I recently wrote about our use of rewards points for everyday items. It’s fabulous to not have to shell out real money for toiletries and other mundane expenses.
MoneyMateKate commented that, even when using rewards points, she won’t pay more on Amazon than she would at a regular store — where she’d be spending actual money.
This brought up an interesting issue. It’s one that I’ve meant to address for ages now: rewards points vs real money. If an item doesn’t technically cost anything, when is it overpriced?
It comes down to how you value your rewards. Do you treat them like money or true freebies? Do you comparison shop the way you would normally, or are you willing to “pay” more for things you get for free?
Free is always good, but rewards programs take time and effort. So “free” is a relative term. Also, few people have an unending supply of rewards points. Rewards GCs are a finite resource. Once they’re gone, they’re gone.
You have to decide what that credit is worth to you. Some people will happily “spend” more to save themselves real money. Others will compare prices and choose the cheapest price, regardless of whether it’s money out of the budget or out of their store credit.
I think most of us fall somewhere in the middle. Free is always better than, well, not free. Saving money is always better than spending it. And all sorts of other obvious-isms.
That said, any kind of purchase is a zero-sum game. Whatever you spend now, you won’t have later.
It’s great to get a $75 item for free — so great that maybe you’re even willing to redeem $90 of credit. But if that uses up all of your credit, the next item you buy will require actual money. In that case, the extra $15 in credit can easily cost $15 in real money.
Or maybe you’re just concerned with the opportunity cost. If you use your rewards points on an overpriced item, your credit just doesn’t go as far.
Personally, I’ll use an extra couple bucks of credit to get something for free. Past that, it just depends. If the item is pricey — say, over $50 — I’d probably pay an extra $5. Over $100, and I would consider a $10 difference.
Like I said, not spending money is better than spending it. But after a certain point, you’re wasting the time and energy you put into the rewards program(s) you use.
So what’s your take? How do you value rewards compared to real money? How much extra would you spend to use credit instead of cash?