Don't Spave Your Way to Save

They are virtually everywhere. Certain incentives and rewards programs that make it seem like they are designed to save you money. But the reality is, it actually causes many consumers to actually spend way more than they otherwise might, thinking there's an underlying benefit to doing so.

I am literally getting paid to spend, thinks certain consumers.

In some ways that's true. I am not one to simply ignore rewards programs, and I actually find them personally valuable. But like all things money related, you have to be responsible about how you use these programs, and you have to think about what the benefits really are. Or aren't.

For example, I use Upside. It's an app that offers cash back rewards on things like gas, groceries, and eating out. And it does pay to use it. In a relatively short period of time, I have been able to accumulate well over $200.

It may seem like small change, but pennies do add up, and with inflation still through the roof, any cost savings is well worth it.

But I don't use the app simply to use the app. In other words, I won't shop at a grocery store offering a reward just because they have an open offer. If there is something I need at that store and the price is right, I'll use the app. 

The same goes for fueling up. I won't get gas at one station that has an offer if I can find gas at another station cheaper.

When it comes to any rewards program, I am also not going to buy things just to stack up my rewards. To me, that's counterproductive. If it is something I would buy anyway, and there happens to be a reward attached to buying it, that's a good deal. But if I am buying something just for the reward, I'm shooting myself in the foot.

This is especially an issue when it comes to credit cards. There are all sorts of rewards offers, and all of them are designed to entice you to spend more money to get more rewards. I use Discover which pays me cash back rewards of 1% to 5%—each quarter there are specific offers that they'll give you 5% back on, such as home improvement stores or gas stations. Each quarter is different.

But in order for the rewards to actually be worth anything, I need to make sure I never carry a balance since any interest I pay will far outweigh any benefits I'd receive back on the reward.

From miles accumulated to get free flights to free cups of coffee or doughnuts at the gas station, or even points towards free groceries at grocery stores, none of these rewards are worth anything if we are spending to save. 

In fact, we're not saving any money at all.

Menards, which is a huge home improvement chain largely in the Midwest, based in Eau Claire, Wisconsin, is one that often offers a rebate program that gives consumers 11% back on their purchases. Since the pandemic, Menards almost always offers the incentive.

But like all the other reward programs, you have to know what your prices are. You don't buy something just because you declare, "Well, I'm getting 11% off." You still have to do your homework, and the deal is only valuable if you use it in a way that actually makes it valuable.

The bottom line is that spending money is never saving money. It is always spending money. Rewards programs can offer you an opportunity to save on things you need anyway and would buy anyway. But it can be a huge trap for consumers who think that these rewards programs offer "secret ways to stash some side cash."

If you are not careful, the real recipient of the "reward" goes to the one who offers it.

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