Chasing credit card points? Here’s a better alternative

Free money - Dividends vs credit card points

Some of my least successful posts are when I talk about credit card points, because I don’t like them. It’s WAY more fun to think about how exciting it would be to go on fabulous trips with fabulous perks just from SPENDING! How amazing. Entire businesses have been made around giving advice on navigating the credit card points game.

But here’s the truth. You’re not gonna get rich on credit card points. It’s a game set up by the credit card companies to get you to spend more. Spending $100 to get $2 is never a good deal.

BUT, there’s another way to get two free dollars! Dividends! When you buy an index fund with your $100, you get $2 per year in dividends! Let’s look at some of the benefits:

• You get $2 PER YEAR, not just once
• You get to keep your $100
• Your $100 also goes up in value
• Your dividends increase as your investment does as well!
• Makes you rich, not the banks

The difference between putting your $100 to use this way vs going after credit card points is STAGGERING. Yet in our culture, how often do you hear people talking about credit card points vs dividends? You’re getting tricked by the banks! It makes them rich, not you.

Did you know index funds pay dividends? As all the stocks contained within profit and pay dividends, the index fund collects all that cash, then pays out a dividend to those who own the fund! For example, last year VTWAX (Vanguard’s total world index fund) paid out out a dividend of about 1.9%. It also went up by about 16% last year as well! So putting $100 in VTWAX a year ago would leave you with about $118, where as putting $100 on your credit card would leave you with $2 in points.

AND YEAH, I KNOW YOU’RE GONNA SPEND THE MONEY ANYWAY, SO MIGHT AS WELL GET THE POINTS. (Although studies show consumers spend 50% MORE when using a credit card). But still, I’m not gonna romanticize this horrific financial decision. Take the points if you want, but try not to let it influence your spending behavior!

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.


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