credit card reward programs: gift cards or statement credit….????

So what’s a better deal?  Should you take statement credit or a gift card?  Most of us are tempted to go with the gift card because it feels like we’re getting some reward (we have no tangible feeling of more money when we only get statement credit), but after some calculations and thinking, I’ve decided that it’s almost always better to take statement credit. 

Here’s the explanation using a planned Kindle purchase as an example.  Let’s say you start with 5,100 points from you Amazon credit card.  With that 5,100 points, you could redeem it for a $50 Amazon gift card or you could receive a $50 statement credit.  Here’s how the different scenarios would work out:

	Statement Credit Method	Gift Card Method
Starting Pts. Balance	5100	5100	Starting Pts. Balance
Redeem for $50 credit	-5000	-5000	Redeem for $50 gift card
New Pts Balance	100	100	New Pts Balance
$139 Kindle Purchase (earn 3pts/$)	+417	+267	$139 Kindle Purchase using gift card (3pts/$); so $139-$50= $89
Final Pts. Balance	517	367	Final Pts. Balance

So unless you’re planning to give the gift card away as a gift (then, it is a better deal because you don’t usually earn points for buying gift cards), you’re better off with statement credit.  Even if you decide not to buy that Kindle now, you would still make out with a lower balance on your credit card and future purchases would earn you more points.  

Image: Jeroen van Oostrom / FreeDigitalPhotos.net

So water the money tree and forego the “gift” card; as you see, in the end it still “costs” us more.  Now take your better financial situation and get more girlie things…