People Who Say ‘Credit Card Rewards Are Scams’ Are Scamming You

I’ve used these miles to travel the world in a way I never would have expected to be able to. I’ve had some amazing experiences, and done it very comfortably, for a fraction of what it would have cost to purchase these same experiences. I’m humbled and grateful for the opportunities that miles and points have afforded me. And I know it’s not a con.

Rewards are not for everyone. If you can’t be strategic, if you can’t handle your finances, then you shouldn’t play. Dave Ramsey profits off scams but also has advice that is helpful to a segment of the population that can’t manage money. The problem is that Ramsey thinks it applies to everyone, and he’s wrong.

Here’s one take on this typical advice.

His model is completely wrong.

  1. You spend money to get stuff, not to get “a penny”
  2. And when you do that for spend that’s happening anyway, you should earn rewards worth more than a penny or you’re doing it wrong
  3. He says ‘whoop de do’ to the rewards, but if you’re spending the money anyway you’re better off getting the rewards too rather than leaving them on the table

If you can get a merchant to give you a 3% discount rather than taking 1% in rebates, of course you do that. And if you’re going to spend more than you otherwise would because of the convenience of the card, you need to work on this.

He’s a venture capitalist. Saying that you ‘only’ get 1% back is like saying you should ‘only’ invest in savings accounts from big banks, rather than scouring the marketplace for better opportunities.

Credit card rewards are a transfer from those who do not pay off their bills each month to those who do. With the more lucrative products, card companies rebate the bulk of interchange to the customer, generally making money only to the extent that they acquire customers who revolve their balances. If you don’t pay card interest, you’re coming out ahead. If you do pay card interest, you’d be better off chasing the lowest APRs rather than rewards.

(HT: @milestalk)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Clearly, the “guru” Nate who gets 3% deducted from the bill, doesn’t realize that he’s also giving up other advantages the cc provides. Like purchase protection, ability to receive the $$ back if service/merchandise doesn’t work, etc. Plus, I want to see him paying cash to Amazon, or an airline.

  2. And since this is a travel website–note that negotiating the discount for cash on air tickets can earn you extra security checks. (Admittedly, this was 20 years ago.)

  3. I am in the merchant processing business. Gary is correct. The banks make a fortune off people who don’t pay off their balances in full and lack the financial discipline or means to be a non revolver. Miles & Points work for the people who understand the game and are able to use the benefits to their advantage. You can earn tremendous travel benefits and the payback is fantastic if you have play the game very carefully. The vast majority of folks don’t have that understanding or spend beyond their means and they are the most profitable customers for the banks.

  4. Yea totally.. Credit card rewards are bad. Spread the word now.. Also.. cancel your card and complimentary airline lounge access too. I guess us peons here will just have to do our best… *Sarcasm

  5. Dave Ramsey’s main pitch is you are deriving your benefit from the credit card companies at the expense of others who got sucked into paying high interest rates. Credit card companies are in the business of making overall profits. The push of credit on the young (via credit cards and student loans) I find troubling and a negative for society. By playing the credit card signup game, your actions do have consequences, even if you are not the one bearing them.

  6. @Brian Playing the victim card is not an excuse. Hucksters of every variety are on every corner looking for gullible prey and have been for centuries.

  7. @brian Spoiler alert. Banks aren’t going to stop targeting profitable clients or lower APR’s on revolvers because non revolvers get SUB’s and points from spending

  8. I’ve been to places and done things with miles and points that I could never have done and paid cash. As others have said, you have to be disciplined. I’m fortunate in that I own my own business and use the corporate card to generate miles and points. In my entire life I don’t think I’ve ever paid a late fee or interest on a credit card. I’m fortunate now that I just have them setup to autopay. I review them and have lots of alerts setup to protect myself. Miles and points are a big benefit IF you can manage your money. My rule of thumb has always been, if I can’t pay cash for it today I’m not going to buy it on a card.

  9. Merchants who charge more when the customer pays with a credit card forget that they do not handle cash for free. They have to safeguard it, count it, make up the bank deposit, and pay the armored car company to come get it. All of that has a cost.

  10. When we were a younger married couple we optimized extreme couponing with a ‘grocery game’ and saved hundreds monthly on our household expenses. Now as we approach our 25th mark we just apply the same concept to our overall finances. All of our credit cards are linked to loyalty programs earning us points on everything we spend money on where possible and we pay off all expenses in full. Then we travel frequently for less and with upgrades. It’s a win-win. I don’t view this as too difficult a concept. I had a client a long time ago when I was just out of college who suggested I pay all of my bills with a credit card and then pay the credit card once monthly in order to build up my credit. This was years before perks and points but it was great advice. Point being you can spend within your means to do it. Hardly a scam.

  11. I’m sure Dave Ramsey means well, but his financial literacy never really evolved past 1993. And a healthy amount of his advice is based on the Bible rather than a finance textbook, lol.

  12. It’s quite incredible that credit cards companies are allowed to charge interest in amounts that would get the average Joe arrested.

  13. I’ll take the scam, thank you.

    If the merchant wants to offer me a discount for cash, I’ll consider it

    Meanwhile, we charge everything to points or rewards card and pay it off each month. I love getting scammed with those points or cash.

    Those scams have let me go round the world multi times, paid for hotels and visit places never thought I’d see.

    I DO hate being scammed by airlines and hotel cards with working hard to get points only to have them devalued. Skyrubles, I’m looking at you.

  14. I think a Dave Ramsey pupil would be better off with cashback instead of points. The value is more flexible , tangible , requires less mastery of the rewards game, and can be used to pay down debt – something even Dave could relate too.

  15. I think Dave Ramsey is about 80% good and 20% wrong. Yes, *everyone* should not spend money they don’t have. That’s 80% of his teaching.

    I can do it while using credit cards and profiting. I have friends who have trouble not getting themselves in trouble with cards. That’s life.

  16. To Dave Ramsay and his pupil Nate. Please keep preaching this propaganda and regarding the mileage and points game. People like myself will love you for it, because that means less competition for us. Thanks ! keep up the great work.

  17. So far my return on credit card bonuses and associated spend is 20.8% at 1 cent per point valuation. At my average redemption rate so far in 2022 of 2.66 cents per point, my return is 55%.

    This is on natural spending that I would have made anyway.

    It requires discipline and a lot of organization, but for those who enjoy the hobby, credit card churning is incredibly rewarding.

  18. I am willing to bet that nobody is getting 2% of value OVERALL from their loyalty points accrued on credit cards (and you have to include breakage, i.e. points you cannot spend). Of course, everyone has the ONE time they got amazing value, but it’s the AVERAGE that counts.

    You can get 2% from cash back cards any day.

    So yeah, loyalty points from credit card programs are a complete scam.

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