Author Topic: redeeming credit card points for gift cards seems dumb  (Read 3951 times)

sol

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redeeming credit card points for gift cards seems dumb
« on: October 26, 2014, 10:35:49 PM »
My credit card keeps trying to get me to redeem my points for gift cards.  Some of them are to places I actually shop, like amazon.

But I fail to see the attraction of paying $100 in points for a $100 gift card when I can just buy $100 worth of products, earning more credit card points, and then redeem $100 worth of points directly to my bill.  If your card is "5% cash back" then you'd have to be able to buy $105 worth of points for $100, and that deal never seems to come up.

How do the expect to entice people to redeem for gift cards in what is so obviously an inferior deal to just using your credit card normally and then using the points to pay off the balance?

Will

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Re: redeeming credit card points for gift cards seems dumb
« Reply #1 on: October 26, 2014, 10:46:24 PM »
Sounds like a crappy program.  I just went to check to see what the deal is with Discover, and there aren't any where it is 1:1.  There are a lot of $20 for $25 gift cards, and $40 for $50 GC, as well as some 20:40, 30:60 and so on.  But yeah, with yours, a GC does not seem to be the way to go.

ETA:  I was thinking you were talking about partner gift cards, where you can get a $25 gift card for Chipotle for $20 or something.  But I think now that you were probably talking about getting a AmEx gift card of equal value or similar instead (and yes, Discover is the same way).
« Last Edit: October 26, 2014, 11:13:50 PM by Will »

more4less

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Re: redeeming credit card points for gift cards seems dumb
« Reply #2 on: October 26, 2014, 11:49:34 PM »
Rule of thumb is get cash or statement credit (in other words maximize liquidity of bonus). However, sometimes gift cards can be preferable. Let's take Citi's ThankYou points bonus program. For example I have 10000 points (equivalent to $10000 spent). Here are options:
1. Cash: $50 check for 10000 points (equals .5% cashback)
2. Statement credit: same - $50 for 10000 points (equals .5% cashback)
3. Mortgage payment - $100 for 10000 points (not too bad = 1% cashback)
4. Amazon giftcard - $100 for 10000 points (1% cashback)
Basically, most points-based bonus programs suck compared to straight cashback. However, Citi is even more evil since it makes emphasis in its marketing not even on gift cards or cashback, but on various items. Which can be bought literally for half (points) price if points converted to Amazon credit and then item bought from Amazon using this credit.

Will

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Re: redeeming credit card points for gift cards seems dumb
« Reply #3 on: October 27, 2014, 12:04:30 AM »
Rule of thumb is get cash or statement credit (in other words maximize liquidity of bonus). However, sometimes gift cards can be preferable. Let's take Citi's ThankYou points bonus program. For example I have 10000 points (equivalent to $10000 spent). Here are options:
1. Cash: $50 check for 10000 points (equals .5% cashback)
2. Statement credit: same - $50 for 10000 points (equals .5% cashback)
3. Mortgage payment - $100 for 10000 points (not too bad = 1% cashback)
4. Amazon giftcard - $100 for 10000 points (1% cashback)
Basically, most points-based bonus programs suck compared to straight cashback. However, Citi is even more evil since it makes emphasis in its marketing not even on gift cards or cashback, but on various items. Which can be bought literally for half (points) price if points converted to Amazon credit and then item bought from Amazon using this credit.

If I had Citi ThankYou points, I would consider using them for international travel.  http://frequentmiler.boardingarea.com/2014/07/22/citi-thankyou-points-more-valuable-now-transferable-to-airline-miles/

seattlecyclone

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Re: redeeming credit card points for gift cards seems dumb
« Reply #4 on: October 27, 2014, 01:20:04 AM »
There's no logical reason to use your points for non-discounted gift cards. The reason these offers exist is because people behave illogically all the time.

Ricksun

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Re: redeeming credit card points for gift cards seems dumb
« Reply #5 on: October 27, 2014, 06:39:42 AM »
I sometimes order the gift cards (i.e. American Express or Discover gift card not an individual store) to avoid fees associated with purchasing the gift cards at the store ($3.95+ activation fees).  This is for when I want to give one for a gift, and not for my own purchases. 

My wife orders gift cards for stores using her rewards as gifts just for convenience so that she doesn't have to go to whatever store she's considering purchasing from.  Even some of those stores charge for shipping of their gift cards online.  Babies R Us is an example where they charge $1.95-$4.50 online for gift cards.

So in limited areas, I do see the value, but I typically go cash back/statement credit 95% of the time.
 
Rick

Sylly

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Re: redeeming credit card points for gift cards seems dumb
« Reply #6 on: October 27, 2014, 08:58:36 AM »
It doesn't make sense when the cash / statement credit conversion rate is the same as for the gift card in question. I only exchange for gc when the rate is better (e.g., $40 credit for $50 gc), and only for stores we're planning to spend money on anyway. This is the main reason I still prefer Discover over Chase, since Chase rarely has a good rate for stores we frequent, whereas Discover generally does. I still should look into that only 0.25% for the first $X purchase though..

arebelspy

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Re: redeeming credit card points for gift cards seems dumb
« Reply #7 on: October 27, 2014, 11:33:43 AM »
How do the expect to entice people to redeem for gift cards in what is so obviously an inferior deal to just using your credit card normally and then using the points to pay off the balance?

Because people are bad at math.
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Glenstache

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Re: redeeming credit card points for gift cards seems dumb
« Reply #8 on: October 27, 2014, 11:41:20 AM »
There is a reason to run it through points rather than a straight payback accounting. If it is converted through a points scheme, it becomes funny money in people's minds.