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One data point from my Rich Habits Study that I found interesting revolved around credit cards. I asked the self-made millionaires if they used credit cards and 93% said they did, but only credit cards that had reward dollars or points associated with the card.
Their credit card of choice? By far, American Express was the favored credit card among 79% of the self-made millionaires.
Why were rewards so important to the self-made’s?
Since 97% of the self-made millionaires paid off their credit card balance every month, clearly the line of credit the credit cards provided were of little value. The reward dollars, however, represented free money that could be traded in for goods and services provided by the credit card companies retailer and service provider partners.
For example, American Express allows you to redeem your reward dollars at Barnes and Noble retailers. I experienced the value of these reward dollars myself, when my eldest son went to college, Barnes and Noble had a book store on campus. At that Barnes and Noble, my son could buy his college books, shampoo, clothing and many other college necessities.
Seeing the value of this during his first year in college, I would redeem $500 worth of American Express reward dollars each semester for Barnes and Noble gift cards and give the cards to my son to use to buy books and sundries for college. I did the same thing when my youngest daughter went to college,
By my calculations, this saved me about $5,800 for both my kids: $8,000 savings from the Barnes and Noble gift cards I redeemed for free, minus the cumulative $2,200 American Express annual fee ($275/year x 8 years).
85% of the self-made millionaires in my Study said that they often put large purchases on their rewards credit card, just to get the rewards points. In fact, one of the self-made millionaires in my Study even purchased two new cars with his American Express credit card, just to get the $800 in reward dollars.
Many of the self-made Entrepreneurs in my study said they used their rewards credit cards to pay for business-related vendor expenses, accumulating several thousands in reward dollars a year, that they were able to use for various purposes.
I learned that reward credit cards were a source of free money to the self-made millionaires in my Study, and that, my friends, is a very smart money habit.
Tom Corley is an accountant, financial planner, public speaker, and author of the books “Effort-Less Wealth: Smart Money Habits At Every Stage of Your Life” and “RichKids: How to Raise Our Children to Be Happy and Successful in Life“. Corley’s work has appeared on CNN, USA Today, The Huffington Post, SUCCESS Magazine, and many other media outlets and podcasts in the U.S. and 27 other countries. Tom is a frequent contributor to Business Insider and CNBC.
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