfway to a ticket. We wound up spending enough where we now have close to 3 tickets for free.

    We get a companion fair for $100 and we get two free bags/ person. We do pay $90 to AmEx as an annual fee. To me, that's $190 for a companion flight. We also get outstanding customer service, we've "lost" the card 5 times since Nov. and they overnight us a new card each time. AND, there was a company who was refusing to refund our purchase because "Returns are not intended." AmEx used their lawyers and got our money back. They took the total off before they even made the complaint with the company and they wont put it back on. We get a great interest rate and we save up for every purchase we make before we make it so we move the money into the card account prior to buying.

  6. Ashley, we use the Dave Ramsey system as well for everything. For instance, my daughters Halloween costume will probably cost around $150 next year, I already have an envelope for that, Christmas and her b-day. His system is very helpful to us but we feel we get better rewards using credit for purchases as opposed to cash. We've saved enough to buy our house in cash and we are HOPING to get our credit line as unlimited so we can put our house on the AmEx and pay it off. We've had friends do this and truly reap the rewards. We saved the cash for our car and did this on our chase card. We wound up getting a couple hundred dollars in gift cards!

  7. We use a rewards credit card--actually, two different ones. We limit our purchases by asking "Do we NEED this?" all the time! So the rewards are worth it, for us, because we aren't paying any annual fees or interest.

    Stopping by from FFF


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