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My credit cards fund my luxuries

Written by Suba Iyer - 3 Comments

We bought our first house three months ago. We are very slowly furnishing our home, and our credit cards are paying for it. No, I do not mean we are putting all the expenses in our credit card. We are making our own furniture and every single tool required to make the furniture and the wood we have bought for free, thanks to our credit card rewards!

Previously, I used different credit cards for different types of purchases to accumulate as many rewards as possible. Between my husband and I, we managed to accumulate more than $3,000 in gift cards. There was a price to pay of course. My husband was beyond confused, so eventually I had to restrict myself to just two credit cards.

Why gift cards? Because I have not been considering credit card rewards as part of our budget or savings and have been designating them for pure luxuries, stuff I wouldn’t normally buy with our budget.

How do you use your rewards?

Hopefully you are using your rewards promptly. According to recent research by J.D.Power & Associates, 41% of credit card users surveyed didn’t fully understand the rewards their cards carried. One-third of the customers indicated that they were not even aware of any benefits associated with their card. For someone strategically squeezing the program to its limit, this almost hurts. How many points are getting wasted? It really pays to take some time to study what your credit card rewards can do for you.

Paying for luxuries or items not in your budget: This is my current favorite way to redeem the points. I usually don’t shop at Williams-Sonoma. It is too expensive for my budget, so I redeem my points for Williams-Sonoma gift cards. We are also cutting back on our eating-out budget. To help with that, I get restaurant gift cards. You don’t have to get gift cards. All the rewards programs have a ton of stuff to choose, from electronics gadgets to garden tools.

Build assets: Our main card pays 2% in rewards for every purchase. So far I have only used the rewards from this card to get gift cards, but I can also cash out my rewards and transfer it to my brokerage account, a 529 account or a retirement account. Once we finish furnishing our house, all our rewards will be going to a 529 account.

Fund a goal: You can accumulate gift cards to fund your Christmas spending. Or you can use the cash to save for the vacation of a lifetime.

Travel the world: There are several cards which accumulate miles instead of rewards points. Personally, I find miles a little difficult to use (very few reward seats per plane and extra fees for booking), but that has not stopped me from getting as many bonus points as possible while signing up for a card. You can use the miles/rewards for booking a trip, upgrading to a better class or getting access to the premium lounge because you have the required number of miles. In the past, I have funded a week-long Walt Disney World trip and a Hawaii trip using rewards and miles. I am planning to visit Europe for free by using just credit card rewards in another two years.

Use the discounts and benefits: This is not related to the rewards per se, but it is time well spent to go through all the discounts you are eligible for with your credit card. Credit cards offer plenty of benefits: car insurance, price protection, travel insurance and premium lounge access. Certain cards offer more cash back if you shop through their website. The extra five to ten percent cash back adds up fast if you were going to shop at that particular site anyway.

Do some good: If you are not interested in reward points and think they are not worth your time, why not just donate it to charity? All the reward cards I have had so far offered that as an option.

Experience something unique: If you have one of the Citi cards, they have the “wish fulfilled” option. You can have your dream fulfilled by using your points. Wish experts will work with you to get the experience you want in exchange for some hefty reward points.

More cash for your cash flow: You can always get statement credit or just hard cold cash to improve your cash flow. I have never done this as I have found redeeming it for cash is usually not the best value, but it certainly depends on the type of card. So what has worked for me might not be the best choice for you.

Making credit card rewards work for you

All of these strategies will only work if you use your credit card responsibly. If you carry a balance, the enormous amount of interest you pay will eat away many times over the rewards you get.

It is also important not to spend extra just to get more rewards. If you are someone who doesn’t spend more when using credit cards instead of cash, have a budget and tracks spending, never carries a balance, I don’t see why you can’t make your credit cards work for you.

How do you redeem your rewards? Do you know what method of redemption will give you the maximum value for your points? What is it?

Published on September 23rd, 2013 - 3 Comments
Filed under: Credit Cards

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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3 Responses to “My credit cards fund my luxuries”

  1. 1
    Lance @ Money Life and More Says:

    I have used my credit card rewards to pay for plane tickets for my family, but mostly I cash them out to pay down my wife’s student loans. Once the loans are gone I imagine we’ll use many of the rewards to go on vacations we wouldn’t otherwise go on.

  2. 2
    Jon @ MoneySmartGuides Says:

    My fiance kills me when I talk about our credit card points and frequent flier miles, but I have it worked out that the majority of our honeymoon will be paid for entirely with credit card points and frequent flier miles.

  3. 3
    terry-d Says:

    I use a amex plumb card for business expenses. It used to get 2% cash back, but they just switched it to 1 1/2% cashback.

    I used to spend huge amount of cash on advertising. This card was making me a months salary on just cash back. It was really nice while it lasted.
    its a great card for business expenses.

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