topic Re: The psychology of rewards in Credit Cards

The psychology of rewards

kdm31091 — Sun, 13 Sep 2015 16:20:32 GMT

We all know banks design reward programs with one end goal. They want us to spend more money in order to "get more rewards". And unfortunately, it works! We apply for cards we don't need to get that extra 1 or 2%. We chase every penny in rewards.

Lately, as I've reflected on things, I've really come to realize that it often makes very little practical difference and is just one more thing to track and manage. As I said in an earlier thread, an extra 1% on one category is not going to make any huge difference in your rewards unless you are spending a lot of money in that category. Things get even more diluted when one has 10+, 20+ etc cards. While of course some people make a lot of money and therefore spend a lot of money, for those with an "average" spend level the benefit is more psychological than practical.

My point here is that I think as a forum we get a little too "app happy" and encourage others to do the same without really drilling down to the nitty gritty: how much am I actually going to get out of this? It's a HP and AAOA ding for say, 1 or 2% more in rewards. Some things sound great on paper but translate to very little. I know I like to "pick on" the AARP card, but if you have a Double Cash, and you spend $500 a month on dining, you got an extra $5 from AARP over a DC. $5 you wouldn't have otherwise had, yes, but it's spread on a different reward card, etc.

Increasingly I'm finding I prefer to keep it more simple. I think as a whole, we need to slow down on encouraging everyone to chase after rewards. Concentrating your spend will often yield more fruitful results (and since many cards have redemption minimums, you may find it takes a VERY long time to redeem rewards if you are chasing too many!).

I realize this is kind of the same wavelength as my thread last week, but just been reflecting and thinking and would love to hear some thoughts.

Re: The psychology of rewards

Open123 — Sun, 13 Sep 2015 16:33:59 GMT

Good post!

Not strange, at all. Many who read my posts may think I'm "App happy," but nothing could be further from the truth.

For instance, unless a compelling reason exists (ie., 3% Miles, Fid Amex for Serve, IT 10% Promo, JCB 3%), my minimum requirements for an HP would be, at the very least, the following: (1) new TL, I'll never accept an HP for CLIs, ever; (2) at least $400 - $500 in cash equivalent value; and, (3) have some kind of feature, benefit, or accelerated spending I find useful. If those conditions aren't met, I won't app. Matter of fact, if those conditions are never met again, I will never app again. Even now, the $400 bonus on WFC's Propel doesn't meet my requirements (benefit and deposit account hassle), I won't app, even for the $400.

However, if those conditions are met, I'll keep app'ing. One of the lessons I've learned in life, "when you see it, bet big." Scared money never wins, ever.

Re: The psychology of rewards

DrZoidberg — Sun, 13 Sep 2015 16:36:16 GMT

This site is a kind of a joke. People celebrate $500 credit lines like they just won the lottery. It's not healthy how obsessed peopl have become and excited they get by obtaining a new debt tool. What's worse is the people who just filed for bankruptcy start posting months later all the new credit cards they just got.

This site has good advice and information, but majority of this stie needs to stay out of the credit card and approval section .

Re: The psychology of rewards

Open123 — Sun, 13 Sep 2015 16:39:51 GMT

@DrZoidberg wrote:
This site is a kind of a joke. People celebrate $500 credit lines like they just won the lottery. It's not healthy how obsessed peopl have become and excited they get by obtaining a new debt tool. What's worse is the people who just filed for bankruptcy start posting months later all the new credit cards they just got.

This site has good advice and information, but majority of this stie needs to stay out of the credit card and approval section .

Really like your selection of cards! Very efficient.

Re: The psychology of rewards

icyhot — Sun, 13 Sep 2015 16:43:43 GMT

I take it you never initiated a CLI request on a BofA or Chase card?

Re: The psychology of rewards

Open123 — Sun, 13 Sep 2015 16:46:33 GMT

@icyhot wrote:
I take it you never initiated a CLI request on a BofA or Chase card?

Me?

No. With Chase, I'll get a new TL, and consolidate if I need a higher CL. Usually, if I need a charge my existing CLs aren't able to accomodate, it goes on Amex's Charge.

Re: The psychology of rewards

kdm31091 — Sun, 13 Sep 2015 16:51:25 GMT

@DrZoidberg wrote:
This site is a kind of a joke. People celebrate $500 credit lines like they just won the lottery. It's not healthy how obsessed peopl have become and excited they get by obtaining a new debt tool. What's worse is the people who just filed for bankruptcy start posting months later all the new credit cards they just got.

This site has good advice and information, but majority of this stie needs to stay out of the credit card and approval section .

Right -- if you just got out of BK, chances are that obtaining 20 new credit cards is not a great move!

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 16:56:54 GMT

@kdm31091 wrote:

My point here is that I think as a forum we get a little too "app happy" and encourage others to do the same without really drilling down to the nitty gritty: how much am I actually going to get out of this? It's a HP and AAOA ding for say, 1 or 2% more in rewards. Some things sound great on paper but translate to very little. I know I like to "pick on" the AARP card, but if you have a Double Cash, and you spend $500 a month on dining, you got an extra $5 from AARP over a DC. $5 you wouldn't have otherwise had, yes, but it's spread on a different reward card, etc.

Increasingly I'm finding I prefer to keep it more simple. I think as a whole, we need to slow down on encouraging everyone to chase after rewards. Concentrating your spend will often yield more fruitful results (and since many cards have redemption minimums, you may find it takes a VERY long time to redeem rewards if you are chasing too many!).

I realize this is kind of the same wavelength as my thread last week, but just been reflecting and thinking and would love to hear some thoughts.

You have to keep in mind what works for you does not work for every one. Base on your needs and circumstances, keeping it simple works very well for you. Other circumstances are very very different- For example, if someone whose situation enables them to spend alot of money be it business etc, why not get something back for that kind of money spent? Think about it..

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 16:58:37 GMT

Agreed. I'll speak for myself. I found this site and learned that I was 'losing' money by using my Freedom, Amazon Visa, and TY Pref as my everyday cards. I felt I NEEDED to get a card to maximize grocery and gas spend and came pretty close to getting something to maximize restaurant spend. Withing the first bit of time finding this site, between DH and I we got: BCP/SM/Cash+/A+ After being here for a while I got my CO Plat converted to a QS, PC'd DP into DC, and found out about the Disco double cash and signed up for that on both of our cards. Obviously, I wanted to focus on cash back. And I think I did a pretty good job of that. But once I got those basics covered, I had a list of travel related cards on my wish list. Next came RC and Hyatt, and DH's AmEx Plat.

Here's where the psychology of rewards I think would be really fascinating. Once he got the Plat, I really started to think about what I want out of these rewards. I think of them like a gift. I want things I WANT, not things I NEED. And while with cash, I can obviously get things I want, I don't. I become practical and pay down something more than I otherwise would have. And obviously that's the most practical use of rewards. (No high interest debt, but some of 0% hanging around, as well as very low interest student loan debt and other what I'd call 'reasonable' debt...home, cars).

I've worked a full and a part time job for 4 years. I recently left my part time job so that I could both focus on my full time job more and me/family/relationships more. And I want to travel. And when I travel, I don't want to stay at a motel 6. The Ritz is a bit excessive (got it mostly thinking of Marriotts having) but I'm happy with the RC and Hyatt card. I enjoyed our summer travel (stayed at Hyatts and some fav indy places that used to seem fine, but seemed not so fine now, but used A+ miles). And I'm happy that the Plat will encourage us to do more than road trips up and down Cali. I have a big birthday coming up next summer and for a few years now, the plan has been in the back of my mind to go to Alaska. It may or may not be next summer based on dog-health. But I'm positioning myself for that trips and other nice travel.

So psychology hit the nail on the head. I moved over to MR earning cards yesterday because I know what I want to be rewarded with. I want gifts. I want nice-to-haves, and not need-to-haves. And could I do that with more willpower with cash back cards? Yes. But with one allowing statement credit and one sweeping into this savings account and that one having a better redemption option for gift cards and...and... MR will work for me for now.

I'll still keep some stuff split, like taking advantage of all the Disco fever, most likely trying to hit my RC spend to stay gold, and I'll think about my Cash+ cats. But for the most part, I'll go for MRs.

Oh, and one more bit of psychology of rewards. I've decided that part of what intrigues me about MRs is the unknown. The 'gambling' aspect of it. Really, it's found money. So if things devalue, so be it. But I can likely reap some fabulous rewards. So I'll roll the dice.

Re: The psychology of rewards

Sharingan — Sun, 13 Sep 2015 17:00:29 GMT

I've never been one to concern myself with the activities of others. If someone wants to apply for any and every rewards card that they see, I will not be one to discourage them from doing so. Eventually, people do find out whether or not their decisions were good decisions; and hopefully, they learn from any past mistakes going forward. Sometimes it's better for people to experience things firsthand.

Though, I don't understand why people question what others have simply because it doesn't translate well to their lifestyle. For example, I have a nosy coworker who likes to question how and why I have the premium car that I do when a Kia can also get me from Point A to Point B. Live your life and let me live mine the way I want. My motto has been, "one's wants to do not have to match another's needs." I believe it also applies in the discussion of credit cards and their rewards.

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 17:02:52 GMT

@kdm31091 wrote:
@DrZoidberg wrote:
This site is a kind of a joke. People celebrate $500 credit lines like they just won the lottery. It's not healthy how obsessed peopl have become and excited they get by obtaining a new debt tool. What's worse is the people who just filed for bankruptcy start posting months later all the new credit cards they just got.

This site has good advice and information, but majority of this stie needs to stay out of the credit card and approval section .
Right -- if you just got out of BK, chances are that obtaining 20 new credit cards is not a great move!

But for some, a $500 IS like winning the lottery! I've been there. BK and other nastiness when DH and I were in our twenties (separately, and at different times). So when we got our first secured Cap One cards after both having been screw ups, it was AMAZING. And then UN-secured. WOW. Super amazing.

I know some people can do the all-cash thing, but our society makes it increasingly difficult to not have SOME kind of credit card available. For some, should they stick to secured for longer or forever? Probably. Could we all exist with secured cards? I'd hope so. But when we're at a point that we can manage to leverage the banks money and policies to our advantage, I think it's okay to get excited about it.

(but yes, 20 cards via SCT etc. after BK, not good)

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 17:04:25 GMT

I am very responsible with credit cards (never use over 30% utilization and always pay entire balance each month) and I would find it foolish to purchase large items with cash. I'll take the cash back bonus and bonus for signing up, thank you. Every penny counts (1.5%-5%); it's like deducting sales tax if you had to purchase an item in your state or simply saving 1.5%-5%.

And I always count my inquires; it's standing at 4 all across.

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 17:07:44 GMT

@DrZoidberg wrote:
This site is a kind of a joke. People celebrate $500 credit lines like they just won the lottery. It's not healthy how obsessed peopl have become and excited they get by obtaining a new debt tool. What's worse is the people who just filed for bankruptcy start posting months later all the new credit cards they just got.

This site has good advice and information, but majority of this stie needs to stay out of the credit card and approval section .

Until you have been there, you will have a hard time understanding why someone will celebrate getting a $500 card after bankruptcy (NOTE: I have never filed BK). But when you have gone through something hellish like that, a $500 approval is a sign of success and a start over hence the celebration.

Re: The psychology of rewards

DrZoidberg — Sun, 13 Sep 2015 17:12:55 GMT

@Anonymous wrote:
@DrZoidberg wrote:
This site is a kind of a joke. People celebrate $500 credit lines like they just won the lottery. It's not healthy how obsessed peopl have become and excited they get by obtaining a new debt tool. What's worse is the people who just filed for bankruptcy start posting months later all the new credit cards they just got.

This site has good advice and information, but majority of this stie needs to stay out of the credit card and approval section .
Until you have been there, you will have a hard time understanding why someone will celebrate getting a $500 card after bankruptcy (NOTE: I have never filed BK). But when you have gone through something hellish like that, a $500 approval is a sign of success and a start over hence the celebration.

Most of the approvals I am talking about are not post BK. Most are people who have 25+ INQ, 30 store cards and 600 scores who just keep getting more usless store cards.

Re: The psychology of rewards

kdm31091 — Sun, 13 Sep 2015 17:20:02 GMT

The point of my post is not to criticize anyone. Of course at the end of the day "live and let live". If one wants 20 cards to get the absolute maximum rewards, that's fine. Doesn't impact me! I'm just giving my opinion on the matter. That's why this is a discussion forum

Nobody's "needs" will match; my point is more that sometimes people decide they "need" x card for dining spend, and in the process end up spending more on dining , etc to get more rewards. Just as an example.

Of course if one is spending the money anyway they may as well get some type of reward but that wasn't really my point.

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 17:19:58 GMT

@Sharingan wrote:
I've never been one to concern myself with the activities of others. If someone wants to apply for any and every rewards card that they see, I will not be one to discourage them from doing so. Eventually, people do find out whether or not their decisions were good decisions; and hopefully, they learn from any past mistakes going forward. Sometimes it's better for people to experience things firsthand.

Though, I don't understand why people question what others have simply because it doesn't translate well to their lifestyle. For example, I have a nosy coworker who likes to question how and why I have the premium car that I do when a Kia can also get me from Point A to Point B. Live your life and let me live mine the way I want. My motto has been, "one's wants to do not have to match another's needs." I believe it also applies in the discussion of credit cards and their rewards.

I think some of the complaint is more second order, person X gets (or is induced to app for) a cc, and people here cheer them on. Which is not quite live and let live, more pushing them (and others reading) in a certain direction.

Of course, you can then say, correctly, that is their (the cheerers) business and if they want to do it, and others are influenced by it, that's on them.

On KDMs original question, I agree that people here tend to obsses a lot on small things (the basic truth being rewards wise: MS>>Bonus Chasing >> Rewards from normal spend) but there are many worse habits, and given that many deciding between QS and DC aren't really going to get into trouble either way, it is a harmless enough distraction.

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 17:21:39 GMT

Another thing I found is that there are lenders I just 'like' better. I love that Barclay posts rewards with the charge, but that's about it. Everything just feels weird about their site. I'd say it is that I have to log in separately to see my A+ and DH's SM, but we've got two log ins for Disco and AmEx and it doesn't bother me in the least.

I like Citibank ok, and I recently had diverted all general spend to Double Cash from A+. But their website has some wonkiness for me. I think it's wrapped up in the fact that I've got HD, BB and Citibank proper cards. I think Chrome gets confused. Or their site does. But they're sort of OK to me.

I'm good with Chase. They've been the most consistent over time (website, knowing how they work with ongoing CC's, etc.). I don't mind their website or app.

But I'm happiest with Discover and AmEx. And it just so happens that's where most of my spend will end up. More psychology for you.

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 17:24:23 GMT

@Anonymous wrote:
@Sharingan wrote:
I've never been one to concern myself with the activities of others. If someone wants to apply for any and every rewards card that they see, I will not be one to discourage them from doing so. Eventually, people do find out whether or not their decisions were good decisions; and hopefully, they learn from any past mistakes going forward. Sometimes it's better for people to experience things firsthand.

Though, I don't understand why people question what others have simply because it doesn't translate well to their lifestyle. For example, I have a nosy coworker who likes to question how and why I have the premium car that I do when a Kia can also get me from Point A to Point B. Live your life and let me live mine the way I want. My motto has been, "one's wants to do not have to match another's needs." I believe it also applies in the discussion of credit cards and their rewards.
I think some of the complaint is more second order, person X gets (or is induced to app for) a cc, and people here cheer them on. Which is not quite live and let live, more pushing them (and others reading) in a certain direction.

Of course, you can then say, correctly, that is their (the cheerers) business and if they want to do it, and others are influenced by it, that's on them.

On KDMs original question, I agree that people here tend to obsses a lot on small things (the basic truth being rewards wise: MS>>Bonus Chasing >> Rewards from normal spend) but there are many worse habits, and given that many deciding between QS and DC aren't really going to get into trouble either way, it is a harmless enough distraction.

I ended up on an 'all about me' tangent, but this is something I meant to say. I didn't stop to think what kind of money we were talking about when we app'd for all those cards out the gate. Meaning the difference between 1/1.5/2% on this or that category. SM is the one card I really wish we'd not gotten. It's great for what it is, but not for us with it's caps.

Re: The psychology of rewards

Open123 — Sun, 13 Sep 2015 17:32:38 GMT

@Anonymous wrote:
On KDMs original question, I agree that people here tend to obsses a lot on small things (the basic truth being rewards wise: MS>>Bonus Chasing >> Rewards from normal spend) but there are many worse habits, and given that many deciding between QS and DC aren't really going to get into trouble either way, it is a harmless enough distraction.

While this may be true, on the ethical scale, from ethical to...er...not ethical: Normal spend > Bonus Chasing > MS.

Re: The psychology of rewards

Anonymous — Sun, 13 Sep 2015 17:51:52 GMT

Zoidberg. Great minds think alike! 😁