How Should You Spend Your Credit Card Rewards?

Here’s a short post/tip for you today for all those money nerds out there still soaking in this stuff as the holidays loom ;) Merry Christmas Eve everyone!

This question came into my inbox this morning:

Yo J,

I have some credit card / banking “rewards.” We’re not talking major cash here**. $70 here, $25 dollars there.

Should I use it for something practical that I would be spending my money on anyway, like at Home Depot or CVS, or can I treat myself to some useless and fun items from say, a Sephora or West Elm?

Gracias amigo! Happy holidays!

**This is why those banking reward ads with someone hiking in the Himalayas or buying a designer dress “on their rewards” pisses me off, you’d have to spend a ton of $$$ to get that in reality!

Haha, right? To be honest it’s hard to advise on anything since I don’t know you and/or your total financial situation, but more often than not I say to go have fun with it and treat yourself to something nice for putting in all that hard work you’ve been doing lately. Assuming you HAVE been behaving yourself, of course ;) If you’ve been slacking on your finances and/or career and/or just in life in general, then my vote is to use it wisely and get yourself back on track again!

You get a “pick your own ending” here today :) Happy holidays!

PS: Another thing you could do is save up all those rewards throughout the year too, and then use them to knock out all your Christmas presents at the end. That way you don’t get stuck with the 6% of those who stress out hardcore during the holidays! A lot of our blog readers here do that, and I think it’s a fabulous idea. Nothing like your credit card companies spending their own money to treat your friends and family for once! Haha… That’s some great Himalayan revenge right there ;)

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  1. Erica December 24, 2012 at 10:22 AM

    My visa is a rewards visa, however I don’t get a choice on what I want to spend the reward money it. It’s automatically applied to my balance at the end of January.

  2. Mercedes December 24, 2012 at 11:35 AM

    I used to use my rewards to buy gift cards to Home Depot while I was doing some bigger renovations on my house. Now that most of that is finished, I’ve decided to cash them out and use them to save towards my EF, and once that is full I’m going to apply them towards the principal on my home loan. (or maybe my car loan to get that sucker paid off)

    I have in the past used them for iTunes gift cards (so I’m sort of getting my music for free) and for restaurants that I know I’ll go to.

    Wonder how much I would have if I had continuously saved up the wards rather than cashing them all out?!

  3. Emily @ evolvingPF December 24, 2012 at 11:40 AM

    We mix our rewards in with our checking account balances/budget when we redeem them. Because we zero out our checking accounts at the end of each month, we effectively use the rewards to defray normal purchases (in a tight month) or they end up in a short-term savings accounts (in not-tight months).

  4. Michelle December 24, 2012 at 1:27 PM

    This is what I’m debating about right now at this exact moment! I’m not sure if I should save mine for our next vacation or just treat myself!

  5. Johnny @ Our Freaking Budget December 24, 2012 at 1:30 PM

    We use airline credit cards right now and if it weren’t for those reward miles, we would never see the beautiful skies at cruising altitude of 30,000 feet.

    In the past when we had general reward cards, we would force ourselves to redeem our points for things we had outlawed during our debt snowball days. So we’d normally splurge and get gift cards to really, really high-brow dining establishments… like Macaroni Grill and Outback.

  6. Judy B. December 24, 2012 at 2:42 PM

    I had forgotten that I had bank “points” that had to be used before the end of the year – a happy surprise. The best deal I got was a $50 gift card to Land’s End – there were other gift cards available but only good for $40 for the points I had earned.

    Hubby didn’t see anything he liked in the catalog, so happy Christmas to me!

  7. Edward Antrobus December 24, 2012 at 3:59 PM

    We go with a middle path. We’ve been using money for date night, which is something we do regardless, but certainly isn’t a “necessary” item.

  8. Cassie December 24, 2012 at 4:54 PM

    It kind of sounds like they’re asking for permission to spend the money on themselves, which isn’t good :s I don’t personally have any rewards cards at the moment. If I did the money would be going towards paying off the last of my new to me car. If I was in the same position as I was a couple months ago before my car died, I’d probably use it to pay for a little bit of shopping and stocking up on Boxing Day.

  9. Wayne @ Young Family Finance December 25, 2012 at 8:38 PM

    I like your advice, or lack thereof. It is a personal decision! We like to just use our rewards money as part of the money we use to pay off the credit card every month. It’s like a little discount on life!

  10. J. Money December 27, 2012 at 3:11 PM

    @Lance @ Money Life and More – Nice timing! Though I don’t see how much you made in that post? I’m sure it’s alot knowing you, but now you’ve got me curious :)
    @Erica – Ahh… I guess that’s good and bad, haha… gives you straight up cash but then “spends it” before you get a chance to do so otherwise! ;)
    @Mercedes – I bet a lot!
    @Emily @ evolvingPF – That’s a nice way of doing things too.
    @Mrs. Pop @ Planting Our Pennies – Look at that! Perfect timing :)
    @Michelle – Aren’t both of those the same thing?? :)
    Hope you all had a wonderful holiday week! Thanks for always popping over to my blog :)

    @Johnny @ Our Freaking Budget – I freakin’ love Macaroni Grill, esp. the atmosphere. Feels so warm and cozy in there!
    @Judy B. – HAH! Awesome :)
    @Edward Antrobus – Awww, I like that actually :) Nice “rewards” during the year rather than waiting at the end to have fun – that works!
    @Cassie – Haha yeah, perhaps :) But is that necessarily a bad thing? Asking for permission to spend on yourself?
    @Wayne @ Young Family Finance – That works too! :)

  11. Lance @ Money Life and More December 28, 2012 at 9:27 PM

    Your wish is my command. Check out my post from today to see how much cash back I earned in 2012 :)

  12. J. Money December 29, 2012 at 2:47 PM

    Awesome! Going over now to check out, you’re too funny…

  13. Melissa January 10, 2013 at 12:39 AM

    Our rewards allow us to directly spend them on Amazon so that’s usually what I use to pay for diapers. It’s nice using them that way directly on Amazon because for most of my other options I’d have to wait until I reached a certain threshold to redeem them but I can spend the full amount of rewards at Amazon whenever I want. Comes in handy when you have a kid who’s not yet potty trained ;)

  14. J. Money January 10, 2013 at 10:41 AM

    Hehe, indeed! I think my AMEX rewards can be used on Amazon too actually, now that you mention it… I should check next time I’m on to see how much I have!

    Give your babe a kiss from me! :)

  15. Jon April 11, 2013 at 9:48 AM

    I’m usually not interested in any of the gifts offered through my rewards program, so I just opt for the cash. Since I pay my credit card balances in full every month, I just apply the rewards to the credit card balance. I find it’s a good way of not wasting it on things I don’t really need. I don’t think of it as “I have some extra bonus cash in my checking account, what can I spend it on?” I think of it as “OK, my credit card balance is now $175 instead of $200, that’s pretty sweet.” And I pay off that $175 at the end of the month and continue spending/not spending as I normally would.

  16. J. Money April 12, 2013 at 9:45 AM

    Yeah, that’s a great way to manage it too. Our USAA card does the same thing with our rewards – just knocks off part of our bill every year once time, it is pretty sweet.