Rewards Points – Buy Something Or Redeem for Cash?

I don’t use credit cards a lot, and haven’t had much experience with rewards cards.  But when Mr. A opened his business checking accounts in April 2009, he applied for and was given a rewards credit card.  As a “reward” for opening the account he was awarded with an initial 2500 points.  We were content to let the points sit there and build and in the 22 months he’s built up a lot of points.

50,091 to be exact.

I’ve visited the Rewards Center a couple of times, just to see what kinds of things are available.  I saw that he could buy gift cards from Home Depot, Best Buy, Target,  Outback Restaurant, Borders, and others, or he could buy all kinds of things like jewelry, alarm clocks, video games, televisions, vacation packages and more.  I was curious to see just what kind of point value he would be looking at and decided to check out two items.

The first thing I looked at was a Fujifilm FinePix JZ300 12 MP Digital Camera with 10x Wide Angle Optical Zoom and 2.7-Inch LCD (Silver).  Buying through the credit card rewards program it would cost 21,600 points.  A quick visit to Amazon and I find this specific model can be had for $119.95. So the point value on this purchase would be $0.0055.

A Homedics Bath Scale with Body Composition Scanner would cost 10,300 points, retailing at Amazon for $59.99. Point value would be $0.0058.

I thought the purchase of a gift card to Home Depot might be the best use of the money, as he could turn around and use it for business purchases so I decided to calculate the point value of the various gift cards.

  • $25 gift cards cost 5000 points.  Essentially the point value at this level is $0.0050 or half of one cent.
  • $50 gift cards cost 7500 points, with point value of $0.0066.
  • $100 gift cards cost 12500 points, with point value of $0.0080.
  • $200 gift cards cost 25000 points, with point value of $0.0080.
  • You can even get a $500 VISA Rewards Card to use anywhere, which will cost 50000 points, with a point value of $0.0083.

Next I compared the purchase of the gift cards versus taking the cash back reward.  Of course the larger the amount of the gift card, the less points it costs per dollar, but the best deal was hands down the cash back reward. For the cash back reward, the point value is $0.01.

Considering the cash back value of the points is one penny, looking back to two items I checked on Amazon I found that the camera would have cost an equivalent of $216.00.  The bath scale’s equivalent would have cost $103.00.  This convinced me that buying from the Rewards Store is probably always a bad idea.

The really interesting thing is if we bought something, ordered a gift card, or the VISA rewards card, it would have been shipped and in our hands in less than a week. However, since we chose to go with the cash back option, it takes 8-10 weeks to process.  And it isn’t actually “cash back” it will be applied to the credit card balance.

That’s okay.  Mr. A is having a bit of difficult with cash flow with his businesses right now so every dollar helps, and this $500 will be a big help even if it is going to take two to two and a half months to see that money back in the account.

Do you use rewards cards?  Have you ever bought from their Rewards Center?  Or do you always take the cash back?

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21 comments to Rewards Points – Buy Something Or Redeem for Cash?

  • I remember when I got my first rewards CC in College…it was a carnival cruise line CC.

    I used it for years and accumulated around 15 or 20K in points. I called up the company and asked what I could get for it – a $150 coupon! I WAS LIVID. I did the stupid thing and closed the account lol

    I now just use my AMEX gold for accumulate points for a trip we will be taking this year, I better get more than half a cent of value

    [Reply]

    Mrs. Accountability Reply:

    @Evan, oh wow, that would have made me very mad, too! You’ll have to let me know if your point value with AMEX Gold is worth it.

    [Reply]

  • I have an airline credit card, so I trade my miles for tickets. I occasionally have leftover miles of a card or airline I will not use again. In those instances I cashed in the miles for token items. To me, there is very little value doing that.

    [Reply]

    Mrs. Accountability Reply:

    @krantcents, it sounds like your airline credit card works good for you. I have a credit card with a tiny amount of points on it and I don’t use it and don’t want to start using it just to build points. That is one annoying thing about points when there just aren’t enough to do anything with them.

    [Reply]

  • I always take cash back and most often put it in savings. In this economy, we don’t need more trinkets and gadgets, we need cash. Grocery prices are going up and you can’t eat a GPS or a blender!

    My cards give me cash back with not much hassle. I also play them off against each other by remembering which purchases earn 5% for a limited time. The cash back builds up fast because I use cards for nearly everything but subtract the amount from my checkbook balance at the time of purchase. That way the $ is already there when it comes time to pay the bill.

    [Reply]

    Mrs. Accountability Reply:

    @midactsdeb, it sounds like you are doing great with using your credit cards to the best advantage!! Every once in a while I try to play the rewards game but I always end up getting in trouble because it still feels like there is more money than there really is when I use the credit cards! Like right now my American Express is over $400 and this is because I had to use it to buy supplies at work. Now of course when the reimbursement check came I needed the money in my account and now that $400 sits there needing to be paid back! I keep thinking I’ll just use that AMEX card while at Costco and go right home and make a payment, but can’t do that when buying for work… agh!! I’m glad you are doing so good with your cards! Do you make a payment as soon as you make a purchase? Or just once a month?

    [Reply]

    midactsdeb Reply:

    @Mrs. Accountability,
    Hi, Mrs. A, I started out making a once-a-month payment and studiously checked and re-checked the account transactions against my checkbook ledger; but now I make a payment whenever I feel like it, a couple of times a month, without checking my ledger. I have overdraft protection at my bank (US Bank) in a reserve line of credit I set up there so I don’t have to obsess about it. I do keep a stack of index cards that I have each creditor written on that I check on every 1st of the month to make sure I haven’t forgotten any of them. Works well. BTW, you can call your creditors and request a particular due date & most will do it.

    [Reply]

  • Good choice Mrs. A! Electronics are the biggest scam ever for rewards. Cash back or travel is the way to go.

    [Reply]

    Mrs. Accountability Reply:

    @Car Negotiation Coach, thanks! Maybe one of these times I’ll look into the travel options just to see what they offer.

    [Reply]

  • Mrs A

    Hit you hit it in the nail. Best value for most folks is cash back. Miles are tricky for domestic flights because they are getting harder to redeem. Using points for “merchandise” on the reward catalog is probably a bad idea in most cases.

    [Reply]

    Mrs. Accountability Reply:

    @Mr Credit Card, thanks! You would know! You get some pretty good deals! Thanks for visiting and commenting! :-)

    [Reply]

  • I use our debit rewards card frequently and don’t have a “cash back” option. So I trade my points in for gas cards. They cut down on our gasoline expenses significantly.

    [Reply]

    Mrs. Accountability Reply:

    @Little House, I can’t get debit rewards unless I pay a $12 fee each year for each card – at least that was the scenario the last time Wells Fargo tried to offer the option. I’m glad you have found a way to use your rewards that works out in your favor. Thanks for visiting and commenting!

    [Reply]

  • Something about “rewards” cards reminds me of the old Green Stamps. You spent and spent (at the “right” places, of course) so you could save and save and paste and paste, and after all those dollars spent and hours killed, you could go down to the redemption center and trade in a mountain of Green Stamp books for some cheesy, often chintzy household item. It was sorta fun, but one wonders if by spending more frugally and putting the savings aside, we couldn’t have accrued enough cash to go out and buy better-quality products.

    Money is what I want. I use the Costco AMEX because it gives me a nice kickback on gasoline and retail products. The windfall only happens once a year, but happen it does. When last heard from, AMEX reported that it owes me $158.

    [Reply]

    Mrs. Accountability Reply:

    @Funny about Money, I remember those. I think A.J. Bayless was the last store to take them, and that was 25 years ago. It was kind of fun. And I do remember that near the end they had grocery specials that were very good so that you didn’t collect the stamps too long. Good deal on your Costco AMEX rewards! I have $40 coming back to me. I got an email recently and they said for me to be sure to not miss the rebate check for it would be coming through the mail. I have a bad habit of looking at a rebate like “found” money so I have to force myself to spend it on necessary items, not some thing I might like to have. Thanks for the trip down memory lane! :-)

    [Reply]

  • I’ve gotten into Swagbucks where you can earn prizes or gift cards, and I’ve come to the conclusion that the best ‘deal’ for us is the $5 amazon gift card. It is a better point value than getting a $25 gift card, and the few prizes I have been interested in can be purchased cheaper on amazon!

    Good review of a rewards card! Thanks!!

    [Reply]

    Peggy Reply:

    @Sandy @ Journey To Our Home,

    I love Swagbucks – I always get the PayPal gift cards. They are 700 points and valued at $5.00 which is directly deposited into your PayPal account. PayPal balances are transferable to your checking account – so it’s like free money!

    [Reply]

  • [...] Mrs. Accountability asks readers to weigh in on the benefits of cash-back vs. buying things with rewards points. [...]

  • [...] Rewards Points- buy Something or Redeem for Cash? @ Out of Debt Again [...]

  • [...] cash back, we have Mrs. Accountability of Out Of Debt Again asking this question on rewards points: Buy Something Or Redeem for Cash? While you review this article, you may come to further appreciate reward cards for what they [...]

  • [...] What do you do with your reward points? when you have earned enough to redeem them for something. As Mrs A found out, you have to sort out the value that you are getting. No surprises that redeeming for merchandises is not really a good value. [...]

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