Credit Card Bonus Category Fallacy
Shocker – people who do stuff on the internet for money have a tendency to make things appear sexier than they actually are. Our points, miles, and travel subcategory is no different. I periodically create remarkably-unattractive content by those standards. One area I feel we overidealize is the credit card bonus category. Next to the signup bonus concept, it may be the area where points and miles enthusiasts focus most. And good reasons exist for doing so. Indeed, in certain situations, I rank ongoing bonus earning categories higher than initial welcome offers. But I occasionally feel like some pay too much attention to bonus categories.
What I Hear
Certain individuals really enjoy cent per point valuations. Meanwhile, others, including some from that cent per point group, inevitably, focus on earning credit card bonus categories. I’m not a part of the first, but I’m a huge member of the second. I almost-exclusively focus my Chase Ultimate Rewards earning in 5x categories (more on that in a bit). Wyndham Rewards enthusiasts, particularly Vacasa fans, have done remarkable things with the business card’s 8x gas category. The list goes on.
So I’m consistently intrigued to hear how people reconcile credit card bonus category beliefs with their redemptions. Here are just a few paraphrased examples of what credit card enthusiasts – at a variety of skill levels – have told me:
- “I’d rather earn points or miles with a card than redeem them for a free one.”
- “I don’t want to redeem via Chase Pay Yourself Back, because I’d rather spend on a card earning in a bonus category.”
- “I’m still working on the signup bonus on X card, but I used Y card because of the bonus category.”
Why To Be Careful
It seems many deify earning to the detriment of redeeming. We fall in love with the eye-popping bonus categories digit(s), subconsciously ignoring perfectly-fine, valuable redemptions along the way.
Hey, I enjoy hoarding points here and there. But individuals who earn instead of redeem sign up for the following:
- Devaluation of rewards currencies sitting unused in loyalty accounts.
- Complete rewards loss via shutdown.
- Unnecessary control by the bank or loyalty program. Instead of using the points or miles on a solid want/need aligned with travel goals, individuals can be cornered into future, less desirable options in order to just use the points.
- Unnecessarily spending cash now for a particular earn rate instead of immediately getting “free.”
My Situation
Now, I’m getting back to how I continually face and handle this dilemma with Chase. I’ve been a huge fan of Pay Yourself Back since the beginning. It was quite easy to be one, because I’d been cashing out Ultimate Rewards points at a penny each for many years before.
Over time, Chase has increasingly focused Pay Yourself Back categories in areas which only earn 1x on the Sapphire Reserve, the card where I’ve found with the best redemptions. But while I only earn 1x on these purchases, I’ve historically been able to redeem Ultimate Rewards points for solid value: 1.5 cent per point at first, mostly 1.25 cpp now. Essentially, while there’s a cost to this cashing out, I consider it negligible relative to the value I receive from the redemption.
On principle, and unlike some of you, I generally don’t pay cash for travel or anything else I can cover with points. When I do, it’s primarily because I’m using some other credit card benefit which triggers a statement credit.
Regardless, card earn rates often don’t enter my equation. I’m simply not in the position that many of you are where I care about taking advantage of certain categories. For instance, if you have an employer reimbursing you for your expenses and you’re allowed to use your own cards with attractive bonus categories, go for it! Indeed, that may even be justification enough to pick up additional cards.
Credit Card Bonus Category Fallacy – Conclusion
So perhaps your employer is covering your expenses, or you have other ways you’re getting reimbursed for your spend. Take advantage of when a credit card bonus category is more logical. But be careful in your analysis and don’t allow earn rates to unnecessarily control your behavior. Carefully earn, actively redeem, and do big things!
How do you decide when you’re going to earn in a credit card bonus category instead of redeeming points?
