Are Rewards Credit Cards Worth It?

Earlier, I was reading the post ‘Thoughts on Going Cash Only- The Benefits and Drawbacks of Not Using Credit Cards‘ on Think Your Way To wealth. It’s a well written post that outlines some of the benefits and drawbacks of using cash versus credit.
One of the comments struck me as very interesting. In part, Get Out Of Debt wrote, “As for the earning rewards stuff – do people really earn that much from their credit card rewards? I’m pretty sure it’s trivial amounts, and you have to spend tons to make it worth it i.e. spend money you haven’t got.”
This got me thinking because my experience has been quite the contrary. Let me go through the points here:
Background
Both my wife and I have Citi Dividend Rewards credit cards. The card pays 1% cash back for regular purchases, and 2% for purchases made at grocery stores, drugstores, gas stations, utilities, and convenience stores. Back when we first signed up, they actually paid 5% for some of the special categories.
Point 1: Do people really earn that much from their credit card rewards?
We have been collecting our rewards into a savings account with the intention of eventually replacing some of the electronics in our home. It’s total luxury but our rationale is that the money we’ve earned through this credit card has been ‘extra’ so we agreed that we can save it for some fun stuff. Our goal is to replace our 32″ tube television with a flat screen TV once the TV dies. How long this could be is anyone’s guess. The TV is about 12 years old, so it could go tomorrow or it could be another few years.
In any case, here’s how much we’ve got set aside that has been paid exclusively from our Citi Rewards cards: Over $800.
My guess is that by the time we’re ready to replace the TV, we’ll be able to buy a new one without going outside the money in this account. At least that’s my plan.
My thought: Yes, it is possible to earn that much from a rewards card.
Point 2: You have to spend tons to make it worth it
We’ve been collecting the amount we have for three years or so, maybe a bit longer. Still, in that time we’ve used our credit cards mainly for the category spending that gives us the most rewards.
Let’s look at an example.
Say you use your credit card as follows every month:

  • Groceries – $350
  • Gas – $200
  • Utility Payments – $100
  • Drugstore Purchases and Prescriptions – $50
  • Gifts – $100
  • Travel – $100

The first five categories are the ‘bonus’ categories. These total $700, so at 2% back per month you would earn $14. The bottom two categories total $200 and at 1%, you would earn an additional $2, for a total of $16 per month.
Over twelve months that totals to $192.
This is pretty typical of an average month for us. Often the gifts and travel are something else, maybe clothes, maybe a day trip, but a couple hundred dollars of ‘other’ spending per month on our credit cards is fairly normal for us.
Now, we’ve done better than that, averaging about $267 per year. I’d account the differences to:

  • Additional money earned the first year before Citi cut the rewards from 5% to 2% on the special categories
  • Charges made of large purchases during our wedding and honeymoon planning strictly for the purpose of gaining cash back rewards. One example: our honeymoon. We splurged and went to Hawaii. This was not cheap. Still, we put it on our credit card and paid the credit card with the money we had saved for our honeymoon. Even though we were ‘only’ getting 1%, that was probably $50 that we wouldn’t have had otherwise. It adds up.

My thought: You don’t have to spend a lot to make it worth it. If you find a card that rewards you for the spending that you do anyways, you’re getting something for nothing, and even with the basic $192 per year, that can add up pretty quickly. However, keep in mind that this assumes you are not carrying a credit card balance.
Point 3: You spend money you haven’t got
My wife nor I have ever carried a balance, and we haven’t spent on our credit card just for the sake of spending. Both of us pay our balances in full every month, so we don’t send a penny of our ‘reward’ back to the card company in interest.
As I said above, we’ve charged things that go to our monthly expenses, or larger ticket items that we have the cash saved for already.
My thought: It boils down to responsible spending. If you can be responsible with a credit card, then it is possible to do really well with a rewards card. But, if you have had trouble with credit in the past, then it might not be worth the risk of getting in over your head.
So, I guess I’ll sum up by saying that my experience has proven opposite of what the comment shows. But, we’ve also been very lucky as to not have had credit problems. Each situation is unique and I think everybody should ask whether they can handle the availability of credit. If history has shown that you can, then by all means I suggest considering the right rewards card.

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A Tale Of Two Garbage Bins

I wrote a while back about our new garbage service. Well, it’s been in place for a little over a month and I have to say that it is working out great!
The city provided two bins, one is a 90-gallon trash bin and the other is a 65-gallon recycling bin. The new recycling program takes a LOT more stuff than I’ve ever seen. They take cardboard, all types of paper, plastic bags, and all plastics labeled 1-7. Most recycling programs I’ve seen take only those labeled 1 or 2.
Mrs. Beagle has led the charge in our house to be more conscious of recycling. As such, we have found that we’re recycling most of our stuff and the garbage is very empty. In fact, we wish that they would allow us to switch the bins and make the larger bucket the recycling bin, which would give us more room.

Needless to say, the recycling won, as it has been since we started using the program.
One of the cool things is that we participate in a program called RecycleBank. When you recycle you get points that you can then ‘cash in’ for coupons or gift cards for local or national retailers.
We average around 70 points per week so far. Some of the example rewards are:
  • 100 points will buy you a $10 off $30 purchase at Bed Bath & Beyond
  • 125 points will get you $6 off two dinner entres at Olive Garden
  • 1225 points will get you a $10 gift card at Applebee’s, Lowes, or Borders
These are just a few of the things that you can get. While the rewards do provide extra motivation, it is reward enough to know that we’re helping save some of our precious natural resources.
One thing that they have that’s really cool is a little indicator that adds up all of the recycling you’ve done and puts it in somewhat everyday terms. They have a widget available that I can add to my blog to automatically update the information but I need to work on fitting it into the site, as it was causing problems when I attempted to place it due to the size requirements. But, here’s what it tells me:
In the five weeks we’ve been part of the program:
We have saved 0.56 trees
We have saved 37.41 gallons of oil from being required to produce new materials
And the most fun statistic,
Our recycling to date weighs as much as….

A penguin!

How cool is that?
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Deciding On Our Baby Monitor

We have spent the last few weeks deciding what baby monitor to get for Baby Beagle. Based on recommendations from various people, including friends, family, and our birthing class instructor, we had narrowed it down to two different types: a video monitor or a movement monitor.

A brief description of each:

  • A video monitor – In addition to offering the typical sound monitoring, you could also mount a small camera and watch your baby. We were at a friend’s house a few months back, and they swore by this.
  • A movement monitor – Our childbirth class instructor recommended a movement monitor. In addition to the sound, there was a device that was placed in the crib that sounded an alarm if there was no movement for 20 seconds. This was designed to warn if the baby stopped breathing. The alarm would alert the parents with the goal to reduce the chance of SIDS.

We picked out our favorite kind of each type. Here’s the one we considered of each type, as well as some pros and cons:

Video Monitor

Summer Infant Deluxe Day & Night Handheld Color Video Monitor with 2.5

Pros: Can see your baby
Cons: Only one monitor, inability to monitor babies movement, requires wall mounting of the camera.

Movement Monitor

BébéSounds Angelcare® Deluxe Movement Sensor with Sound Monitor

Pros: Two monitors (one for each parent), alerts if baby isn’t breathing, cheaper than the video monitor, room temperature monitor, built in night-light for nursery.
Cons: Requires hard surface to be placed at the bottom of the crib, alarm will sound if you forget to turn it off before removing the baby from the crib.

Our decision

We went back and forth a few different times. We loved the idea of watching our baby but also loved the idea of knowing that our baby was breathing.

In the end, we ended up going with the movement monitor.

The reason was the safety issue. While seeing our baby would have been cool, we know that first time parents are constantly getting up and checking that the baby is still breathing. This should hopefully give us some peace of mind so that we don’t have that worry, and can catch a few more winks. And since I have had no less than ten people over the last two days tell me how little sleep we’ll be getting once the baby comes (and no, hearing it NEVER gets old), I figure any little bit we can add to our sleep schedule will be nice.

We purchased it today. I think it was the right choice, but only time and the baby will tell. We’re only a couple of weeks away from the due date, so we will definitely be able to tell soon!

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Easy Way To See If People Are Cutting Back

For those who work in the 9-5 office world, I thought of an easy way to check to see if people around you are cutting back:

Open your office refrigerator.

What you’ll find might surprise you. No, I’m not talking about the unidentifiable leftovers that have been there since 2006. I’m talking about just how many more people might be using it.

I’ve noticed in my office that when I go to take my lunch out, it’s been getting a little more crowded over time. I have no problem getting my lunch IN the fridge, because I’m usually the first one in the office in the morning. But, lately, I’ve noticed that getting it OUT is a bit more difficult.

Why?

Because people are skipping the lunches out and brown bagging it. So, there’s a lot of extra lunches to wade through from people that have added theirs throughout the day.

Of course, what goes along with that is more rotten fruit, old vegetables, half-eaten leftovers, and other unimaginable things that maybe once used to be food. What IS it about work refrigerators that make people create the most awful science experiments?

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