Hi Everyone, long time lurker to the MMM blog, first time poster.
I have the Chase Freedom/Sapphire tag team combo. I don't always max out my Freedom Quarter categories and maybe travel twice a year. I don't eat out at restaurants very often either.
I know there have been studies about people spending more when they use credit cards vs. using cash. However, what about people who use rewards cards vs. non-rewards cards (or simpler cash back versions)? Is there any concrete evidence that this happens? Do the rewards falsely encourage consumers to overspend when they are normally frugal?
I generally prefer using hotel/airline sites to directly book my rooms and flights (not loyal to any one company). I generally try to find bargains when I can. Is the Freedom/Sapphire combo my best avenue, or would a simple cash back (no annual fee) card that reimburses you through statement credit (i.e. Freedom or Citi Double Back) better for someone like me?
thanks everyone in advance
There is probably no way to quantify whether the CC effect really impacts you without testing it for yourself.
I know that I have no issues with overspending CC whether its reward or not, because my decision process on making a purchase comes before I think about which CC I'm going to put it on. These are two separate decisions. [disclaimer] It's quite possible that there is some spending increase with a CC, but it's either not much, or worth it, for which CC or cash the end result should be the same..
It's very easy to see though, that someone might go from the mindset of: I have X card that is good on these categories, what can I go and get? and then spend from there. If you're caught in this mindset, then there is some excess spending. Is it overspending? Depends on your budget. It could just as easily be that your budget is too lax.
This works the same way that a person could look in their wallet and say 'I have extra cash, what can I go buy?'
Regardless, no one ever overspends when sticking to the cash in envelope method (by strict definition), but it is definitely restricting and inconvenient, and that's part of why the method works.
You want to know what works best for you, but I think that will highly depend on how much excess spending you are doing. Once you are able to cut out the excess spending, regardless of the method of payment, you can optimize what's left by using whatever method gets you the best cashback for your mental constitution. But if that method makes you spend wastefully, then it's backfiring. Good luck
