Getting Rid of Credit Cards and Credit Card Rewards
I have probably around 8 credit cards to my name. Some have annual fees, most don’t. I have closed only a few in the past few years not before transferring the points to my airline rewards account, of course. I feel that the credit card ‘game’ or ‘hack’ needs to be revisited. Just like anything, when a system becomes mainstream the profiting companies figure out ways to get more out of you. In this case I think they are profiting by manipulating our psyche.
Here’s my hypotheses:
- accumulating points becomes an obsession
- annual fees become justified based on rewards offered
- travel points give you false sense of “savings” leading you to spend more on the trip
- you make decisions based on points vs value of the expense
- in time you drop your guard when it comes to spending
- there is a benefit from seeing your checking account drop immediately in value when you make a purchase
Rolling In Doug… Points!
The past few months I have debated the value of having rewards credit cards. I’ve had the urge to switch back to my debit card and spent straight from my checking account. How archaic of me!
Up until 2 months ago I was carrying my Southwest credit card. I have managed to accumulate 98,332 rewards points towards travel over the past couple of years. Most of it has been from daily expenses and also letting moms use it for some of her expensive dental work.
Now I’m sitting here staring at almost 100k of Southwest rewards, another 33k of Delta points, 6k Thankyou points from Citicards and I think I have 30k worth of points from Alaska Airlines. What’s my plan with these points? I accumulated the majority of these points during my more spendy years. If I use them up it’s quite unlikely that I will be able to replenish them with my measly $1,500/mo of expenses.
Cost of Attention
There is something to be said about having that one extra card in your wallet… having that one extra login to worry about… having that one extra item on your mind that depleted your focus whether you believe it to be true or not.
Expense Snowball
Besides a deflated attention I may develop an inflated budget due to these points. I’m currently in my accumulation phase of my financial life. I’m spending wisely and earning efficiently in order to build a snowball that I can roll down the mountain. Taking a trip can snowball financially as well:
- Airline fees for using points ($5-15),
- travel to/from the airport ($5),
- lodging ($90-400),
- food ($20-120),
- entertainment ($20-200)
- Total = $140-740
When you get something for free (the airline seat) you have the tendency to think “since I got the flight for free, it’s OK if I spend a little more on xyz”.
What about gas rewards for those of you with cars or grocery rewards for those of you with larger families. If you have amazing self-control, sharp insight and 20/20 foresight then you might benefit from them. Again, I can’t help but think that we somehow will justify certain expenses ‘because they will get me points’.
So, after writing this post I think this will be a great opportunity for me to try this out. I will retire my cards. Some card issuers will naturally lower my credit limit, some points may expire and some banks may even close my account. I’ll keep you guys posted.