Points Are Not The Best Credit Card Rewards
Although some exceptions exist, credit card rewards points are essentially the least valuable type of credit card rewards you can earn. In my opinion, cash back rewards are king, and airline miles are pretty good. Both cash back and airline reward units tend to be worth one cent. Point rewards can be worth one cent, but are often worth as little as half a cent.
Now, not all reward points are the same. Some credit card company's points are worth more than others (unless you want to convert the points to cash). A prime example of a good rewards point system is the American Express Membership rewards program. If you use Membership rewards points for airline travel or retail gift cards, points are generally worth one cent. However, if you want to use your points for a cash equivalent, such as an American Express gift card, your points are only worth one half cent.
(Note: Point value is one of very few negatives about the American Express Membership rewards program. For high spenders who spend enough to offset the annual fee, credit cards in this agenda have a number of benefits which can't be measured in half cents.)
Point rewards from other companies are usually worth less than a cent, even when exchanging them for gift cards. For example, many rewards programs charge 3,000 rewards points for a $25 gift card, reducing the point value to $0.83. And if you use your points to buy things ranging from crock pots to flat screen LCD's, the points are often worth significantly less that $0.83.
To make matters worse, points have no set value. They are points, not cash, so a credit card company can reduce their value by charging more for gift cards and crock pots whenever it wants to. And many already have.
Because of these factors, I'm not going to rant all day about the primacy of cash back credit cards or airline cards to points. Yes, in some instances, a high quality rewards agenda that offers points may provide good value. Ultimately, however, points are just points and points are never as good as cash.
