Don't Fall for the Pay with Points Trick at Amazon and Other Online Retailers

If you shop at Amazon and pay with an Amazon Rewards Card from Chase or a Discover Card you are offered to pay with your rewards points at checkout. Other online retailers have similar offers.

Never pay with your rewards points!*

The reason is simple: you save more money if you pay for the entire checkout amount with your credit card and redeem the points as a statement credit or cashback. (This assumes that you do not carry a balance on your credit card.)

Here's a simple example. Suppose you have $100 in redeemable points and are going to buy something that costs $100 (taxes and shipping included). At checkout you're offered the ability to pay with your points, which ends up making the purchase free.

If you pay with the points, they're deducted from your account and your item is shipped. Great.

But, what if instead of using your points, you pay for the full amount with your rewards credit card?

In this case, the $100 purchase will count towards new rewards. At Amazon that would be an extra $3 earned with the regular rewards Visa, $5 earned with the Prime Visa, or $1 earned with a Discover Card (for the last few years Discover has offered 5% rewards at Amazon in the last quarter of the year--October through December, so that would be $5).

Next, you log in to your credit card account and redeem the points you didn't use to buy the $100 item for a statement credit or cashback into your checking or savings account. The upshot is that you still got the item for free, but you earned additional rewards points for the purchase that you can use in the future.

*Things get complicated if you are carrying a balance on the credit card instead of paying off the entire amount when you get the statement. In this case, focus on buying less stuff you don't need and paying down the balance!