What is the actual price of the “free” points that some credit cards offer their customers? It must not just be free money, and I am wondering if there is more in the point system for the credit card company than incentive to use their card over a competitor’s.

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Posted by EmmaLia Mariner (MONEY FORUMS: 3, Answers: 0)
Asked on May 3, 2016 12:16 am
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You’re right. No free money. From talking with a friend who owns a flower shop, my understanding is that the merchant pays a higher fee for reward cards. Also, studies show that when we pay by credit card we tend to overspend (buy more and more expensive stuff) by 10 – 40%. That means to get a plane ticket for 25,000 miles we have to charge $25,000. If only 10% is overspending then that plane ticket just cost $2,500. That’s way more than the typical $300 = $600 for a ticket.

I’ve also read that points are worth about $.02/point. At 25,000 x $.02 the ticket is worth $500 meaning it’s better to pay with cash if the ticket will be less than $500.

My 2 cents on miles and cards – Matt

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Posted by Matt Kelly (MONEY FORUMS: 0, Answers: 5)
Answered: June 28, 2016 5:10 pm