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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: sizzlinkola on February 19, 2018, 12:24:49 PM

Title: How to handle cashback bonuses?
Post by: sizzlinkola on February 19, 2018, 12:24:49 PM
I'm a CC churner and want to apply for a CC to get a $400 cashback bonus. I'm having a dilemma on how to treat this $400.

I'm planning to make a large purchase for a hobby of mine: crash pads for bouldering. At the same time, I want to maximize my Roth IRA or reduce my debt. Thus, I'm conflicted on the different options on how I could use this money:

If I didn't have the $400 bonus, I would feel bad about buying the $310 pads and may opt for the $150 pad instead (or 1 superior quality pad rather than 2). Thus, having the $400 bonus makes me feel less guilty to splurge.

My finances: Have a 6 mo EF. I maximize my 401(k), HSA and working on my Roth. I'm confident I'd be able to maximize my Roth without any cashback bonus. I have a student loan of $16k @ 3.4-3.8% and a auto loan $12k @ 2.2%.

How should I handle this?
Title: Re: How to handle cashback bonuses?
Post by: terran on February 19, 2018, 12:29:21 PM
A credit card bonus is no different than income from any other source. Income is income, not something special because of where it came from. Ignore that and this is just a question of saving vs spending, so do what matches your values most closely.
Title: Re: How to handle cashback bonuses?
Post by: SuperSecretName on February 19, 2018, 02:08:54 PM
money if fungible.  research the concept if you aren't familiar.
Title: Re: How to handle cashback bonuses?
Post by: MDM on February 19, 2018, 02:26:22 PM
Whether the $400 is taxable or not depends on how the rewards are received. (https://www.investopedia.com/ask/answers/110614/are-credit-card-rewards-considered-taxable-income-irs.asp)

Said another way, depending on how you obtain them, rewards may [or may not] be taxable as income (https://www.creditcards.com/credit-card-news/irs-taxable-income-credit-card-rewards-points-gift-1277.php).