This brings up an interesting question, which I have often wondered about. Why do rewards cards offer you a choice between, say, a $25 check and a $25 gift card to various stores?

Isn’t a $25 check always more useful than a $25 gift card? Even if you are going to buy something from Amazon, you are no worse off getting $25 in cash, versus getting a $25 Amazon card. And some credit card companies even offer a “statement credit” which is applied directly to your account, so you don’t even have to go cash the check, you just pay $25 less on your credit card.

Granted, if you carry a balance, and you SHOULDN’T, a statement credit may be worth less to you, because it doesn’t put money into your pocket. But if you pay off your balance every month, a statement credit is effectively the same as direct depositing the amount into your checking account.

But, even if you carry a balance, and don’t want a statement credit, a check is still better than a gift card, right? Unless you buy something for that exact amount, you still have to enter another form of payment for the difference, which is arguably as much of a hassle as physically depositing the check in the ATM.

So, if gift cards are never better, and are at best, equal to a check, why do they even offer them? Better yet, why do people select them? I am assuming here that the face amount is equivalent, which has been the case in all circumstances I have seen. If the gift card is for more than the check, that is a different argument.

If you routinely select the gift card over the check, please post in the comments and let us know why. Maybe there is something I am missing, and I would love to learn about it.

However, this brings up some important issues that I would like to explore.

First, is earning rewards worth carrying a balance? You don’t really need to do much math to know that the answer is no. Any savings on rewards would be wiped out by interest payments, so you should not attempt this strategy if you will not be able to pay off your card in full each month.

In fact, we pay off our card twice a month (online), and I’ll get to the reason in a moment.

The second question, which is harder to answer is, “Will I spend more because I am using a credit card?” Many studies have shown that consumers spend more when using a credit card, because they don’t perceive it as money. According to this theory, only by paying in cash do you associate a purchase with money leaving your possession.

I see the point, but I humbly disagree. When I make a purchase with my credit card, I immediately enter into an excel spreadsheet that tracks my expenses. So, even though I used my card I am effectively treating it as cash.

Also, as I mentioned above, I pay off my balance twice a month online, so I know when I charge something the money is coming out of my account almost right away. There are two reasons I do this — one is to keep my outstanding balance low relative to my credit limit, which helps my credit score. The second is to help me mentally treat this as spending actual cash, which helps me to spend less.

So, if you are careful with your spending, and pay off your balance each month, I think using a credit card for the rebates can be a wise decision. This is especially true for recurring bills that you would be paying anyway, such as cable, phone, etc. Not only do you get the rewards, but you save money on stamps because you don’t have to mail them a check.

What about you? Do you use a credit card for the rewards? Do you have any tips or tricks to share?