Tuesday, March 6, 2012

Why Credit Card "Rewards" are Ridiculous

I have talked before about how much I hate the misleading "rewards" programs touted by credit cards. in short, I think they're absolute garbage.

As much as I would've loved to never hold another, I had to take one out for the business travel now warranted by the new job. This being said, I wanted "the best" travel rewards credit card and, after some research, I had found it - the Capital One Venture was, according to several sources, my best bet.

After nearly $14,000 of business travel, I have 36,400 rewards.

Neat, huh?

It might seem neat, until you consider how those "rewards" translate...
As it turns out, 100 travel rewards miles = $1

So those 35,000+ miles earn me $350 to redeem for travel.

And you might say, "hey, now, KG - that's $350 of free! Everybody likes freeness! How can you possibly complain? You're so ungrateful."

And yea, I might agree... but I'm just a little less than impressed by the rest of the translation equation...

Dollars spent: $14,000
Miles earned: 35,000 miles
Dollars "rewarded": $350

Want to know the effective reward ratio? 0.025
2.5%! Two-and-a-half-percent.

Would you get excited about a 2.5% discount on anything else?!

(Would you go through any effort to save 12 (and a half) cents on a $5 sandwich?) Of course not. This is how laughable it is to get excited over a free $500 flight after spending $20,000... You're better off just setting that money aside as you go!

This is the garbage of the rewards programs - even those regarded as "the best" are designed to mislead.

So next time you're feeling hot to trot and frenzied to flash the plastic, just remember that your "rewards" are effectively saving you $0.625  (that's, um, less than two-thirds of a penny...) on your coffee.

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