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January 15, 2010


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-My Costco membership netted us approx $300 after the $100 membership fee
-My Costco American Express check comes next month but it will be around $600

Total = $600

My only comment is that I'm much more frugal on my check card or cash spending. So this year we are minimizing the use of the AmEx. I'm more apt to impulse buying on the AmEx. However, the Coscto AmEx is great - 4% on gas and 3%, 2%, and 1% depending on type, plus NO annual fee!

I've always paid in full so don't know what the penalties are.

While I am not a huge CC user, I'm excited for the rewards this year since I purchased our car on my Costco American Express in addition to the rest of purchases. I am looking at around $400 back in a few months.

What changed about the Chase Freedom rewards?? I use this as my primary card; and I wasn't aware of any changes.

There was an online rumor that they were doing away w/ the $50 bonus @ $200...but they haven't, as I just hit 200 and ordered one the other day.

You didn't "earn" anything. You received a partial rebate of the higher retail prices paid by everyone because of the proliferation of "rewards cards." Merchants pay higher fees for rewards card swipes and those higher fees are passed on to consumers at the retail level. Personally, I would rather have the lower prices by paying cash but the plastic addicts won't let that happen.

$355 on charges of 15512 (2.28%) on my Penfed Platinum Visa. Best of all, I didn't have to do anything at all. No silly redeeming points, or watching for a bonus mark, blah, too much work. Reward is credited at end of month.

I'm sure I got some of those silly points on my various AMEX cards, but I don't use them as much anymore unless I'm buying something I need more protection on.

I'm not sure of the amount, but it was over $700. I use Chase Freedom for gas, groceries and fast food (I signed up before they changed it to your top 3 categories and it's stayed the same) for the 3% and 25% bonus, and then use the Schwab for everything else.

FMF, did you ever get a notice that your Chase changed? I know a lot of people did, but I still have not and so I keep using it.

@Mr. ToughMoneyLove
I will pay the same for an item whether I use cash or a credit card, so it would be financially unwise to use cash and skip the credit card rewards. Credit cards also make it much easier to keep track of budget specifics. They also are like receiving 0% three week loans. Of course I'm a "plastic addict". As long as you don't abuse credit cards, they are fantastic. Get with the times and chill out.


I had roughly $600 back from my Costco Business AmEx and Schwab cards:

$350 Schwab
$250 AmEx

FMF - A snow blower, really, don't you have kids?

We 'earned' around $350 cash rewards from Citicard for the year (measley) for extensive use (all gas, groceries, sports club fees, textbooks, clothes, you name it!). I'm going to take the advice of Mr. ToughMoneyLove and see if I can spend less using cash. Hopefully so, because HATE=giving up 'free' money!


It seems they are doing away with the bonus. The reward structure may also be different. I thought I was immune too, since a lot of people were getting switched and I wasn't, then at the end of the year I received notice that mine was changing too. They moved me to Ultimate Rewards. You can still get cash back, but the $50 bounus at $200 is gone.

Tom --

Ha! Yes, I do. But do you know how much snow we get in Michigan? Over 100 inches per year the past two years (though we're "only" at 45 inches so far this year.)

Geoff --

Yes, I did get the notice.

How has AMEX Blue Cash changed? I thought it was the same it has been.

We use a Discover More card for almost everything, a Discover Open Road card for gas and other car expenses, and a Worldpoints Mastercard for anything that doesn't take Discover (graduate school mostly). These are our totals for 2009.

Discover More = $263.26 cash back for $21,570 spent (1.22%)
Discover Open Road = $59.18 cash back for $1895 spent (3.12%)
Mastercard = $105.95 cash back for $10,595 spent (1%)
So in all, I earned $428.39 with purchases of $34,060 for a return of 1.26%.

I love Discover, but I will take a closer look at the 2% Schwab Visa.

This summary made me really appreciate how happy I'll be when we don't pay for graduate school anymore...

Mike --

They lowered the payout percentages.

have Chase Freedom as my primary card - love it! I just cashed my $250 reward check 2 days ago - $50 bonus is still in effect for me. I earn 2% bonus rewards in top 5 spending categories (max $12 per month) plus the standard 1% on all purchases. Maybe mine isn't changing b/c I am also a Chase banking customer - i have checking and tiny savings (I use ING for my real savings) acct there.

May want to let readers know that Discover is allowing cardholders to donate rewards directly to the Red Cross and will match the first $1M of donations.

I just got a notice about 40% off purchases w/ my Amex reward points so I bought a few things. I'm a big Amex guy!

All you TML haters - I'm not saying don't use rewards cards if you are going to use plastic. Just don't pretend that using them is economically efficient compared to a system where prices are lower because merchants aren't being charged for your "rewards." The amount you pay in increased prices on almost all purchases due to high merchant fees exceeds the value of your "rewards." You are not a genius gaming the system. Visa and the banks are the geniuses, tooling you and the merchants around with their rewards programs.

If merchants could offer cash customers a 3% discount, wouldn't you take that deal? Of course you would, unless your plastic addiction were truly not curable. Unfortunately, most agreements between Visa and the merchants prohibit that, all thanks to a system that encourages the use of "rewards cards" system. You are being tooled folks.

Insightful comments, TML.

Mr. ToughMoneyLove --

1. Yes, there are extra costs added to goods to pay for credit card fees.

2. I'm guessing that almost everyone on this blog would prefer lower prices and no card rewards over higher prices and card rewerds.

3. The "system where prices are lower because merchants aren't being charged for your rewards" doesn't exist and will not exist in any form or fashion. So why are you arguing that it's a great option? Having unicorns check you out at the cash register would be wonderful too, but that's not going to happen either.

4. GIVEN THAT WE'RE STUCK WITH THE SYSTEM WE HAVE, why not get credit rewards? And why aren't they added earnings versus using cash (assuming you do not spend more) GIVEN THE CURRENT SYSTEM?

5. GIVEN THE CURRENT SYSTEM, using a card and getting 2% (or whatever) back is a smarter option than not doing it. So no one is being tooled, except in the mythical land in your imagination.

i plan on doing some shopping this wknd and would definately LOVE to have a unicorn ring me up :)

@Mike and FMF - Nothing has changed with my Amex Blue Cash. I heard months ago that there would be changes, but I still get the same rewards. 5% on gas, groceries, drugstore and 1.25% on everything else (over $6,500 in spending). This year (year starts in June) I've got a little over $700 on about $35,000 in spending.

However, my family is on a 21 day "financial fast". No credit cards, cash only, no unnecessary spending. I truly believe that using the card can increase spending and eat up any "savings" the rebate gives you. Never mind the increased cost of goods pointed out by TML...

I use a combination of CitiCard and Schwab reward credit cards.

I only earned $366 this year, I'm going to have to figure out if Citi has changed their reward program... $366 seems kind of low.

CommRe --

That's what I mean. It used to be 1.5% on all other purchases.

I'm really surprised so many readers so far don't report having a Penfed Visa card. It's only of the top 4 or 5 cash rewards cards. Most consider it right up there with Chase Freedom. Interesting.

Infinion --

I've never heard of it. In what way is it near the top? Who lists it near the top? Is it cash back or points-based (my quick Google search implied it was points, not cash.)

@FMF - I see how you think now. Whatever system is imposed upon consumers, you will accept and willingly play in it. You will also assume that changing the system is impossible, just like finding a unicorn at the checkout. You are the perfect, fully compliant customer for a fat cat financial system. That's just part of the collateral damage caused by MBA programs that seek to preserve the financial status quo.

Now how about an alternative? Given all the regulation of the financial system that has occurred and that is still being discussed, about an FDIC rule that prohibits Visa from using merchant agreements to prevent cash discounts to consumers? That way all of you rewards hounds can have your fun and I can get my cash discounts. Why don't we have that rule? Because Visa and the banks have successfully lobbied against it. And so consumer behavior and prices continue to be manipulated by the credit and banking industries.

Mr. ToughMoneyLove --

It's not going to change, so why assume it is and then disparage others for working under the current system? It's illogical thinking and as a result you appear to be unstable by constantly doing so.

Tell the unicorn I said hi.

I should get around $500-$550 back from my Amex Truearnings Costco card with spending of about $35,200. So its about 1.5%

Mr. ToughMoneyLove,

Visa and other credit cards do not prohibit cash discounts. Ask a small business owner and read the contract. Businesses are not allowed to put up signs that limit the amount you can charge to a credit card, but they are more than welcome to give a discount if you pay with cash.

So, no signs that say "$5 minimum for credit card purchases", but it's okay for a sign to say, "5% Discount if you Use Cash".

That's why Specs Liquors can give a 5% cash and debit card discount but the small book store I worked had to take down the sign that stated a $5 credit card minimum.

As to the credit card system, I'm with FMF. Working with the system that exists seems logical to me.

On a side note, the unicorn references really made my day. :-)

Great use of the credit card.
I have the Discover gas card that pays 5% back on gas. Too bad it's capped at 100 per month and I charge 99 per month to the card.

The unicorn reference and discussion cracked me up. You should link it to your post on jokes.

Different question that has not come up:

Do you have to pay taxes on credit card rewards or cash back, especially if it is over $600 (normal limit where you usually get a 1099 for amounts over this)?


The point should be made that you spent more than the average family takes home for income to get those rewards and you could have saved allot more by not spending so much and getting less rewards money.

You don't state if this is business or personal expenses or both.

Not spending in the first place will always save you more than any rewards, sales, or coupons.

Oooooo! A whole $845 dollars!! I've never heard a millionaire say he got rich from his cash-back rebates or airline miles.

You're taking a big risk playing with snakes (even if you pay the balance in full every month). Just wait until your payment doesn't post and you're hit with late charges or interest. Or the hassle of switching cards because the "teaser" promo expires or the card issuer changes the rules. Not for me, man!! I'll stick with good 'ol cash and take the discounts upfront, if offered.

FMF. I love my Penfed card. Here is some info:

* Earn 2% cash back on supermarket purchases*
* Earn 5.00% cash back from gas purchases paid at the pump*
* Earn 1.25% cash back from all purchases** you make with the card during each billing cycle
* Up to $50,000 limit
* No Annual Fee
* Cash Rewards credited each month
* No special restrictions to earn your cash rewards
* Limited Time- Balance Transfer of 4.99% APR for 24 months †

They also periodically add another 5% category, like back-to-school, or electronics. I've seen a couple 'best reward cards' lists, and the penfed visa is usually there. The smart people over at fatwallet finance forums also really like it along with the chase freedom along other things. Some say Penfed has tighter credit requirements. A lot of people at fat wallet post that they can't get it. But, when they do give you credit, they give you all you want. The credit app allows you to name your credit limit up to 50K. They also have good deals on mortgages and auto loans. I've heard that having the credit card really helps getting approved for other things.

They also have an AMEX card that used a points system, which is useless to me.

To all the CC Reward 'Haters':

It's 'free' money many of us would have been passing up because we spend a LOT on things we need...groceries (KIDS); school clothes and tuition (KIDS); gifts (KIDS and 25 nieces and nephews, Christmas with 3 sets of parents-divorced and remarried); gas (KIDS getting to school, xtra-curr. activities, sports practices); auto ins.; home hazard ins.; medical co-pqys (KIDS); braces for 2 (KIDS); cell phone (KIDS)... GET IT!?!?!

We might make more money than some, but then it's necessary- KIDS!!!!!!

Mike --

No tax is due since these are classified as rebates off purchases, not income.

Roy --

Of course. But I buy only things in my budget and much of the charges are for necessities (food, house stuff as noted, etc.) Probably about 1/3 or so was business-related expenses that I was reimbursed for.

mikegardner64 --

Didn't say I got rich doing this, but $800 is better than nothing for doing what you would do anyway.

Never had a fee or interest. We'll see if that keeps up or not -- no reason it shouldn't.

As someone else noted, using a card doesn't prohibit getting discounts as well.

Infinion --

Hmm. Sounds decent. But I think if I used it as my lone card (and I do have a one-card strategy), I'd be well below earning 2% (which is what I get with Schwab.) What's your annual cash-back percentage?

hurts the poor
January 9, 2010
Your Money
The Damage of Card Rewards

I use my PenFed Visa as my gas card and Schwab Visa for everything else.

Mr. ToughMoneyLove --

Since you mentioned in the past that you use debit card with high interest checking, and since merchants pay interchange fees on debit cards as well as credit cards, I see it as a bit hypocritical to chastise credit card users. Now, I admit that the value of the interchange fees may be higher for reward cards than for debit cards even those used as credit, but the difference is way smaller than 3% you cite.

Any business owner here who can tell us a sample of fees for different types of cards?

FMF -- great reply. I just loved your unicorn reference. Brilliant!

mikegardner64 - cash rewards aren't going to make one a millionaire, but no reason to pass up free money. As to other things you mention - if you pay via internet or autopay, you payment will always be on time; if you pay in full, other things you mention don't matter. For the record, I've been "playing with snakes" for over 20 years, and would bet $$$ that my debt is lower than yours and my net worth is much much higher.

@ those that still get the 3% Chase rewards.

I have two Chase Freedom cards. One of my was switched to the "Ultimate" rewards while the other still remains on the "old" system ($200 in rewards nets $250 check).

I think it has to do with the expiration date on your card. When my first card expired, it switched over. Thankfully, I still have another year or so on my second card, so I am trying to rack up as much points as I can (within reason) (and within my 3% categories).

Anyway, that's just my theory about why some have switched and why some others haven't (yet).

I have to agree with TML.

Charging purchases for a rebate/reward makes as much sense as purposely having too much tax witholding just to get a big refund check on April 15.

MasterPo --

That's the fallacy of the argument. No one is charging just to get the rewards. They are doing what they'd normally do, buying what they'd normally buy -- even if they used cash. But they're getting money back for it.

Seems like a no-brainer...

Just like you, I am a big Costco shopper, so, I have to carry an AMEX, and a Visa/MasterCard in case AMEX is not accepted. Here is what I am using.

1. PenFed Rewards Visa (5% Gas, AMEX is not accepted)

2. FIA Fidelity Investment Rewards AMEX (2% all purchase, including Costco)

Someone thought Fidelity AMEX only deposit rewards to Roth IRA accounts, and that is not true at all. I am direct deposit the rewards to my Fidelity non-fee checking account, called mySmart Cash. Of course, you can also choose other accounts if you want. If you do not want to open a Fidelity account to get cash rebates, you will get $250 check after spending $12500.

Will this card combination help you make more rewards?


As I posted before, my overall percentage was 2.28% cash back. Like others have posted here, most people use the Penfed for Gas alone, and some add supermarkets. Since that's about all the shopping I do (Gas and supermarkets), I average well above 2%. It really wasn't worth it to me to have another card to get more back on all other purchases. I'd rather just use the Penfed rewards card for nearly everything. So now, my decision of which card to use for any transaction is solely based on protection. If I buy some electronics, I use my AMEX card, which I get some points for, but what I really want is the extended service for free. If I buy from somewhere I'm not comfortable with, mostly online, I use my AMEX, because I know I can get the charge reversed with little effort on the AMEX card. I've had to do that with Penfed also, and it's not terrible either.

Sadly, it looks like the Schwab Invest First Visa maybe reviewing their 2% cash back reward system.


I think the point TML is trying to make (and I would agree) is that you don't get something for nothing.

Someone has to pay for those rewards points/bennies you get. The card company isn't giving you those rewards out of sheer kindness and generosity.

The card is probably charging more to the merchant in terms of a higher discount rate which in turn forces the merchant to raise prices to compensate.

The point being that since someone has to pay for these rewards EVERYONE - card user and cash purchaser alike - ends up paying for them in the form of overall higher prices for goods/services.

Terrence --

We discussed this here:

Not sure what the future holds...

MasterPo --

Ok, so? Does that mean that people shouldn't use them? Or that they're being "tooled" or "fully compliant customers" for doing so?

Part of TML's "rationale" is lack of logic when the current state of things is considered and the other part is a less than diplomatic delivery.

Major LOLs at the unicorn reference, FMF. Genius haha :)

I've been around the PF-sphere for quite some time now and have had "run-ins" with TML across various blogs. To be honest, he just comes off as a big troll to me. Just ignore him and hope he goes away.

On the other hand, I develop love the Schwab too. It's been my primary card since it came out. Easy peasy.

Thought I'd chime in albeit a tad late....
My 2009 cash-back/rewards/free money number: $1,230

$600 HSBC
$355 Amex (Costco)
$175 Chase
$100 Wells Fargo


HSBC is from their 2% cash back card, which I've mentioned before. New cards are now only 1%, but the old ones (like ours) are still at 2%

AMEX nice card, because you get cash back on Costco purchases and prior to this card, I used to pay with a check and got 0 in rewards. We use this card now for all gas purchases (that used to go on the Chase) and all dining (also moved from chase). My 2010 cash back should be coming later this month.

Chase we are no longer using this card since they changed the rewards.

Wells Fargo, they were offering $50 to open an acct. we didn't have one with them, so my hubby and I each opened one! We're actually happy with it (mostly) because it's the closes bank to our home actually. We still use ING as our main bank though.

Have also been making a few extra hundred $$ by being on marketing panels. Doing one tomorrow for $100, woo hoo!

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