Forum: money.stackexchange.com
Tags: <credit-card><reward-program>
Title: Should I use cash back rewards for rewards, or to pay off the balance?
Question: I have a credit card with cash back rewards. I can use these rewards to go shopping on Amazon, for example, to buy gift cards, to pay off the balance, and possibly some other options that I may have missed.  My instinct is to simply put the cash back towards the balance. However, are there any other benefits that may be worthwhile to obtain instead?  Note: I pay my balance off in full each month. The card is a Discover It

Answers:
sents: text: If you are purchasing something you would have purchased anyway, and if the rewards purchase yields a higher purchase power than would cash, it makes sense to shop using those rewards.
text: If not, it makes sense to simply put the cash back towards the balance.
text: That's what I do pretty much every time.
text: Some folks "reward" themselves by using the points for purchases they wouldn't otherwise make.
text: That doesn't make financial sense to me.
answer_details: author: money.stackexchange.com/users/11334/Joe Strazzere
score: 11
sents: text: Either get it as cash or as a balance credit.
text: Unless there's a specific reason to do something else, these would be the most beneficial options.
text: Using the reward balance towards purchases reduces the rewards you'd be getting for these purchases.
text: Since the reward used towards the purchase is not your "money spent", you don't get the reward on that amount.
text: If you use your credit card to pay the full amount and apply your reward balance to the balance on your card - you'll get rewards in full for your purchases.
answer_details: author: money.stackexchange.com/users/2998/littleadv
score: 10
sents: text: Vendors, and credit cards, offer rebate points because they know people have a bad habit of "double counting" rebates.
text: It's much too easy to think both "I'll get some of the money back
text: so I'm not paying full price" when making the first purchase and then also think "since I'm using the points, I'm not paying full price" when making the second purchase.
text: This psychological weakness encourages us to buy/pay more, over time, than we otherwise would, and is VERY hard to resist.
text: Taking the rebate as cash might help you realize that you can only count it once.
text: Or it might not.
text: Either way, this is the most important trap to avoid.
answer_details: author: money.stackexchange.com/users/12439/keshlam
score: 4
sents: text: With Discover, you can get discounted gift cards with your rewards balance, e.g. a $50 for $40 of your rewards balance.
text: If you would be shopping at any of the stores/restaurants they offer anyways, it is a good deal to use that.
text: Whenever I get my balance above $45 I send myself a $50 Chipotle gift card since we eat there fairly often anyway.
answer_details: author: money.stackexchange.com/users/3174/Philip
score: 1
sents: text: We always take our cash back rewards as a balance credit.
text: Here is why: It is the most convenient.
text: We pay off the credit card in full each month, and it reduces the size of our monthly bill.
text: If we had a $25 reward and took it as a check, we'd then have to deposit the check and send it right back to the credit card on our next bill.
text: As a balance credit, we just get our bill reduced by $25.
text: It doesn't encourage frivolous spending.
text: If we took our $25 reward as a gift card, we might view it as free money and blow it on something we would not have purchased otherwise.
text: Because it is a balance credit and not tied to any particular purchase, it doesn't feel like we are getting $25 extra to spend somewhere.
text: Instead, it helps out our budget in the background.
text: We are still getting the $25 benefit, but it doesn't come to us in a readily spendable way.
text: We budget as if it is not there, and when our bill turns out to be less than what we had planned, it helps us fund our saving goals.
text: It is essentially a quicker way to get the reward.
text: When you take it as a gift card, you are getting the benefit on future spending.
text: When you take it as a balance credit, you are getting the benefit on your past spending.
answer_details: author: money.stackexchange.com/users/10997/Ben Miller - Remember Monica
score: 1

Summary of the answers:
If you are purchasing something you would have anyway, however using the reward will reduce the reward you receive for this purchase. If you take it as a gift card, you get the benefit for future spending.
If you are purchasing something you would have purchased anyway, and if the rewards purchase gives you a higher purchase power than cash, then using rewards would make sense. But you could say that using a reward balance towards purchases actually reduces the rewards you'd be getting for these purchases. If you use your credit card to pay the full amount and then apply your reward balance to the balance on your card, you will benefit by getting rewards in full for your purchases. Using cash back might help you realise that it can only count once. Using as a balance credit means that you are benefitting from your past spending. With Discover for example, you can get discounted gift cards with your rewards balance, e.g. a $50 for $40 of your rewards balance.  Taking it as a gift card means you are getting the benefit on future spending.