How shopping portals and rewards programs fix credit card overspending

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MilesAbound recently published “Going all cash – should you stop using credit cards for everyday spend?”  In that insightful post, MilesAbound pointed out research that shows that credit cards induce people to spend more than they would if they used cash instead.  He proposed, rather than going all-cash, that a good strategy would be to use cash for everyday spend, but continue to use credit cards mostly just for manufactured spend.  His basic argument is that the rewards earned from everyday spend are pretty small, so most people would be better off saving money by going all-cash than by earning credit card rewards.

cash

Here’s the problem with MilesAbound’s argument: my readers and I are not necessarily at all like “most people”.  I can’t speak for you, but in my household, shopping portals and rewards programs have led us to spend less, not more.  What follows is a real life example based on my memory of events that took place about a week ago.  The following is a conversation between me and my wife…

Wife: I need to buy some new clothes.  Do we have any special deals at Lands End?

Me: Well, yeah.  I still have a pretty sizable Sears gift card that I got for 21 points per dollar.

My wife then searches LandsEnd.com for about 30 minutes…

Wife: OK, I found what I want to buy and I’m checking out.  Where’s the gift card?

Me: Did you log in as me first? That way we’ll earn ShopYourWayRewards points.

Wife: OK, I don’t know what that means, but if you say so…  Ugh!  I just logged in as you and now my shopping cart is empty!

My wife then spends about 15 minutes re-finding what she wants to buy…

Wife: I’m checking out again, where is that gift card?

Me: Wait, did you go through BeFrugal to get 8% cash back?

My wife glares at me…

Wife: That’s it. I give up!

And, she never did buy those clothes. 

The story above is not an isolated incident.  A focus on rewards has led us to forgo almost all impulse shopping.  For example, if I’m at a store and see something I’m interested in buying, the following thoughts inevitably go through my head:

I wonder if there are any good coupons online?

I think I remember that TopCashBack offers 7% cash back here.  I should order online.

Oh wait, Staples.com sells e-gift cards to this store.  I should go through uPromise to Staples.com to buy the gift cards.  That way I’ll earn 5% back and 5 points per dollar with my Ink Plus card.

Once I get a gift card to this store, I’ll go through TopCashBack to place the order.  And, I’ll use online coupons to save even more.

This sounds like a lot of work.  I don’t really need this thing.

I’m not making this up!  I can hardly remember the last time I’ve made an impulse purchase.  My wife still buys a few things here and there when I’m not looking, but I have little doubt that our overall impulse spending has gone down considerably.

What do you think?  Do credit cards cause you to spend more?  Or, have you become like me… almost paralyzed by the desire to maximize savings and points earned?  Please comment below.

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