Are Credit Card Perks Causing You to Waste Money?

Statement credits can be great perks -- if you already make those purchases.

When you have a rewards credit card with no annual fee, or even a mid-range fee, the rewards are the star. These cards are often selected based on how well they maximize your rewards for every purchase.

Once you get into the top-tier cards, however, the rewards actually take second fiddle. Instead, these luxury cards are all about the perks. In particular, many high annual fee cards offer statement credits to help offset that big annual fee. 

If you're already using the services these statement credits apply to, they can turn an expensive card into a break even -- or even a moneymaker. But some of these credits could actually be encouraging you to waste money on purchases you wouldn't otherwise make, just to earn statement credits.

The more specific the credit, the more likely the waste

For the most part, the more versatile a statement credit is, the more likely you are to use it naturally over the course of your regular spend. For example, a general travel credit you can spend on anything from hotels to subway fees should be easy to use for most travel rewards cardholders.

But more and more, these credits are for specific companies or brands. If you don't already shop with these brands, going out of your way to use the credits can often result in spending money on stuff you don't typically use.

One example of this is the Uber credits offered by some American Express cards. If you already use Uber or UberEats on the regular, then these credits are a no-brainer. But what if you don't?

Every time you spend $40+ on a food delivery order just so you can use your $10 Uber credit, you've now spent $30 you probably wouldn't have spent if not for that credit. So, are you really coming out ahead in that case?

Statement credit FOMO

The big problem with statement credits is that they tend to instill a certain sense of FOMO (fear of missing out). Many of us simply can't stand the idea of missing out on what feels a lot like "free" money. 

This can be exacerbated if we've already calculated the statement credits into the value proposition for the card. For instance, if a card has an annual fee of $550 and statement credits worth $300, the effective annual fee of that card is then $250. If a card also has decent rewards on top of those credits, then that $250 effective fee can seem pretty reasonable.

But the statement credits are only a workable part of the equation if you actually use them. And this can lead to excessive or wasteful spending if you're coming up on an expiration date with unused credits. That FOMO pressure could drive you to use them before you lose them -- no matter what you end up spending them on.

Your purchase history tells the real story

The best solution I can offer for this problem is to do a little more self-reflection before you rely on statement credits to add value to an expensive credit card. Take a look at your purchase history on existing cards for the last year to get a realistic idea of what you actually spend money on.

Don't regularly make monthly Uber transactions? You probably won't start just because you got a new credit card. Never shop with a specific retailer or use a particular service? There's probably a reason for that. 

Bottom line is, if you don't already make these purchases, don't include the statement credits as a part of your effective annual fee calculations. Instead, consider them to be nice bonuses on the off chance you use them in your normal course of spending.

What’s more, if the card's other perks and rewards don't make up for the annual fee without those specific credits -- don't get the card. You'll wind up wasting money to justify your fee, which really defeats the purpose.