That’s what a recent Lending Tree survey indicated. Surveys can tell you lots of things, but you can definitely tweak the data to get the desired result. That’s why I asked for the raw data behind the survey.
You can see the overview of the study here, but there are some really interesting tidbits. I can’t tell if I’m more surprised that half of the respondents didn’t know what they were earning or that 20% though they earned less than half a percent in “rewards”.
There’s three ways to look at that figure:
- They do know what they earn and they have really bad credit cards in their wallet.
- They don’t know what they earn and they’re guessing.
- They kind of know what they earn but they don’t value the rewards highly enough.
None of them are really that good, but I guess #2 is one I could tolerate, especially because I think I’ve got a fighting chance to educate folks.
But, let’s double back to half of the survey respondents not knowing what they earn. There were roughly 1,500 people who participated in the survey. I thought that folks with higher income levels might skew towards not knowing (or caring) what they earned for rewards. But, the income levels were spread evenly, with a decent chunk of folks earning $25,000 to $79,999 (a range that certainly couldn’t be called “rich”) having no idea what they earned. They’re also spread out across the country geographically.
In the end, only about 15% probably nailed their reward rate correctly (the folks who responded in the 1-1.5% and 1.5-2% categories). It’s not overly difficult to earn more than that, much more in some cases. But, I’d guess most folks average between 1 and 2% if they’ve paid any attention at all.
While I disagree with some of the credit cards they mention in the article, they do have a good way of explaining why rewards are important:
As 6% of $6,000 is $360, we revert back to our earlier statement about how much more cash back one could be earning from their credit card. A rate of less than 1% on gas and/or groceries is very low, and won’t earn you anywhere near as much money as any of these three cards would on your expenses.
Comparing these rewards to what most people said they were getting (0-0.5% rewards) leads to some pretty astounding figures. Even using the simple Bank of America cards gets you a much better return on your spending. Studies have shown that an average of $890 per month is spent on a credit card with a rewards program.
It may sound obvious, but you should think of miles and points (or any other form or reward) as currency. When you go to a foreign country, you exchange dollars for the local currency. If you had hundreds of dollars worth of foreign currency when you returned from your trip, you wouldn’t throw it away, would you?
Then, don’t throw away your rewards. Take some time and come up with a good earning strategy. I’m always happy to help.