Psychology and CC reward programs

[disneysteve]

We've often talked about how psychology comes into play with spending and savings, like whether or not you should prepay your mortgage vs. investing extra money.

For a few years, we were charging everything we could to our Marriott Visa to rack up reward points which we then used toward free hotel stays on vacation. Last summer, for example, we were able to get 10 free nights in New Hampshire using our Marriott points (as well as a couple of other free stays during the year). Since then, I started tracking different reward promos better so we used our AOL Visa for 5x reward points on certain purchases or our Discover card for 5x cashback on certain purchases. I figured that financially, we earned more in rewards that way.

What I've realized, though, is that even if we made a few more dollars jumping from card to card to take advantage of special reward promos, I miss having the Marriott points. When it came time to book our summer vacation this year, I didn't have nearly enough points to consider going that route for our hotel needs.

So I'm torn between doing the special promos and getting a little more in rewards or going back to using the Marriott card pretty much exclusively to concentrate our rewards in one place. Psychologically, the free hotel stay has more "value" to me than the equivalent amount of cashback from Discover, for example. In other words, I'd rather get a free night at a $100/night hotel than a cashback check for maybe $110 or $120. I know it doesn't make sense financially, but that's just how I look at it. The cashback just gets deposited in our account and merged with all our other moneys, so it doesn't stand out as being special, but the free hotel stay is.

I think we'll stick with Discover for the 5% back on gas through September but go back to using the Marriott card for everything else.

[noppenbd]

Why don't you take the cashback check and set it aside (or the equivalent cash) until it is time to take the trip? I am sure Marriott is a great hotel but by locking yourself into them you may miss out on other hotel deals.

[disneysteve]

Why don't you take the cashback check and set it aside (or the equivalent cash) until it is time to take the trip? I am sure Marriott is a great hotel but by locking yourself into them you may miss out on other hotel deals.

We don't really compartmentalize our money that way. We don't keep a bunch of separate accounts. One checking account. One main money market account. To me, money is money. One dollar is the same as the next regardless of where it came from, who earned it or how it gets spent.

We don't stay brand loyal to Marriott, though I do usually check them first when making travel plans. If they have a hotel that meets our needs and is priced competitively to others in the vicinity, we will choose Marriott. If not, we will happily stay elsewhere.

[noppenbd]

We don't really compartmentalize our money that way. We don't keep a bunch of separate accounts. One checking account. One main money market account. To me, money is money. One dollar is the same as the next regardless of where it came from, who earned it or how it gets spent.

No offense, but this kind of goes against your earlier statement that you would rather have a free $100-a-night hotel room than a $110 or $120 in cash. If you truly feel that "one dollar is the same as the next" then you can just tell yourself that the hotel room was paid for by your cash back, rather than given to you directly as a reward. Plus you can get a $10 bag of chips from the minibar on the house

[disneysteve]

I never said it makes sense.

That's the thing with psychology. It isn't always in line with reason and logic.

[ea1776]

IMHO, if you are mentally tough enough to use CC's to get rewards in the first place (and pay in full every month without living beyond means), you are mentally tough enough (and a good enough planner for that matter) to take the best financial benefit... which is what you are doing now.

My suggestion would be to find another way to get motivated about vacations, and continue making the most mathematically perfect financial decisions with CC's.

[Ima saver]

I personally love to get the checks in the mail for the free money. I have already received $450 in rewards checks this year and I just ordered another $50 check. I do write it down too. I don't have separate accounts, but i have sub accounts that I keep track of, on paper.

[disneysteve]

IMHO, if you are mentally tough enough to use CC's to get rewards in the first place (and pay in full every month without living beyond means), you are mentally tough enough (and a good enough planner for that matter) to take the best financial benefit... which is what you are doing now.

True.

I personally love to get the checks in the mail for the free money.

That's the problem. I get more excited by the free hotel stay than by the free money. I guess the hotel stay is more tangible to me in my mind (not that money isn't tangible, but a hotel stay is a more concrete thing).

[Gruntina]

I can relate!

I get more excited when I get a gift card for one of my favorite store as a gift instead of cash in the same amount. For some reason it makes it more "permission to spend" in my mind to spend on luxury item than I would with cash. Somehow when I get cash, I feel like it needs to go to a need and not a want bill or item.

While I do want money in general, but money is just a number in my account or papers. I enjoy getting things or doing things.

[disneysteve]

I get more excited when I get a gift card for one of my favorite store as a gift instead of cash in the same amount. For some reason it makes it more "permission to spend" in my mind to spend on luxury item than I would with cash. Somehow when I get cash, I feel like it needs to go to a need and not a want bill or item.

While I do want money in general, but money is just a number in my account or papers. I enjoy getting things or doing things.

Exactly. I'm glad I'm not the only one who feels like that.

The same thing happens when we get cash gifts. Last year, my MIL gave us a generous holiday cash gift. A while later, she asked what we bought with it. She was kind of annoyed when we said nothing. The money just got deposited in our account and added to existing funds. We didn't go out and buy anything special or do anything specific with that money (nor did she say she expected us to when she gave us the gift). It probably ended up getting added to savings in one way or another. Had she given us a gift card or show tickets, it would have been different.

[noppenbd]

I don't disagree that the psychological effect of getting free stuff is real. There is a very real behavioral economics effect going on, where it is much easier to justify using the gift card/free room versus spending the exact same amount from your cash account. I have noticed that when someone gives me a gift card, I feel "entitled" to go right out and purchase something that I might not have needed. Whereas if someone gave me cash that I put into my account, I would probably be more inclined to exercise more restraint on what I purchased. That is why I keep a separate account for fun money (all cash gifts go in here). Otherwise I will never spend anything on myself!

[maat55]

I'm very new at using CC's to build rewards and haven't taken the time to learn the ins and outs. I only spend about 300.00 per month for now and have built up some points, but I don't have a clue as to what they are worth.

As a DR fan, I have been reluctant to venture down this path, but I will go at a snails pace. I get multiple card offers weekly, but don't know which are the best to build points with, so I just chunk them.

[LivingAlmostLarge]

I just made $1k in rewards on the citibank cash rewards card, which gave 5% back for the first three months. Now I'm back to my regular car. I just deposited the checks, the last was $503 into my checking to pay my bills.

I think it's just a free to spend pleasure getting the rooms, and why I don't do it. The cash back checks go straight back to paying off the credit card.

So I just spend $20k in 3 months on the credit card I guess. Damn DH's tuition. But thank god for the cash back.

[disneysteve]

I'm very new at using CC's to build rewards and haven't taken the time to learn the ins and outs. I only spend about 300.00 per month

maat, our CC charges for 2007 totaled $40,451.45, so average of about $3,370/month. When you are charging that kind of money, those credit card rewards get to be significant, so managing them becomes important. I'd say last year we earned about $900 in rewards.

[PrincessPerky]

To solve the cranky gma giving money, I try to tell them right away what we plan on using their money for. Like Gmcs recent birthday he told every cash giver he planned on using it for a bike.

I prep him and myself to know what to say..so I don't have to later answer what I really did do with it

If I do ever get asked I try to pick a recent splurge to give them credit for.