Do You Take Your Credit Card Rewards In Cashback, Points, Or Crypto?
Prior to the pandemic, I aspired to become an expert credit card rewards hacker, traveling first class to all kinds of exotic international destinations. Fast forward a year-and-a-half, and I have accumulated a fairly sizable trove of unused points, but with nary a plan nor destination in sight. All the while, I have paid more annual credit card fees than I care to admit, despite my best efforts. This has led me to re-evaluate whether I should take these credit card rewards in the form of cashback, points, or even cryptocurrency.
Cashback is King
Just last year, I would scoff at the idea of taking cashback rewards, an inefficient exercise I would never again partake in. In my youth and ignorance (and poverty), I happily accepted Chase’s Ultimate Rewards points in cold hard cash, about $100 at a time (10,000 points). Upon stumbling down the travel rewards wormhole, I realized that the Points Guy values these rewards at double that amount if redeemed properly, using the Chase portal to book travel and so on and so forth. Never again would I redeem these prized earnings for a mere penny a point.
The problem with points
The problem with HODLing these rewards points is that there’s an opportunity cost to not redeeming them immediately. In the rewards game, cards are for churning and points are for earning and burning. The Points Guy doesn’t factor in that, even in a short calendar year, the market might go up 20%. Rather than find a home in my brokerage account, my rewards balance simply sits there with Chase. Those points aren’t working for me, which to my optimizing brain means they’re working against me. Traitors!
Now, does anyone actually withdraw cashback rewards and immediately invest that money instead? No chance. Psychologically, rewards points are generally viewed as free money to be spent on splurge purposes—as they should be. That’s what I plan on doing with my points—splurging. I’d like to book a first class plane ticket somewhere new and stay in a hotel I’d never pay for on my own.
But that opportunity cost isn’t limited to investing those would-be dollars. It could simply be in preventing you from purchasing something else that you enjoy with what could be good old fashioned USD. In any case, there’s an opportunity cost to those points staying points for a long period of time. And a risk, too.
As points, rewards are more likely to decrease in value than anything. There’s no guarantee that Chase doesn’t swoop in and say that 100,000 Ultimate Rewards points are now worth $1. Such a move would surely piss off their client base (not that that’s stopped them before), but there are no rules or regulations against it.
A crypto alternative emerges
On the other side of the digital coin, there’s the recent emergence of cryptocurrency rewards. Depending on where you stand on Bitcoin, this option can either be viewed as getting “cashback” in the currency of the future, or as simply storing the value of these rewards in a vehicle no more or less arbitrary than a specific company’s rewards program.
I’m in the process of slowly allocating a portion of my net worth to Bitcoin and Ethereum. Slowly. To date, I’m still at less than a quarter percent. I’d like to get that number in the 2-3% range to feel like I have enough skin in the crypto game—and a game is exactly what I view it as.
In doing so, I got involved with the soon-to-be-defunct BlockFi, where I had earned 4% interest on my BTC & ETH every month. The theory was to dollar cost average very tiny amounts back into the crypto space via the existing money I have in Bitcoin and Ethereum without having to actually buy more Bitcoin or Ethereum.
Bitcoin rewards
Crypto as a reward is not a new concept—Coinbase and other platforms have been issuing amounts of Bitcoin for sign-ups and referrals for years. For credit card companies, offering Bitcoin to the Zoomers in lieu of that worthless old Boomer fiat currency or those Millennial airline miles is a way to attract
These credit cards allow for cardholders to redeem credit card rewards in the form of Bitcoin instead of cash or rewards points. Similar to their interest-earning accounts, the BlockFi credit card gave me an opportunity to accumulate Bitcoin without actually going out of my way to purchase more Bitcoin. Sound too good to be true? I guess it was!
The verdict?
I’m going to hold off on taking cashback for another year and see if I can actually plan an international trip on Chase & Visa’s dime at some point in the next 12 months. But if those plans fall through, it might be time to permanently pull the points plug. A bill in hand is worth two thousand Ultimate Rewards points in the bush.
How do you take your credit card rewards? As a historically bad manager of rewards points, I welcome any and all travel hacking suggestions.
My wife and I are doing a big travel rewards push specifically for a future trip to Hawaii. It’s a lot of fun to play the game and see if we can cover all our flights/hotels just with travel rewards.
The crypto cash back is really interesting. It would have been awesome to have back when Bitcoin was at <$10,000!
I get addicted to chasing points a little bit. I’ve even purchased something I didn’t want or need because of a big points bonus haha. All in fun though.
Hopefully these crypto rewards will pay off one day!
It’ll only be a matter of time before bitcoin rewards with credit cards will be much more mainstream. In another 10 years, it will be. So that means that we are still literally very early and it’s just the beginning.
I love credit card points! Although, I’ve been hoarding them just to see how much I can rack up before I cash them out. My credit card companies are not happy and attempt to tell me to spend them without giving me anything meaningful in return.
It will stay as reserves!
Looks like I timed my Bitcoin card pretty well–though not actually since the price spiked before I earned any BTC! But I agree, it’s still very early days.
The one thing that has stuck with me about hoarding points–which I do as well–is that the value of the points can change at any time without warning should the hotel/airline/bank so choose. I usually end up using points on short notice flights–not the best value, but that way I don’t hate myself for paying way too much in real currency. It’s all just mental gymnastics haha.
I just used my hilton card points for a last minute hotel in santa cruz this weekend. I’ll admit and say this was my first use of points for anything after two years of entering “the game”. Felt fantastic. Hotel had a full free breakfast too, so double whammy on a frugal weekend getaway. I don’t see myself doing the cash back thing, at least not at this stage in my life.
I am two months late replying to comments but that’s awesome–hope it was a good trip! Santa Cruz is a strange, beautiful town haha. The cash back used to be huge for me in my poorer days, but I love feeling like I gamed the system by scoring free flights and hotels these days.
i had the southwest points card for about 10 years and it served us just fine. i think our $69 fee got us about 1 free flight/year and it is our preferred airline. but…i switched to cash back cards with no fees 4-5 years ago. i like the flexibility of cash and 1.5% for the chase freedom unlimited is pretty good. i could buy a hotel stay or plane ticket of just spend the rewards on a weeks’ worth of groceries. also, we got a sign-up bonus and 2% on groceries, 3% on restaurants with a td card with no feel. seems not many people know about that one.
I have the Freedom with 5% bonus categories, which I hammer when it’s groceries & gas. The nice thing about the Southwest card is they give you bonus points every anniversary, so that $69 is really more like $39. I haven’t looked into the TD card but I certainly will now!
Interesting post – I’m still reluctant to get into crypto (I don’t invest in gold or Fx either), but it’s becoming more and more mainstream that I suspect we’ll eventually have to get in.
We’re big fans of the cash back cards, but just recently signed up for the Chase Preferred card for the 100,000 point bonus ($95 fee) and a Hilton Amex for 80,000 points bonus ($0 fee). I’d like to get more into travel hacking, but not sure I have enough motivation or interest to do it right and make it worth it. We’ll at least keep them for the bonus points, but still up in the air if we’ll actually use them for non-travel spending or just churn ’em after using the bonus points.
That 100k points bonus for the Preferred is incredible. I think I signed up at 60k a couple years ago and was pumped about that.
And I would say any hotel card is good value, since they usually offer a free night certificate to cover the cost of the annual fee. But if Hilton’s card doesn’t have an annual fee, even better!
I used to be a lot more into rewards and points, but sadly lately I fell off the bandwagon. Your post made me want to get back to it!
It’s a fun little hobby, but there have been bigger fish to fry lately, that’s for sure. I am looking forward to diving back into it myself!
I’m a big fan of points and optimizing spend to earn the most back I can. I have found that Chase made keeping my Reserve card worthwhile with the increased 150% back categories over the pandemic. However, they end in September, so I downgraded my card and will apply for the Preferred since I have had the reserve long enough to qualify after downgrading.
The Bitcoin card is heavily advertised on Twitter, but I am reluctant to sign up since it offers no signup bonus, and bitcoin is too volatile to make using it worthwhile as points currency. That could change, though, and if it does, consider me intrigued.
I just had my points increased on Chase Preferred as well–I’ll take it!
Good point about the sign up bonus. They are offering a higher percentage (3% as opposed to 1.5%) for purchases made in the first three months, but it’s capped at $100 worth of Bitcoin. So kind of a sign up bonus?
Cool, I didn’t know about the crypto rewards!
Like you, before the pandemic I was mostly looking for travel rewards (being a higher dollar value on average). But these days I am mostly focussed on cash back. 🙂
I don’t blame you there, definitely considering cash back. But seems like an easy entry point into increasing my crypto exposure, so that’s probably the winner for the rest of the year!
Good point about point balances being equivalent to money in a savings account that isn’t earning any interest. I used to make the mistake of using AMEX points for free purchases on Amazon until I realized the same thing about the watered-down redemption value. Mentally, I just get so much more satisfaction from not feeling scammed like that again. So I religiously save them up for travel, even if that involves the risks you mention. Definitely anxious to start redeeming all those points, too. Stupid delta variant.
In normal times I think I don’t think I would have had a problem spending these points at near peak value, but obviously that has changed in the last year-plus! Also, very morbid, but typically you can’t put points in a will–they are really only good when redeemed!
I’m totally intrigued by the bitcoin rewards card.
Cashback or other credit card rewards are between very unattractive and non-existant in my region, and unlike any other reward, bitcoin has both potential and likelihood to go UP in value. What other reward gets more valuable over time?
I’d sign up in a heartbeat for this card, but sadly it’s only available in the US. When it becomes available to me, I’ll get this for sure.
Even though I don’t use my existing card much (maybe 200$ a month?), this is really something that could get me to change behaviour.
If you do get it, I look forward to a proper review!