Author Topic: Help me with credit card math! (Fee vs. points)  (Read 951 times)


  • Stubble
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Help me with credit card math! (Fee vs. points)
« on: April 01, 2017, 06:38:59 PM »
So let's say I can put something on a credit card even if I have the case, but there is a fee....usually it seems to be 2.35% or something like that.  Does it make sense to put it on the card and get the points or is it not worth the extra fee?  Let's say I'm putting $4k on a card, is it worth paying the fee?  I have no idea how to calculate this.  Thanks


  • 5 O'Clock Shadow
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Re: Help me with credit card math! (Fee vs. points)
« Reply #1 on: April 01, 2017, 06:59:48 PM »
It shouldn't be too hard to calculate...

Is the fee from the store, or an extra charge in paying your bill, or something like that?  Anyway, I'm assuming you are trying to hit a min. spend for a sign-up bonus.  If you had a straight up 2% cash-back card, this math would be very easy (and I'd be saying not to pay a 2.35% fee with it).  Try to figure out the redemption value of your points.  I think as a general rule of thumb, divide your points by 100 and that is your minimum cash value of your points.  For example, if you are getting 50K points on a Chase Sapphire Preferred, that can be turned into a minimum of $500 (hopefully much more if you use it right).

With a sign-up bonus, it almost always makes sense to do whatever possible to meet the min. spend.  If you don't spend enough, you get nothing.


  • 5 O'Clock Shadow
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Re: Help me with credit card math! (Fee vs. points)
« Reply #2 on: April 02, 2017, 01:15:02 PM »
If a merchant is charging you extra to use a credit card (basically passing on the interchange fee they are charged by the card network) then it generally does not make sense to use a credit card for day to day spending (separate from needing that purchase to hit a spending requirement for a sign-up bonus). You may be able to squeak out a few basis points of arbitrage, but it is probably not worth the effort, especially since you are spending the cash now but may not redeem the points for months or years.
Many rewards programs are in the vicinity of a 1% return (assuming you don't shop around, optimize spending, or optimize how you redeem the rewards). With optimization, it is pretty easy to obtain a 2-3% return across your total spending without too much work (USAA is even piloting a flat 2.5% cashback card, which makes this super easy). Higher rates of returns are possible for particular categories of spending (6% on groceries with Amex Blue Cash Preferred or 5% on cell phone/internet with Chase Ink that turns into 7.5% when the points are moved to Chase Sapphire Reserve) or with very specific redemptions (international business class airfare from point A to B on the second Tuesday of the month).


  • Handlebar Stache
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Re: Help me with credit card math! (Fee vs. points)
« Reply #3 on: April 02, 2017, 02:09:41 PM »
The question is to vague to answer.
Different cards give different amounts of points; from 0 to 6%, and some cards give different amounts of points for different things.
It's also convoluted.   There are fees (most usually, but not always) for getting cash from a credit card, but not for buying things.