Have you ever found yourself roped in to a lame conversation about gas prices?
You know what I’m talking about. You’re making small talk at work with colleagues and that one guy chimes in with his usual “ugh, gas prices were up 7 cents this morning” spiel.
Then proceeds to show you his latest gas price tracking app and brag about how he drove all the way across town because he found a place that was 10 cents cheaper than the rest.
Meanwhile everyone is politely nodding while their eyes glaze over.
What I want to say: “You do realize that you spent all that time and effort to save about (~15 gallons * 10 cents =) $1.50 right? And that’s not factoring in the extra gas you used to drive across town….
What I actually say: “That’s great, you’ll have to tell us where you find these great deals”
I don’t mean to belittle someone for trying to save money, I’ve certainly put a lot of time and effort in to perfecting that subject with regard to travel.
But it’s important to always account for the time and effort that you put in to it. Otherwise you’re just creating a ton of work for very little reward.
This same thinking occurs in the points/miles world.
In fact, I get a few dozen emails per week that go a little something like this.
I am new to the whole credit card rewards thing and curious as to how you manage everything. Do you have some sort of “cheat sheet” to keep track of which card to use for all of your purchases? If so, could you share it with us? I would love to know how you keep track of everything.
In fact I use the same card for more than 90% of my purchases. (I already shared which card that is with my Insiders List).
Many casual points/miles fans assume that the real secret to maximizing rewards is making sure you use the perfect card for every purchase you make.
Which is entirely false, and unfortunately scares a lot of people away from this hobby. Typically they have excuses like these:
- I don’t want to carry 10 credit cards in my wallet at all times
- I can’t remember which card I need to use for which purchases
- I’m worried that it’s too much to manage and I’ll miss one of my payment dates
- I don’t want to have to log in to a dozen different websites to manage all my cards
Fact: For the vast majority of people, trying to use the perfect card for every purchase is a total waste of time.
Much like trying to save a couple bucks by driving to every gas station in town, the rewards simply don’t justify the effort.
Let’s take a look at a quick example to see what I mean.
Let’s say that you have 5 different credit cards, and for the sake of argument we will say that each one earns 1% in rewards used for travel, gift cards, cashback, doesn’t matter. Just go with me here.
They all earn the same 1 point per $1 on standard purchases, but have the following bonus categories.
- Card 1 earns 2x points on groceries and gas
- Card 2 earns 2x points at restaurants
- Card 3 earns 3x points on department store purchases
- Card 4 earns 5x points on movie/show tickets
- Card 5 earns 2x points on travel purchases
(These cards are completely made up, so don’t try to read in to this)
Now let’s say your monthly expenses look like this. Again, totally hypothetical.
- $485 on groceries/gas
- $200 on eating out
- $80 at department stores
- $25 on movies/entertainment
- $120 in travel expenses
Assuming you memorized every bonus category, carried 5 different credit cards in your wallet, managed 5 different online accounts, and used the right card for every purchase you would earn an extra 1,975 points per month.
Which, going by our example, is worth a whopping $19.75.
So the question is, is it worth the time and hassle of managing all those variables to earn an extra $19 a month?
For most people, the answer is NO.
Especially when you can earn 20x that amount of points with a new credit card signup bonus.
Are there exceptions to this? Of course.
If you spend thousands of dollars per month to feed a family of 12 it would be worth your while to pay attention to which card you’re using at the grocery store.
But if you’re trying to juggle a dozen different cards just to earn a few extra points here and there you are far more likely to burn out and completely give up on this hobby.
Remember folks, less is more.
Focus on the big hits and don’t worry about the small stuff.
Images: StyleCaster.com, MyFico.com