Why Chasing Credit Card Rewards Is A Waste Of Time For Most Physicians

By: Varun Verma, MD

Published: Dec 15, 2023

📂 Physician Perspectives

Written for:

✅ Medical Students

✅ Residents and Fellows

✅ Early Career Physicians

✅ Mid Career Physicians

✅ Established Professionals

Introduction

As a physician with personal experience of having over 20 credit cards, I've ventured deep into the world of credit card points and rewards. Initially I was drawn to large sign up bonuses and got some free flights, hotels stays and was able to acquire some presents for loved ones with reward points. These are all nice perks, however one needs to remember that a $2000-$5,000 annual reward from card companies isn’t going to ultimately contribute to your net worth as a physician or allow you to reach financial independence any faster. On the other hand,  having too many cards may put you at risk of paying annual fees with marginal returns, not catching fraudulent transactions, and an inefficient points accumulation strategy because they’re been split across too many reward systems to prove useful on redemption (one tribe online always seems to prefer Amex Membership Rewards or Chase Ultimate Rewards or the other).  

I want to emphasize that I’m not advocating to leave money on the table - the premise of this article is that you should develop a simple system (cash back, points or a combination), avoid high annual fees unless you get consistent value from the ‘perks,’ and generally you should stick to one credit card reward system so all of your points are in one ‘bucket.’ Today, I want to share my perspective on why chasing credit card rewards may not be the optimal financial strategy for most physicians. I've walked the path of accumulating rewards, dabbling in premium cards, and I think now have a simpler, more efficient approach that provides financial benefits without occupying too much of my time and effort.

Responsible Credit Card Use

Before delving into the intricacies of credit card rewards, it's crucial to emphasize responsible credit card use. Throughout my journey, I've diligently paid off my balance each month. I view credit cards as a financial tool, not an excuse for reckless spending. However, I strategically used them on occasions like furnishing our new house when I opened a 0% APR card with an 18-month promotional period. This approach allowed me to spread the cost over time without incurring interest charges.

The Appeal of Premium Cards

Like many others, I've been lured by the prestige and allure of premium credit cards such as the American Express Platinum Card and the Chase Sapphire Rewards Card. These cards often tout impressive perks, including airline lounge access and cashback offers for exclusive experiences like Equinox+. However, upon closer examination, I realized that most of these rewards weren't aligned with my lifestyle.

The truth is, many of these "premium" rewards are nothing but clever marketing tactics. For instance, while an airline lounge benefit sounds impressive, how often do we find ourselves with enough downtime to truly enjoy it? I know that with three young kids my wife and I aren’t rushing to get to the airport just to hang out in lounges. Additionally in our situation, our home airport Philadelphia really doesn't have lounges that come included with PriorityPass (the company that Amex uses). Similarly, $300 cashback on a specific luxury purchase (Equinox+)  is tempting, but how often will you use this feature? Most of these rewards turn out to be more of a novelty than a real benefit.  I would have never purchased or used the Equinox+ app ($300) if Amex Platinum didn’t reimburse me. I still don’t use it now even though it is free! Similarly the Saks Fifth Avenue $50 reimbursement was somewhat of a joke and this year I was able to purchase an expensive face moisturizer (and still owed $5 for shipping). I think next year I’ll stick to free YouTube workout videos and my $35 EltaMD UV Clear and save the $695 annual fee of the Amex Platinum. If you have a business or lifestyle where you can maximize your rewards redemption - then more power to you!

The Hidden Costs of Premium Cards

It's crucial to remember that nothing in the world of credit cards is truly free. Premium cards often come with hefty annual fees. For instance, the American Express Platinum Card demands a substantial $695 annual fee. To justify this expense, you'd need to spend a staggering $34,750 on an equivalent 2% cash back card. For most physicians, these extravagant fees can become a financial trap rather than a benefit. Furthermore - the Amex Platinum is a terrible daily spending card since the only bonus category is 5X points on travel, however I see plenty of people plonking down the metal for meals or groceries. They’re essentially getting no benefit in these scenarios versus using a Amex Gold Card (4x points on meals and groceries) or a straight cash back 2% card. Also in order to execute the special extended warranty or theft/loss protection on these cards - you’re actually going to have to remember to put your big ticket purchase on the premium card.

The Simplicity of Cash Back Cards

Now, let's talk about a simpler and sometimes more efficient alternative: cashback cards. Points aficionados will tell you that the best use of points is to transfer them to an airline/hotel partner to get the maximum value. If you don’t want to jump through these hoops or your preferred airline/hotel isn’t a partner - then consider a cashback card.While these cards might not be as glamorous as their rewards points counterparts, they offer tangible benefits with minimal complexity and risk. One cashback card that I personally use and highly recommend is the Alliant Visa card.

The Alliant Visa® Signature Credit Card offers a generous 2.5% cash back on all purchases, a rate that surpasses most rewards points cards. What's even more appealing is that you can boost your cashback rate by depositing $1,000 with their credit union and having at least one direct deposit per month. This card provides substantial rewards without the need for excessive management or financial acrobatics. If you want to avoid the deposit requirements the Wells Fargo Active Cash® Card is good also at 2% cash back - just don’t use it abroad because of the foreign exchange fees.
Beware of credit cards with rotating 5% categories. These often limit you per quarter in purchases for the 5%. E.g The Chase Freedom Flex limits the 5% back (or 5 points per dollar) to the first $1,500 spent in combined bonus categories each quarter you activate the bonus. That’s only a $100 that you are squeezing out of them a quarter! Then the cash back often drops to 1%. 

My System

Carry with me- Amex Gold - 4X rewards on groceries and restaurants/cafes
Carry with me- Alliant Visa® Signature Credit Card - 2.5% cash back on everything else
Store away securely- Citi®/AAdvantage® Credit Card -  free checked bags on American Airlines
Store away securely- Chase Amazon Rewards Prime Visa Card - 5% cash back on Amazon purchases

Conclusion

In conclusion, while credit card points and premium cards may seem like an attractive option, they can sometimes become a waste of time for most physicians. The hidden costs, limited usability of rewards, and the effort required to manage multiple cards can outweigh the benefits. My advice would be to pick 1-3 cards, figure out the optimum spending categories and stick to it. Having a tighter credit card usage strategy will offer real financial benefits without the complexity and risk associated with points and premium cards. Remember, time is a precious commodity for physicians, and a straightforward approach to credit card rewards can free you to focus on what truly matters – your patients, your family, and your well-being.

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