I usually don’t talk about credit cards on the blog because they’re boring and there are plenty of websites and blogs that do cover such things. But when credit cards and bad marketing cross my path, we then have some Weakonomics material.

I’ve made it clear before that I am a Chase Freedom credit card user and have been more or less pleased with their product. I get good cash back on regular purchases and aside from a recent increase in my interest rate (despite never having carried a balance or missed a payment) my only gripe has been I can’t design my own card and put this mug on there like Capital One cards.  At least I have a website where I can force you to look at how cute he is.

But Chase does regularly send me information about programs I can enroll in that will protect my identity or save me from malaria or something.  I ignore them (partially since I don’t have them sent to my current address) because they are designed to get more money in the hands of Chase and out of my pockets.  But recently I got a notice for a program they call Ultimate Rewards.  This piqued my interest since it’s a rewards program that exchanges my normal cashback for points which can be exchanged for things like air travel and gift cards.  I’m interested in niether of those things because if I ever traveled a lot I’d get a dedicated miles card and the giftcard exchanges are dollar for dollar.

But I can also trade my points for gifts and items I want, such as books and electronics.  I noticed that the provider of the merchandise is Amazon, so I was hoping for some great deals.  Since the points translate to real dollars, it was easy to compare the points I’d have to pay with the prices I’d pay using Amazon.  I looked at a book I want, the new iPod Nano, and something random: a KitchenAid mixer.  Below are the prices.  On the left are the equivalent points I would pay and on the right are the prices I’d pay just using Amazon.com.

The Big Short          $24 vs $15.36
iPod Nano                $139 vs $125.79
KitchenAid Mixer     $255 vs $181

It’s a complete rip.  I am very disappointed in Chase for putting together such a program.  What they’ve done with Amazon is negotiated some kind of price between what Amazon charges and Chase lists.  This way Chase saves a few bucks in cash back and Amazon gets a slightly higher return on a few sales.  I’m disappointed in Chase for trying to trick me, but I’m not surprised they’re doing it.

For many people it’s kind of a good deal.  When you get something with points it feels like it’s “free”.  But the truth is far from it.  Let’s look closer at the iPod Nano, something I’m considering buying.   I could trade my points effectivly buying it for $139.  Or I could get a check sent to me from Chase with my cash back and go buy it myself for $125.79.  If I bought it myself I could use my Chase card and get 1% cash back too, which further reduces what I actually pay by another $1.25!

Now Chase isn’t all bad.  This program includes some cool things like rotational cashback options (like right now 2% cash back at the Apple store and 10% at Dicks).  So before I make a purchase I go there and see if there’s anything worth scoping out.  My wife actually bought some stuff at Dicks yesterday so we got 10% cash back.

So the points program is for the same fools that likely carry a balance and make it possible for Chase to offer me this great card.  Thanks fools.  For the rest of us, cash is king.

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  By 		The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice.

categories: business, personal, personal finance