Every month I give my miles, points and rewards update. Often, I get comments commending the impressive number of HiltonHonors points, or MBNA WorldPoints that I have amassed. But is it something worth commending?
I had a conversation with a friend recently, who professed, "if you want to be rich, look at what the rich do." Good advice. No argument here. She continued, "millionaires don't worry about frequent flier miles and credit card points." Essentially, as she saw it, the miles, points and rewards programs are marketing tools (true) to encourage customer loyalty and get you to spend more. 18% more to be precise. The former I agree with. There's a reason my Hilton Honors American Express card is my card of choice. The points created customer loyalty. The latter may or may not be the case.
How do they get you to spend more money? Well, two ways. First, you justify purchases in your mind because you are earning points or miles. Obviously, you're not going to go out and ring up thousands on the charge card just for the points. But if you are on the fence about a purchase, it may be the tipping factor. Second, given two choices, you may opt for a more expensive option for the points. Sounds ridiculous, but I assure you people do it every day. "We're only going to be there one night, and the Hilton Garden Inn is only twenty bucks more than the Holiday Inn Select. Besides, it's nicer and we get the points. Ahh, what the heck. Let's stay at the Hilton." Bingo. Some points, which probably won't get you a tenth of a stay, just cost you twenty bucks.
Of course, my response was that I'm going to save hundreds of dollars (maybe over a thousand bucks) on my honeymoon by using my Hilton points. I understand the potential traps, but I'm aware of them and make an effort not to get suckered. But am I really the sucker? It this a case of overconfidence, as I wrote about in my Boglehead "Mastering Your Emotions" review?
Is my friend right? Do millionaires avoid the use frequent flier programs and credit card rewards (being careful to pay the card off every month, of course)?