Originally Posted by
dangw20
Quote:
Originally Posted by PaulMSN
But the caution is not specific to MS. The writer could more logically connect it to not buying that fancy sound system or as a caution not to use a CC at all.
I agree 100%.
The warning from the writer is not specific to MF at all. It's specific to any rewards credit card.
Take the Citi Forward card for example that offers 5 points/dollar (5% cashback if redeemed for certain rewards) at restaurants, among other places.
Some people mightend up spending more at restaurants just to get the extra rewards (thinking 'I'm going to eat something anyway, might as well go to a restaurant'), but here's a simple example that shows this is a terrible idea. We all know it's cheaper to eat food from the grocery versus food at a restaurant:
Restaurant
Deli sandwich and drink at local cafe = $10
5x bonus points = 50 points or $.50
Net Cost = $10 - $.50 = $9.50
Grocery
Deli sandwich and drink at grocery = $8
1x bonus points = 8 points or $.08
Net Cost = $8 - $.08 = $7.92
Result
Even though you got 525% ((50-8)/8) more points in this oversimplified example, you saved 17% ((9.50-7.92)/9.50) by eating food from the grocery instead of a restaurant even after you take into account the rewards points.
I know this is an oversimplified example but I think it makes it obvious that you should think twice before blindly spending money just because of the credit card rewards.
I respectfully disagree. You're not taking into account the fact that you're ALSO earning the 5x on all the meals you would eat out anyway. That's why it's useful to think about both sides of the game: saving money on trips/meal/electronics you are going to buy anyway; but also buying trips/meals/electronics you wouldn't be able to afford without MS. Between the two, you end up living a better/more fun/nicer life than you would if you weren't playing the game.
Now, if that's NOT true, if you end up spending more than you save (on interest, or junk you don't need, or whatever), then you should rethink what you're doing. Juggling dozens of cards with different bonus categories isn't for everyone, but fortunately we also have flat 2% CB cards like the FIA.