Do rewards credit cards have any long term impact on wealth?

[Fishindude77]

These credit card kick backs are nice and smart to take advantage of, but in terms of building wealth, they are peanuts. They are the difference between somebody buying their groceries at whole foods vs Aldis.

To really build wealth you need to maximize income and live a lifestyle well under your income level, avoid taking unnecessary loans and paying unnecessary interest, keep your nose to the grindstone for a long time churning in and smartly investing your excess income, invest in assets such as real estate and businesses that will appreciate in value and provide additional income streams, invest wisely in the market, etc.

[Drake3287]

I know this CC topic comes up all the time but like I've stated many times here, I charge EVERYTHING (I mean everything) and simply pay off my bill in full each month, haven't paid a penny in finance charges in 20 years.

If I can make a free $1,500. in cash back each year then I guess yes, it's making a small impact on my wealth.

[kork13]

Considering the thread going right now about tallying up this year's credit card rewards, I think it shows very clearly how much impact CC rewards really can have a long term impact on your wealth.

Personally, I've gotten about $1k this year in rewards. Many others have gotten double, triple, or more than that. People are literally saving thousands of dollars every year in CC rewards. Money is fungible, so $1000 I get in rewards is $1000 more that I can put in to an IRA, 401K, savings bonds, or whatever... Every year! Over 40 years, that's an extra $100k (earning ~4% above inflation), which can generate an extra $4k/year in retirement.

Is $4k/year in retirement income going to make or break you? Not likely. But even still, that significant -- that could be 5-10% of someone's retirement income!

[Singuy]

If we are talking about a saver's wealth, then no a CC has no impact. If we are talking wealth for the general public, then ABSOLUTELY reward cards are detrimental to ones wealth on average.

The math doesn't lie.

Only 35% of credit card carriers pay off their balance in full.
You spend 18% MORE money on CC vs cash
The average CC interest rate is 15.07%

Math tells me that if you have a CC, the odds of you accumulating wealth is not in your favor.

[tripods68]

I think we got like $200 rebates this year because of the kitchen/home home renovation before we sold it over the summer. At the same time, I saved all my quarters for the year and cash it yesterday worth $494.80. The difference there's a greater reward saving real on tangible asset than rebates.

[puck36]

I have a 6% cash back grocery card, which can redeem the cash back for statement credit.

What card is it?

[scfr]

What card is it?

American Express Blue Cash Preferred gives 6% back on purchases made at supermarkets, up to $6k per year.

[thestrongprofessional]

People spend more when they have credit cards

You guys do bring up some valid points. I think reward cards can be beneficial initially (bonus offers) but it's well documented that people who use reward credit cards spend much more than those who just use cash as their main payment option. I'm not saying that everyone should cut up their credit cards and only use cash but it's something to keep in mind. When using credit cards, it's important to really evaluate your purchase decision.

Raphael

[Nutria]

American Express Blue Cash Preferred gives 6% back on purchases made at supermarkets, up to $6k per year.

Walmart & Target too, or just "regular" grocery stores?

[Nutria]

If we are talking about a saver's wealth, then no a CC has no impact. If we are talking wealth for the general public, then ABSOLUTELY reward cards are detrimental to ones wealth on average.

The math doesn't lie.

Only 35% of credit card carriers pay off their balance in full.
You spend 18% MORE money on CC vs cash
The average CC interest rate is 15.07%

Math tells me that if you have a CC, the odds of you accumulating wealth is not in your favor.

That's psychology, not math. Following a budget, then as @kork13 said, paying for $900 in groceries on a DC costs just as much as paying for $900 of groceries on a CC. Thus, you might as well put it on a Rewards CC and get some money back.

[Nutria]

but it's well documented that people who use reward credit cards spend much more than those who just use cash as their main payment option.

Statistically, that's true of the population.

But individuals are not statistics. If you have that German pure strength of will (it's a sarcastic TV reference, not an actual love of Prussia) to follow the budget, then use the CC.