Frugal NationFrugal Nation

Rewards programs don't save you money

Want true savings? Use this simple trick to make rewards credit cards and other programs work for you.

By Donna_Freedman Nov 28, 2012 12:19PM

Teenage girl buying clothes at till, close-up (Lisa Stirling, Digital Vision, Getty Images)My daughter loves rewards programs as much as I do. While I tend to give the gift cards outright as holiday presents, Abby uses them to buy gifts for the folks on her list.

A frugalist's dream: Free presents! Think of all the money she's saving, right?

Not really.

"It's more a case of 'not spending' as opposed to 'saving.' Chances are (those) funds will still get sucked up in the whirlwind of random expenses that is life," she writes in this post on I Pick Up Pennies.


"To truly save money, it has to be . . . well . . . saved. Put away. Not spent."

Know anyone who actually does that?

Or do relatives and friends just talk about how much they "saved" by cashing in points from a rewards credit card or a program like Bing, MyPoints or Swagbucks?


People also love to brag about Black Friday/Cyber Monday "savings." But can they actually point to where that money is?

Most shoppers didn't save money, Abby says: "They repurposed it."

True savings

A simple tactic lets her avoid this consumer disconnect: Whenever Abby spends rewards points, she transfers their cash equivalent from checking into an online bank account.

Now that's saving.

If you really want to benefit from rewards programs, get in the habit of transferring the gift card amounts -- right away! -- out of your general budget and into an account where they can't be touched.

Ditto with anything you bought for yourself or your household during the recent sales. BF/CM As I noted in "A year's worth of gifts at rock-bottom prices," taking advantage of low prices is great if you needed to buy new towels or a stove.

But be sure to set aside the difference between what you'd planned to spend and what you did spend. If you don't, the money will just melt into your checking account -- and eventually flow back out.

A dedicated account is a psychological boost, i.e., you can watch your savings grow toward a goal. For Abby and her husband, it's the emergency fund. Your own account might be called something like "pay cash for next car" or "down payment on a home."

No matter what your goal, keep repeating this mantra: It's not savings unless you save it.

More on MSN Money:

Dec 18, 2012 1:20AM
Rewards cards can be a great tool if looking to save. In general when looking to save money cutting costs should be priority #1 as well as budgeting and figuring out what you can and cannot spend. I am personally trying to master this discipline.
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Donna Freedman's Frugal Nation blog is for readers who want to live cheaply -- whether due to necessity or a lifestyle choice. It explores living sustainably and making life more meaningful at the same time.


Donna Freedman

Donna Freedman, a writer based in Anchorage, Alaska, writes the Frugal Nation blog for MSN Money. She won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. Donna also writes about the frugal life for her own site, Surviving and Thriving.