This staunch credit card rewards lover doesn't want to accept it. But a study from the Federal Reserve Bank of Chicago, which I learned about from this Wall Street Journal story, found cash back rewards card users spend more and accumulate more debt.
According to the study:
I can't say that I've consciously purchased a pricier item or more stuff because I know I'm getting a certain amount of cash back. And I still manage not to carry a balance from month-to-month
But who knows if I subconsciously spend more. And I definitely factor rewards into my decisions about where to shop and which card in my wallet to use.
For instance, I did much of my holiday shopping, especially if it was online, using my Discover card in order to take advantage of the card's bonus cash back offers.
And I'll admit that I poked around the Toys R Us Website and found more to buy on Thanksgiving day because American Express cardsholders who spent at least $150 would receive $25 off their total I was pretty close to $150 as it was....
Would I spend less if I used only cash? I'm not sure. But I'm not going to try because it's too inconvenient for me. Plus I have a new plastic strategy.
I feel as if I've gotten good value out of my cash-back rewards. For example, I purchased all of the gift cards for teacher's gifts this holiday with Discover cash and routinely trade rewards for gift cards at stores where we buy school and work clothes. But I sometimes redeemed rewards for restaurant cards and have wondered if trading points for a $25 gift card at a restaurant where the bill would top $70 was stupid money. So I've tweaked my rewards strategy to focus on saving, not spending.For most of my purchases, I'll use:
