"FU^%ING" Credit-Cards!!!

[SeanB]

Funny thing is with Covid pretty much all retailers that accept tap and go there is no PIN entry any more, even after using the card multiple times. Only exception is every single fuel retailer, PIN required at the forecourt. Only time I needed to enter PIN in the last 3 months was paying for groceries, which included an airtime purchase and a bill payment.

Of course the outlier is the good old South African Post office, who, despite having card readers that are both chip and tap capable, as the exact same models are used pretty much everywhere else, and those are capable in other retailers, but SAPO still requires swipe and PIN. Also still has the entire billing system running on Windows XP, mostly on old Intel Core single systems, with 1G of RAM. Not even the thieves who break in will steal them, no value other than the copper inside. The other half, Telkom, also still there on XP, and wonder why they are losing customers by the thousands every week, even though actually cancelling is an exercise in beating your head against a wall covered with broken glass, if you actually want a refund due to you.

[Rick Law]

The contracts that merchants sign with credit card companies often specifically prohibit giving discounts for using cash...   they don't want the costs associated with using a card to be visible to the consumer, for obvious reasons. 

The US gas station example is about the only one I can think of where this rule is not in place - perhaps the exception that proves the rule, perhaps they were never able to get that industry to conform to their policies from the beginning.  Consumers are extremely conscious about the price of gas, every tenth of a penny counts here.  I can't think of any other industry that majors on price in the same way...

Fuel is a necessity, people will have to buy it. The only incentive to accept card is that it means the motorist caught short will have to pay by card but most customers would come purposefully so the first card company to cave in sets the stage for the others.

It is funny that USA gas stations are the one the posts it side by side - consistently.  The following may be outdated since I don't shop in-person often these days, but store has (had?) similar things: discount when you use store's own credit card.  Major retailers like Sears (now defunct), Macy's, etc. has (had) discounts when purchased with a store credit card.

If it is my first visit to a particular store that I am unfamiliar with, I often simply ask: "Do you give a cash discount?"  Hey, just a simple question that may save you a few bucks.  Except in cases I want to get some protection from credit card purchase (life's lesson living in big cities - always the possibility of getting merely an empty box, or stuff with unknown origin...).

With gas stations, I think the main factor is that it is a fairly competitive business.  They usually have large elevated display signs that shows their lowest per-gallon price - typically their "regular" (87 octane in most states).  So, they use that to attract customers - but once the customer pulled by the pump and if they look - they see the extra 5-cents more (or there-about) it actually costs if you use credit cards.  I was fooled by that for a few years when I was in my youth going for the convenience of the credit card.

Most youths in my days, their first credit card is either a store credit card or gas-station credit card.  So, people get "conditioned" as it was in my case.  When I realized I was throwing money away (using generic band card instead of store-branded cards), I started paying cash whenever it represents a saving.

[SilverSolder]

The contracts that merchants sign with credit card companies often specifically prohibit giving discounts for using cash...   they don't want the costs associated with using a card to be visible to the consumer, for obvious reasons. 

The US gas station example is about the only one I can think of where this rule is not in place - perhaps the exception that proves the rule, perhaps they were never able to get that industry to conform to their policies from the beginning.  Consumers are extremely conscious about the price of gas, every tenth of a penny counts here.  I can't think of any other industry that majors on price in the same way...

Fuel is a necessity, people will have to buy it. The only incentive to accept card is that it means the motorist caught short will have to pay by card but most customers would come purposefully so the first card company to cave in sets the stage for the others.

It is funny that USA gas stations are the one the posts it side by side - consistently.  The following may be outdated since I don't shop in-person often these days, but store has (had?) similar things: discount when you use store's own credit card.  Major retailers like Sears (now defunct), Macy's, etc. has (had) discounts when purchased with a store credit card.

If it is my first visit to a particular store that I am unfamiliar with, I often simply ask: "Do you give a cash discount?"  Hey, just a simple question that may save you a few bucks.  Except in cases I want to get some protection from credit card purchase (life's lesson living in big cities - always the possibility of getting merely an empty box, or stuff with unknown origin...).

With gas stations, I think the main factor is that it is a fairly competitive business.  They usually have large elevated display signs that shows their lowest per-gallon price - typically their "regular" (87 octane in most states).  So, they use that to attract customers - but once the customer pulled by the pump and if they look - they see the extra 5-cents more (or there-about) it actually costs if you use credit cards.  I was fooled by that for a few years when I was in my youth going for the convenience of the credit card.

Most youths in my days, their first credit card is either a store credit card or gas-station credit card.  So, people get "conditioned" as it was in my case.  When I realized I was throwing money away (using generic band card instead of store-branded cards), I started paying cash whenever it represents a saving.

Here's a good tip for you:   Go into the gas station and buy gift cards for that brand of gas station, using your credit card (and getting 2% or 3% back on that, depending on your credit card).   Then, you use the gift card at the pump -  which gives you the cash price!   Now you are almost 10% better off.  Do that over a year, and it adds up to a nice bit of tech gear off eBay, or a dinner, or whatever,  with almost zero effort.

It is a sad truth that these days, the cash back you get on some credit cards is a better rate than you are able to get in a savings account at the bank...

[Halcyon]

Here's a good tip for you:   Go into the gas station and buy gift cards for that brand of gas station, using your credit card (and getting 2% or 3% back on that, depending on your credit card).   Then, you use the gift card at the pump -  which gives you the cash price!   Now you are almost 10% better off.  Do that over a year, and it adds up to a nice bit of tech gear off eBay, or a dinner, or whatever,  with almost zero effort.

I use a fuel card issued by Caltex (Chevron). That automatically gives me 4c per litre off fuel every time I fill up. Yes, that locks me into using their service stations, but I find it convenient as the routes I frequently travel all have Caltex service stations anyway. Plus I use the Australian Government's FuelCheck application on my phone which gives me live pricing for any service station in the state, so I can go to the cheapest one in the area I'm in (or plan ahead if I know I'm going to be somewhere in the coming day or two) in order to get the cheapest price. I generally fill up once the tank reaches 50% so I have a buffer if fuel pricing is at its high point. By using the fuel card and by being smart about when and where I fill up, I'm easily saving upwards of 20c per litre.

[DrG]

Here's a good tip for you:   Go into the gas station and buy gift cards for that brand of gas station, using your credit card (and getting 2% or 3% back on that, depending on your credit card).   Then, you use the gift card at the pump -  which gives you the cash price!   Now you are almost 10% better off.  Do that over a year, and it adds up to a nice bit of tech gear off eBay, or a dinner, or whatever,  with almost zero effort.

I use a fuel card issued by Caltex (Chevron). That automatically gives me 4c per litre off fuel every time I fill up. Yes, that locks me into using their service stations, but I find it convenient as the routes I frequently travel all have Caltex service stations anyway. Plus I use the Australian Governnment's FuelCheck application on my phone which gives me live pricing for any service station in the state, so I can go to the cheapest one in the area I'm in (or plan ahead if I know I'm going to be somewhere in the coming day or two) in order to get the cheapest price. I generally fill up once then take reaches 50% so I have a buffer if fuel pricing is at its high point.

You know, that is really the key...balancing what is convenient with what is the best deal. A CC that I use gives me only a 1% rebate, but on everything. Every couple of months they offer a higher rebate on some merchandise class, but it is painless to activate - no doubt they are keeping email lists updated and so on. My point is that I am comfortable with it and I don't want to go chase a 2% rebate and go through any headaches.

I don't bother with those gas deals but I understand doing so if it is convenient.

I guess what I am saying is that I really do not enjoy all this financial crap, it is necessary and I try to do a reasonable job of due diligence and then make a decision, only occasionally revisiting the topic. No doubt I have missed out on some deals, but financial stuff is somewhat aggravating because nobody is giving anything away and we all know that.

[Rick Law]

...

Here's a good tip for you:   Go into the gas station and buy gift cards for that brand of gas station, using your credit card (and getting 2% or 3% back on that, depending on your credit card).   Then, you use the gift card at the pump -  which gives you the cash price!   Now you are almost 10% better off.  Do that over a year, and it adds up to a nice bit of tech gear off eBay, or a dinner, or whatever,  with almost zero effort.

It is a sad truth that these days, the cash back you get on some credit cards is a better rate than you are able to get in a savings account at the bank...

That IS indeed a good tip.  Too bad I don't drive so much these days.  Could really have use it a year or two ago.  (I drive much less these days)

Don't get me started on the low interest rate of savings account.  If I start, this blog will get a disk-full error before I finish.

EDIT - To correct a line I was trying to moved but didn't re-paste properly after cutting.

[steve30]

My building society debit card has contactless, chip, and magnetic strip. I was intrigued that they still use the magnetic strip when you go inside the branch. The bank I used to use used chip+pin for teller transactions for years. I don't know what the ATMs here use.

I pay cash for virtually everything. Therefore there is virtually no risk of bank-based fraud, at least where normal shops are concerned. I do use my debit card for internet based payments though so there will be some risk there, but I've only ever had one fraudulent transaction to deal with, and the bank managed to stop that.

[GlennSprigg]

I'm amazed at the number of replies!!  (I'm the O.P.).
You have all educated myself & my 'missus' well beyond what we knew before, & thank you all!! 
Especially regarding the use of an actual 'Credit' card, as opposed to a 'Debit'(master) card.   

[SilverSolder]

Here's a good tip for you:   Go into the gas station and buy gift cards for that brand of gas station, using your credit card (and getting 2% or 3% back on that, depending on your credit card).   Then, you use the gift card at the pump -  which gives you the cash price!   Now you are almost 10% better off.  Do that over a year, and it adds up to a nice bit of tech gear off eBay, or a dinner, or whatever,  with almost zero effort.

I use a fuel card issued by Caltex (Chevron). That automatically gives me 4c per litre off fuel every time I fill up. Yes, that locks me into using their service stations, but I find it convenient as the routes I frequently travel all have Caltex service stations anyway. Plus I use the Australian Governnment's FuelCheck application on my phone which gives me live pricing for any service station in the state, so I can go to the cheapest one in the area I'm in (or plan ahead if I know I'm going to be somewhere in the coming day or two) in order to get the cheapest price. I generally fill up once then take reaches 50% so I have a buffer if fuel pricing is at its high point.

You know, that is really the key...balancing what is convenient with what is the best deal. A CC that I use gives me only a 1% rebate, but on everything. Every couple of months they offer a higher rebate on some merchandise class, but it is painless to activate - no doubt they are keeping email lists updated and so on. My point is that I am comfortable with it and I don't want to go chase a 2% rebate and go through any headaches.

I don't bother with those gas deals but I understand doing so if it is convenient.

I guess what I am saying is that I really do not enjoy all this financial crap, it is necessary and I try to do a reasonable job of due diligence and then make a decision, only occasionally revisiting the topic. No doubt I have missed out on some deals, but financial stuff is somewhat aggravating because nobody is giving anything away and we all know that.

Last year, I generated almost $2,000 cash back by using the right credit card at the right time - shamelessly maximizing the use of those "special offer" categories, paying everything I can with a credit card (including utilities, taxes, you name it).  Once you've thought out the strategy, it really doesn't take any extra time - and the money you get, is totally tax free so actually worth a lot more than if you had earned the same amount at your job! 

It is a mistake to ignore the small but completely risk free returns of 1% - 5% that you can get by just bothering to bend down and pick the money up! 

[DrG]

Here's a good tip for you:   Go into the gas station and buy gift cards for that brand of gas station, using your credit card (and getting 2% or 3% back on that, depending on your credit card).   Then, you use the gift card at the pump -  which gives you the cash price!   Now you are almost 10% better off.  Do that over a year, and it adds up to a nice bit of tech gear off eBay, or a dinner, or whatever,  with almost zero effort.

I use a fuel card issued by Caltex (Chevron). That automatically gives me 4c per litre off fuel every time I fill up. Yes, that locks me into using their service stations, but I find it convenient as the routes I frequently travel all have Caltex service stations anyway. Plus I use the Australian Governnment's FuelCheck application on my phone which gives me live pricing for any service station in the state, so I can go to the cheapest one in the area I'm in (or plan ahead if I know I'm going to be somewhere in the coming day or two) in order to get the cheapest price. I generally fill up once then take reaches 50% so I have a buffer if fuel pricing is at its high point.

You know, that is really the key...balancing what is convenient with what is the best deal. A CC that I use gives me only a 1% rebate, but on everything. Every couple of months they offer a higher rebate on some merchandise class, but it is painless to activate - no doubt they are keeping email lists updated and so on. My point is that I am comfortable with it and I don't want to go chase a 2% rebate and go through any headaches.

I don't bother with those gas deals but I understand doing so if it is convenient.

I guess what I am saying is that I really do not enjoy all this financial crap, it is necessary and I try to do a reasonable job of due diligence and then make a decision, only occasionally revisiting the topic. No doubt I have missed out on some deals, but financial stuff is somewhat aggravating because nobody is giving anything away and we all know that.

Last year, I generated almost $2,000 cash back by using the right credit card at the right time - shamelessly maximizing the use of those "special offer" categories, paying everything I can with a credit card (including utilities, taxes, you name it).  Once you've thought out the strategy, it really doesn't take any extra time - and the money you get, is totally tax free so actually worth a lot more than if you had earned the same amount at your job! 

It is a mistake to ignore the small but completely risk free returns of 1% - 5% that you can get by just bothering to bend down and pick the money up! 

Terrific that you can do that. I participate, but not to that extent and, yes, you are right about "bothering to bend down and pick the money up!", but I am not as dedicated as you.


You are making me feel a little guilty  that I'm not doing more, but I think I have the right balance for me. and that balance includes listening to how other people do it so I might pick up something new and helpful for me.

When I look at a CC card, there is a ton of crap to consider. All of them have privacy (or lack of privacy) policies that are updated continually and no normal human being should take the amount of time and study to understand them to the point of deciding which is better - the assumption is that they all suck on that because they make money selling your details.

Then there is an annual fee - that is a deal breaker right there, because I am not paying an annual fee to use a CC. Historically, there was a time when certain cards were status symbols in the days of upward mobility and yuppies (Gen Z, millenials and Gen X, please consult a Wiki) and all that crap. It never interested me and I was fine to use a no annual fee card even if the type suggested that I was not at all upwardly mobile . Now days, they are the rule but there was a time when they were an exception.

But even then, there could be some incentive connected to the card which might make it worthwhile..e.g., ....If I KNOW that I am going to be engaged in air travel for the year and they are offering a big-ass miles bonus for getting the card, plus miles per dollar....now, I have to calculate the expected price of the tickets and so on - blackout dates - special crap that you don't find out until you spend 20 hours reading the fine print and it's all fine print - it's a headache.

Same with the Gas cards - what I am gaining depends on how many gallons I buy and is balanced out with the inconvenience of getting gas at a certain chain - that *might* be worthwhile or it might be a headache - especially if I find myself going out of my way to get gas.

It's the same principle with coupons. Sure, I take advantage of Microchip free shipping along with a sale price, WHEN I decided to replace my PICkit 3 with a PICkit 4...and I know that game and will answer a short questionnaire or whatever is needed to get the codes to get the discount - if I have already decided on the purchase.

I struggled deciding which first scope to get (well second after a toy scope).  Months of reading all the comparisons and inputs on forums and so on. What finally did it was learning, from an EEVBLOG thread, that an OWONHDS1022M-N was nearly 1/2 price from a certain vendor - I pulled the trigger and am happy with the purchase as it fits my level quite well.

So, I am not saying you are wrong, I am saying that I strive for a comfortable, non-compulsive, balance that I am happy with. I am also not saying that you are compulsive - that, I would reserve for the coupon nuts who impressively manage to get a week's worth of groceries for $1.48 or something like that. See, I am not going to five different grocery stores to get five different loss leaders - if I had to feed 16 people, maybe I would set up a system for that, but I don't, so I am not.

BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

[SilverSolder]

Here's a good tip for you:   Go into the gas station and buy gift cards for that brand of gas station, using your credit card (and getting 2% or 3% back on that, depending on your credit card).   Then, you use the gift card at the pump -  which gives you the cash price!   Now you are almost 10% better off.  Do that over a year, and it adds up to a nice bit of tech gear off eBay, or a dinner, or whatever,  with almost zero effort.

I use a fuel card issued by Caltex (Chevron). That automatically gives me 4c per litre off fuel every time I fill up. Yes, that locks me into using their service stations, but I find it convenient as the routes I frequently travel all have Caltex service stations anyway. Plus I use the Australian Governnment's FuelCheck application on my phone which gives me live pricing for any service station in the state, so I can go to the cheapest one in the area I'm in (or plan ahead if I know I'm going to be somewhere in the coming day or two) in order to get the cheapest price. I generally fill up once then take reaches 50% so I have a buffer if fuel pricing is at its high point.

You know, that is really the key...balancing what is convenient with what is the best deal. A CC that I use gives me only a 1% rebate, but on everything. Every couple of months they offer a higher rebate on some merchandise class, but it is painless to activate - no doubt they are keeping email lists updated and so on. My point is that I am comfortable with it and I don't want to go chase a 2% rebate and go through any headaches.

I don't bother with those gas deals but I understand doing so if it is convenient.

I guess what I am saying is that I really do not enjoy all this financial crap, it is necessary and I try to do a reasonable job of due diligence and then make a decision, only occasionally revisiting the topic. No doubt I have missed out on some deals, but financial stuff is somewhat aggravating because nobody is giving anything away and we all know that.

Last year, I generated almost $2,000 cash back by using the right credit card at the right time - shamelessly maximizing the use of those "special offer" categories, paying everything I can with a credit card (including utilities, taxes, you name it).  Once you've thought out the strategy, it really doesn't take any extra time - and the money you get, is totally tax free so actually worth a lot more than if you had earned the same amount at your job! 

It is a mistake to ignore the small but completely risk free returns of 1% - 5% that you can get by just bothering to bend down and pick the money up! 

Terrific that you can do that. I participate, but not to that extent and, yes, you are right about "bothering to bend down and pick the money up!", but I am not as dedicated as you.


You are making me feel a little guilty  that I'm not doing more, but I think I have the right balance for me. and that balance includes listening to how other people do it so I might pick up something new and helpful for me.

When I look at a CC card, there is a ton of crap to consider. All of them have privacy (or lack of privacy) policies that are updated continually and no normal human being should take the amount of time and study to understand them to the point of deciding which is better - the assumption is that they all suck on that because they make money selling your details.

Then there is an annual fee - that is a deal breaker right there, because I am not paying an annual fee to use a CC. Historically, there was a time when certain cards were status symbols in the days of upward mobility and yuppies (Gen Z, millenials and Gen X, please consult a Wiki) and all that crap. It never interested me and I was fine to use a no annual fee card even if the type suggested that I was not at all upwardly mobile . Now days, they are the rule but there was a time when they were an exception.

But even then, there could be some incentive connected to the card which might make it worthwhile..e.g., ....If I KNOW that I am going to be engaged in air travel for the year and they are offering a big-ass miles bonus for getting the card, plus miles per dollar....now, I have to calculate the expected price of the tickets and so on - blackout dates - special crap that you don't find out until you spend 20 hours reading the fine print and it's all fine print - it's a headache.

Same with the Gas cards - what I am gaining depends on how many gallons I buy and is balanced out with the inconvenience of getting gas at a certain chain - that *might* be worthwhile or it might be a headache - especially if I find myself going out of my way to get gas.

It's the same principle with coupons. Sure, I take advantage of Microchip free shipping along with a sale price, WHEN I decided to replace my PICkit 3 with a PICkit 4...and I know that game and will answer a short questionnaire or whatever is needed to get the codes to get the discount - if I have already decided on the purchase.

I struggled deciding which first scope to get (well second after a toy scope).  Months of reading all the comparisons and inputs on forums and so on. What finally did it was learning, from an EEVBLOG thread, that an OWONHDS1022M-N was nearly 1/2 price from a certain vendor - I pulled the trigger and am happy with the purchase as it fits my level quite well.

So, I am not saying you are wrong, I am saying that I strive for a comfortable, non-compulsive, balance that I am happy with. I am also not saying that you are compulsive - that, I would reserve for the coupon nuts who impressively manage to get a week's worth of groceries for $1.48 or something like that. See, I am not going to five different grocery stores to get five different loss leaders - if I had to feed 16 people, maybe I would set up a system for that, but I don't, so I am not.

BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

You have a very sensible approach;  I am also very loathe to jump through hoops for little reward, but let me give some easy examples:   PayPal offers a credit card that gives 2% back on everything.  That is hard to beat, and when you add up all your eBay and other online activities over a year - or 5 years, or 10 years -  it becomes real money.

For example - if your annual spend is $20K, and you can get 2% on that, it is $400 of "free money" every year with zero effort other than opening the account in the first place. 

Even some cards that have an annual fee can be worth it - for example, a card that gets you access to the airport lounge and free luggage on the flights will pay for itself very quickly and start becoming a net gain (at least pre-Covid19, when it was actually possible to fly, LOL!)

I kind of see it as a fun game to get the most out of these things.  But I am super disciplined and trust myself never to carry a balance and pay interest - that, and taking a long term view (10 years...  20 years of good habits add up!!) is the key!

Also, you are right, the cash back is probably considered "after tax money" all along - maybe better to think of these things as loss avoidance, rather than financial gains! 

[Bassman59]

Last year, I generated almost $2,000 cash back by using the right credit card at the right time - shamelessly maximizing the use of those "special offer" categories, paying everything I can with a credit card (including utilities, taxes, you name it).  Once you've thought out the strategy, it really doesn't take any extra time - and the money you get, is totally tax free so actually worth a lot more than if you had earned the same amount at your job! 

It is a mistake to ignore the small but completely risk free returns of 1% - 5% that you can get by just bothering to bend down and pick the money up! 

I completely agree!

Target and Lowe's give a 5% discount on every purchase if you use their house card, so why the hell not?

Most of the credit card issuers -- notably not American Express -- have moved away from "points" that you can use to buy stuff to "cash back." Even the standard 1% cash back is better than nothing. And when they have offers "5% cash back for select streaming services" or "hardware stores," it's easy enough to just use their card for that. Oh, Bank XYZ is doing the 5%-streaming thing for three months? Let me spend five minutes every three months changing the billing accounts for the services to that card. Gas station charges are 5% back on this other card? I use that card for gas.

One thing to watch out for: some cards won't give you the cash back rebate until there's $50 to give back. That means spending $5,000 on the card for 1% cash back. So those cards don't get used.

It should be obvious where this 1% or 5% cash back comes from -- it comes from the fees charged to the merchant by the card issuers and processors. The cost of the fees is built into the retail price. So not taking advantage of the cash back offers is leaving money on the table because you are paying the higher retail price anyway.

Obviously each card balance gets paid in full every month. That's easy but if you don't do it the rebates are irrelevant.

One more thing. Since retail prices include the card transaction fees, you might as well use the cards instead of cash. But! If you want to help out your local merchants, like the indie coffee shop or restaurant, pay cash. They don't have to pay the 3% transaction fee and that little bit helps. But for the big chains and big box retailers, fuck 'em, Amex all the way! (OK, not Amex because their rewards suck.)

(There's an argument that says that the time a merchant spends dealing with cash, and managing theft by employees (!) and going to the bank and all of that "costs more" than the credit card fees. So I asked my friend who co-owns a coffee roasting business that has a retail outlet, and he said, "I'm going to the bank all the time anyway with the checks from the wholesale customers.")

[DrG]

Here's a good tip for you:   Go into the gas station and buy gift cards for that brand of gas station, using your credit card (and getting 2% or 3% back on that, depending on your credit card).   Then, you use the gift card at the pump -  which gives you the cash price!   Now you are almost 10% better off.  Do that over a year, and it adds up to a nice bit of tech gear off eBay, or a dinner, or whatever,  with almost zero effort.

I use a fuel card issued by Caltex (Chevron). That automatically gives me 4c per litre off fuel every time I fill up. Yes, that locks me into using their service stations, but I find it convenient as the routes I frequently travel all have Caltex service stations anyway. Plus I use the Australian Governnment's FuelCheck application on my phone which gives me live pricing for any service station in the state, so I can go to the cheapest one in the area I'm in (or plan ahead if I know I'm going to be somewhere in the coming day or two) in order to get the cheapest price. I generally fill up once then take reaches 50% so I have a buffer if fuel pricing is at its high point.

You know, that is really the key...balancing what is convenient with what is the best deal. A CC that I use gives me only a 1% rebate, but on everything. Every couple of months they offer a higher rebate on some merchandise class, but it is painless to activate - no doubt they are keeping email lists updated and so on. My point is that I am comfortable with it and I don't want to go chase a 2% rebate and go through any headaches.

I don't bother with those gas deals but I understand doing so if it is convenient.

I guess what I am saying is that I really do not enjoy all this financial crap, it is necessary and I try to do a reasonable job of due diligence and then make a decision, only occasionally revisiting the topic. No doubt I have missed out on some deals, but financial stuff is somewhat aggravating because nobody is giving anything away and we all know that.

Last year, I generated almost $2,000 cash back by using the right credit card at the right time - shamelessly maximizing the use of those "special offer" categories, paying everything I can with a credit card (including utilities, taxes, you name it).  Once you've thought out the strategy, it really doesn't take any extra time - and the money you get, is totally tax free so actually worth a lot more than if you had earned the same amount at your job! 

It is a mistake to ignore the small but completely risk free returns of 1% - 5% that you can get by just bothering to bend down and pick the money up! 

Terrific that you can do that. I participate, but not to that extent and, yes, you are right about "bothering to bend down and pick the money up!", but I am not as dedicated as you.


You are making me feel a little guilty  that I'm not doing more, but I think I have the right balance for me. and that balance includes listening to how other people do it so I might pick up something new and helpful for me.

When I look at a CC card, there is a ton of crap to consider. All of them have privacy (or lack of privacy) policies that are updated continually and no normal human being should take the amount of time and study to understand them to the point of deciding which is better - the assumption is that they all suck on that because they make money selling your details.

Then there is an annual fee - that is a deal breaker right there, because I am not paying an annual fee to use a CC. Historically, there was a time when certain cards were status symbols in the days of upward mobility and yuppies (Gen Z, millenials and Gen X, please consult a Wiki) and all that crap. It never interested me and I was fine to use a no annual fee card even if the type suggested that I was not at all upwardly mobile . Now days, they are the rule but there was a time when they were an exception.

But even then, there could be some incentive connected to the card which might make it worthwhile..e.g., ....If I KNOW that I am going to be engaged in air travel for the year and they are offering a big-ass miles bonus for getting the card, plus miles per dollar....now, I have to calculate the expected price of the tickets and so on - blackout dates - special crap that you don't find out until you spend 20 hours reading the fine print and it's all fine print - it's a headache.

Same with the Gas cards - what I am gaining depends on how many gallons I buy and is balanced out with the inconvenience of getting gas at a certain chain - that *might* be worthwhile or it might be a headache - especially if I find myself going out of my way to get gas.

It's the same principle with coupons. Sure, I take advantage of Microchip free shipping along with a sale price, WHEN I decided to replace my PICkit 3 with a PICkit 4...and I know that game and will answer a short questionnaire or whatever is needed to get the codes to get the discount - if I have already decided on the purchase.

I struggled deciding which first scope to get (well second after a toy scope).  Months of reading all the comparisons and inputs on forums and so on. What finally did it was learning, from an EEVBLOG thread, that an OWONHDS1022M-N was nearly 1/2 price from a certain vendor - I pulled the trigger and am happy with the purchase as it fits my level quite well.

So, I am not saying you are wrong, I am saying that I strive for a comfortable, non-compulsive, balance that I am happy with. I am also not saying that you are compulsive - that, I would reserve for the coupon nuts who impressively manage to get a week's worth of groceries for $1.48 or something like that. See, I am not going to five different grocery stores to get five different loss leaders - if I had to feed 16 people, maybe I would set up a system for that, but I don't, so I am not.

BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

You have a very sensible approach;  I am also very loathe to jump through hoops for little reward, but let me give some easy examples:   PayPal offers a credit card that gives 2% back on everything.  That is hard to beat, and when you add up all your eBay and other online activities over a year - or 5 years, or 10 years -  it becomes real money.

For example - if your annual spend is $20K, and you can get 2% on that, it is $400 of "free money" every year with zero effort other than opening the account in the first place. 

Even some cards that have an annual fee can be worth it - for example, a card that gets you access to the airport lounge and free luggage on the flights will pay for itself very quickly and start becoming a net gain (at least pre-Covid19, when it was actually possible to fly, LOL!)

I kind of see it as a fun game to get the most out of these things.  But I am super disciplined and trust myself never to carry a balance and pay interest - that, and taking a long term view (10 years...  20 years of good habits add up!!) is the key!

Also, you are right, the cash back is probably considered "after tax money" all along - maybe better to think of these things as loss avoidance, rather than financial gains! 

Yeah, some great deals are definitely out there and I did not know about the PP card - I wonder how long it will stay that way (another consideration)?

The big point is not carrying a balance - *damn* I don't know why some kind of basic financial strategy is not taught in grade school on up.

Approaching it as a fun challenge is worthwhile, but there have been instances when I have really been pissed off about some situations. Case in point is taking change to a bank or counting machine.

Once, some years ago, I dutifully wrapped a bunch of change that had been collecting for I don't know how long - in those days, come home, empty your pocket change in a big container and when it is too heavy to carry, or you are too poor to eat, cash in. Now the little sociopath clerk says that "we" [note the royal 'we'] can't take those rolls unless you write your name, address and account number on each one.  I hit the roof, I have some 40 rolls of coins here - are you out of your &!@$ing mind?!

When I asked why, the response was this gobbldygoop crap mixed with classic weasel words - I could have slugs in there [breaks some/all open and look - it's not like I have 10K of coins here and I do have an account at this bank]..."we" would be violating Federal Reserve regulations if we took them without that required information [what regulation is that, you lying sack of ^%@#]. OK, I am embellishing a bit...

Next stop was the next up "manager" who supported the sociopath's positions and invited me to use the coin counting machine located in the adjacent grocery store (I already had checked that out which is why I had wrapped the rolls and waited in line at the bank, you dufus). I ask if the bank owned that machine...no real answer...I asked if he knew how much that machine charged to count money...he said he did not (it was 8.9% I remember it clearly and I told him)...I asked how much interest a CD from this bank paid (something like 5.25% at that time). I then asked him, with a concerned look on my face, if he had ever taking any courses on financial management - at that point, the way forward was clear and I left with my rolls of coins and closed the account - with extreme prejudice, but remaining civil - barely.

I found a machine at a grocery store that charged almost as much, but there was no charge if you got your money in gift$$ at the grocery store. I was fine with that.

Later, I found a bank that had coin counting machines in all of their branches, for free, to their customers and that was where I opened up an account.

I was probably not entirely rational, but I just did not care what it cost to purchase and maintain a counting machine because you are a *&^ing bank!  and the idea that a bank would borrow my money at 5% for a year but charge me 9% to count it once, or require me to provide a ridiculous amount of information, time and trouble, to punish me for inconveniencing them, was just not acceptable and I was not about to do that.

To this day, whenever I see someone pouring bottles of change into a machine, I think back at that incident and chuckle.

[Rick Law]

...
...
BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

Good point - yeah, in the USA, that would not be entirely "free".  You are getting money that you paid a tax on already.

In the USA, that would depend on what State you reside and what you buy.
- Every State has the own State sales tax rate that you must pay.
- In some locales, you have to pay both State and Local tax with your purchases.
- In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line.
- Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example)

Take New York City for example (State 4%, City 4.875%).  So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back.

On the other hand, discount is always applied before sales tax.  So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay.

Duty free shopping, anyone?  Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping.  But if you are not flying, you may still be able to do it!  In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item).  A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly.

I don't mind paying tax if the money is put to good use.  But you can count on government waste like you can count on the earth spinning.  It will happen at least for another few million years.

[SilverSolder]

...
...
BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

Good point - yeah, in the USA, that would not be entirely "free".  You are getting money that you paid a tax on already.

In the USA, that would depend on what State you reside and what you buy.
- Every State has the own State sales tax rate that you must pay.
- In some locales, you have to pay both State and Local tax with your purchases.
- In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line.
- Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example)

Take New York City for example (State 4%, City 4.875%).  So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back.

On the other hand, discount is always applied before sales tax.  So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay.

Duty free shopping, anyone?  Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping.  But if you are not flying, you may still be able to do it!  In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item).  A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly.

I don't mind paying tax if the money is put to good use.  But you can count on government waste like you can count on the earth spinning.  It will happen at least for another few million years.

Hmmm it is an interesting question.   

Let's say you buy something in a state that has 6% sales tax that cost $100,  so the total charge to your credit card is $106.

You will "get back" 1% of that $106 on your next statement. 

But the state received the full tax owed, and the store received the full $100.

So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense!

So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you.  Awesome, right?  Printing money right in front of us!

[DrG]

...
...
BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

Good point - yeah, in the USA, that would not be entirely "free".  You are getting money that you paid a tax on already.

In the USA, that would depend on what State you reside and what you buy.
- Every State has the own State sales tax rate that you must pay.
- In some locales, you have to pay both State and Local tax with your purchases.
- In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line.
- Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example)

Take New York City for example (State 4%, City 4.875%).  So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back.

On the other hand, discount is always applied before sales tax.  So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay.

Duty free shopping, anyone?  Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping.  But if you are not flying, you may still be able to do it!  In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item).  A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly.

I don't mind paying tax if the money is put to good use.  But you can count on government waste like you can count on the earth spinning.  It will happen at least for another few million years.

Hmmm it is an interesting question.   

Let's say you buy something in a state that has 6% sales tax that cost $100,  so the total charge to your credit card is $106.

You will "get back" 1% of that $106 on your next statement. 

But the state received the full tax owed, and the store received the full $100.

So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense!

So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you.  Awesome, right?  Printing money right in front of us!

The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example.

The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate.

That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/

US and IRS only of course.

[SilverSolder]

...
...
BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

Good point - yeah, in the USA, that would not be entirely "free".  You are getting money that you paid a tax on already.

In the USA, that would depend on what State you reside and what you buy.
- Every State has the own State sales tax rate that you must pay.
- In some locales, you have to pay both State and Local tax with your purchases.
- In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line.
- Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example)

Take New York City for example (State 4%, City 4.875%).  So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back.

On the other hand, discount is always applied before sales tax.  So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay.

Duty free shopping, anyone?  Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping.  But if you are not flying, you may still be able to do it!  In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item).  A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly.

I don't mind paying tax if the money is put to good use.  But you can count on government waste like you can count on the earth spinning.  It will happen at least for another few million years.

Hmmm it is an interesting question.   

Let's say you buy something in a state that has 6% sales tax that cost $100,  so the total charge to your credit card is $106.

You will "get back" 1% of that $106 on your next statement. 

But the state received the full tax owed, and the store received the full $100.

So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense!

So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you.  Awesome, right?  Printing money right in front of us!

The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example.

The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate.

That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/

US and IRS only of course.

But the state received their full 6% of the $100 in this example...   by rights, they should only have taxed $99, not $100, if it really was a discount...

The IRS probably chose to ignore this small error (1% of 6%, or 0.06%)

[DrG]

...
...
BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

Good point - yeah, in the USA, that would not be entirely "free".  You are getting money that you paid a tax on already.

In the USA, that would depend on what State you reside and what you buy.
- Every State has the own State sales tax rate that you must pay.
- In some locales, you have to pay both State and Local tax with your purchases.
- In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line.
- Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example)

Take New York City for example (State 4%, City 4.875%).  So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back.

On the other hand, discount is always applied before sales tax.  So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay.

Duty free shopping, anyone?  Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping.  But if you are not flying, you may still be able to do it!  In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item).  A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly.

I don't mind paying tax if the money is put to good use.  But you can count on government waste like you can count on the earth spinning.  It will happen at least for another few million years.

Hmmm it is an interesting question.   

Let's say you buy something in a state that has 6% sales tax that cost $100,  so the total charge to your credit card is $106.

You will "get back" 1% of that $106 on your next statement. 

But the state received the full tax owed, and the store received the full $100.

So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense!

So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you.  Awesome, right?  Printing money right in front of us!

The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example.

The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate.

That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/

US and IRS only of course.

But the state received their full 6% of the $100 in this example...   by rights, they should only have taxed $99, not $100, if it really was a discount...

The IRS probably chose to ignore this small error (1% of 6%, or 0.06%)

I don't think they (the IRS) cares much how the CC describes the rebate, they are just saying that they gave you a discount and they gave it to you as a rebate, so long as they didn't give you more than you spent. IOW, if you didn't pay any sales tax at all, for some reason, they still are not going to make you pay Federal tax on the discount and in turn the State is not going to make you pay State income tax, on the rebate that you got. Of course, the State may make the merchandiser charge a sales tax, or simply charge them the sales tax.

As I remember, in the early days of Amazon, it was rare to be charged sales tax if you were not in the state and that got changed or they buckled down on it or something - somewhere in this thread, someone mentioned that.

Edit: actually as I am re-reading what you are saying, it seems that the difference is like @Rick Law said - "On the other hand, discount is always applied before sales tax."

So if I have a coupon for a bottle of soda for $1, regular price $2, I pay $1 + the 6% sales tax. In the case of the rebate maybe it does not work that way - is the CC giving you 1% of the total amount that you spent or 1% of the total amount NOT including the sales tax?

[SilverSolder]

...
...
BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

Good point - yeah, in the USA, that would not be entirely "free".  You are getting money that you paid a tax on already.

In the USA, that would depend on what State you reside and what you buy.
- Every State has the own State sales tax rate that you must pay.
- In some locales, you have to pay both State and Local tax with your purchases.
- In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line.
- Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example)

Take New York City for example (State 4%, City 4.875%).  So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back.

On the other hand, discount is always applied before sales tax.  So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay.

Duty free shopping, anyone?  Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping.  But if you are not flying, you may still be able to do it!  In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item).  A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly.

I don't mind paying tax if the money is put to good use.  But you can count on government waste like you can count on the earth spinning.  It will happen at least for another few million years.

Hmmm it is an interesting question.   

Let's say you buy something in a state that has 6% sales tax that cost $100,  so the total charge to your credit card is $106.

You will "get back" 1% of that $106 on your next statement. 

But the state received the full tax owed, and the store received the full $100.

So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense!

So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you.  Awesome, right?  Printing money right in front of us!

The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example.

The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate.

That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/

US and IRS only of course.

But the state received their full 6% of the $100 in this example...   by rights, they should only have taxed $99, not $100, if it really was a discount...

The IRS probably chose to ignore this small error (1% of 6%, or 0.06%)

I don't think they (the IRS) cares much how the CC describes the rebate, they are just saying that they gave you a discount and they gave it to you as a rebate, so long as they didn't give you more than you spent. IOW, if you didn't pay any sales tax at all, for some reason, they still are not going to make you pay Federal tax on the discount and in turn the State is not going to make you pay State income tax, on the rebate that you got. Of course, the State may make the merchandiser charge a sales tax, or simply charge them the sales tax.

As I remember, in the early days of Amazon, it was rare to be charged sales tax if you were not in the state and that got changed or they buckled down on it or something - somewhere in this thread, someone mentioned that.

Edit: actually as I am re-reading what you are saying, it seems that the difference is like @Rick Law said - "On the other hand, discount is always applied before sales tax."

So if I have a coupon for a bottle of soda for $1, regular price $2, I pay $1 + the 6% sales tax. In the case of the rebate maybe it does not work that way - is the CC giving you 1% of the total amount that you spent or 1% of the total amount NOT including the sales tax?

The total amount you spent.   So there is an issue (small!) with the maths here.

[DrG]

...
...
BTW: I don't think the money on a 1% rebate from a CC is tax free. You spend $100, they give you $1, but you already paid the taxes on the $100 (when you earned it) that you spent. They are simply giving you $1 of your money back on which you already paid taxes. Otherwise, it should be declared as income and subject to taxes - no?.

Good point - yeah, in the USA, that would not be entirely "free".  You are getting money that you paid a tax on already.

In the USA, that would depend on what State you reside and what you buy.
- Every State has the own State sales tax rate that you must pay.
- In some locales, you have to pay both State and Local tax with your purchases.
- In some States/Locales, you have to pay the State/Local tax even if you purchased from out of State on-line.
- Federal and certain State has additional excise tax on certain items (such as liquor, gasoline and cigarettes for example)

Take New York City for example (State 4%, City 4.875%).  So if your card's spending is all in NYC, you really are getting back only about $91 for the $100 you "got back - but if you purchase in Pennsylvania, they have a rate of 6% (state wide except two counties), so you are getting $94 back.

On the other hand, discount is always applied before sales tax.  So, if it is a $100 discount, you not only "get back" the $100 immediately (by price reduction), there is also another $8.89 tax (if in NYC) that you didn't have to pay.

Duty free shopping, anyone?  Airport Duty Free shops requires a boarding pass for an international flight for duty free shopping.  But if you are not flying, you may still be able to do it!  In the USA's American Native Reserved lands, you don't have to pay federal tax (on item such as cigarettes, that is way more than half the cost of item).  A former coworker of mine drives to a near by American Native Reserve to purchase her cigarettes regularly.

I don't mind paying tax if the money is put to good use.  But you can count on government waste like you can count on the earth spinning.  It will happen at least for another few million years.

Hmmm it is an interesting question.   

Let's say you buy something in a state that has 6% sales tax that cost $100,  so the total charge to your credit card is $106.

You will "get back" 1% of that $106 on your next statement. 

But the state received the full tax owed, and the store received the full $100.

So your 1% cash back is essentially paid for by the store, in the form of credit card transaction fees.... which they are deducting from their tax return as a business expense!

So, the 1% (or whatever) "cash back" is actually tax free to you, and also to the business that gives it to you.  Awesome, right?  Printing money right in front of us!

The $1.06 in your example is tax free in the sense that it does not have to be reported as income and is not taxed. It is not tax free in the sense that you have already paid taxes on the $106 that you spent, both Federal and State as per the example.

The IRS considers it a discount and does not tax the rebate so long as it is a direct result of you spending. If, however, the CC card gives you a $25 referral bonus for signing me up, that $25 is reportable and taxable because it does not result from your spending - it is not considered a discount as is the rebate.

That is how I understand it from various sites like this one: https://thepointsguy.com/guide/complete-guide-to-paying-taxes-on-credit-card-rewards/

US and IRS only of course.

But the state received their full 6% of the $100 in this example...   by rights, they should only have taxed $99, not $100, if it really was a discount...

The IRS probably chose to ignore this small error (1% of 6%, or 0.06%)

I don't think they (the IRS) cares much how the CC describes the rebate, they are just saying that they gave you a discount and they gave it to you as a rebate, so long as they didn't give you more than you spent. IOW, if you didn't pay any sales tax at all, for some reason, they still are not going to make you pay Federal tax on the discount and in turn the State is not going to make you pay State income tax, on the rebate that you got. Of course, the State may make the merchandiser charge a sales tax, or simply charge them the sales tax.

As I remember, in the early days of Amazon, it was rare to be charged sales tax if you were not in the state and that got changed or they buckled down on it or something - somewhere in this thread, someone mentioned that.

Edit: actually as I am re-reading what you are saying, it seems that the difference is like @Rick Law said - "On the other hand, discount is always applied before sales tax."

So if I have a coupon for a bottle of soda for $1, regular price $2, I pay $1 + the 6% sales tax. In the case of the rebate maybe it does not work that way - is the CC giving you 1% of the total amount that you spent or 1% of the total amount NOT including the sales tax?

The total amount you spent.   So there is an issue (small!) with the maths here.

If it is 1% of the total amount (which includes the sales tax) that you spent there is no problem for Income tax because that was taken on the $100 base and the $6 that went to for the sales tax.

It is accurately described as a 1% rebate on the total amount that you spend. It may not be the same as a 1% discount, because that would mean that you pay $99 + sales tax on $99. But the CC card is not describing it as a 1% discount. Not sure where the issue is, but I think I understand what you are saying. Maybe the way the IRS describes it as a discount is a little odd?

[Rick Law]

Disclaimer first: this is my personal opinion and from my experience only.  It is not from a tax professional.  I am not a lawyer, not a CPA, and not a licensed tax professional.

With that out of the way, this is how I understand it (from doing my own tax for years which means having the read those Form XXXX instructions from IRS and State).

Tax is calculated based on the value of the transaction.  Discount reduces the value of transaction.

You purchased a car at the dealer.  You managed to negotiate the price down to $40,000.  Tax is on the value of the transaction.  The transaction is $40,000.  That's the amount that is taxed.

The price the dealer wanted never comes into play.  He might have wanted to sell it for $100,000.  That means you save $60,000.  But, that $60,000 was merely someone's desire, and did not become part of the transaction -- hence it is not included in the transaction value to be taxed.  He might have wanted to sell it for $200,000.  You might have "saved" $160,000.  It is irrelevant.  It is not part of the actual transaction.

One time a decades ago, I failed to get the car dealer to lower it further.  So, I asked for another $1000 for my trade-in car.  The sales clerk throw it back in my face and said then this new car is going to go up $1000.  My mind clicked and I said "fine" then I ask for another thousand more for my trade in, and the new car went up another $1000;  I just told him I want to feel good that I trade-in that car at a very good price, and ask for more for my trade-in again.  In that State and at that time, trade-in applies as directly subtracting from the transaction.  Every extra $1000 my trade-in is worth is $1000 less in the new car.  That is $1000 less value in the transaction, and that is $1000 less I have to pay tax in.  Within reason of course, and staying in good faith with complying with the law of course.  I really would not want to stand before a tax auditor trying to justify that my 10 year old junk is worth 90% of when it was a new car.  Being charge with tax fraud would not be fun, so, within reason only.

Applying the discount first gets us to the actual transaction value.  That is why discount is always applied before tax. 

Rebate from your seller (or the Credit Card company whom processed the transaction on behalf of the seller) is a post-facto discount. (Exception is healthcare insurance rebates...  That one is a rat's nest which may be governed by different State laws.  In some States, the resurrected the awful Obama Care mandates and penalty.  Health Insurance is a mess these days)

When they promise you a rebate of 1%, they based that 1% on the total post-tax amount.  Their lazy math and their vague attempt to exaggerate the value of their rebate.

Only folks at this forum would have the minds to think about pre- verses post- tax implications.  Most others would just think...  ah 2% back = 2% less = 2% discount.

They could have based that on a pre-tax basis, but they would need to do a lot of work.  Excise Tax Local, excise tax State, Federal excise tax, Sales tax State, Sales tax local, ahh... a mess.

In either case:  the value of the transaction has been taxed, so neither IRS or State Treasury has a bone to pick with you.  The tax duty was satisfied.

[SilverSolder]

Because the credit card gives you 1% back of the full payment including taxes etc., it is actually equivalent to getting slightly more than a 1% discount on the price of the original item.

E.g. take our $100 item, with 6% tax ($6),  you pay $106.

Now, the credit card company gives you $1.06 back (1% of the $106)

So your discount on the $100 item is actually 1.06%,  not just 1%!

[Rick Law]

Because the credit card gives you 1% back of the full payment including taxes etc., it is actually equivalent to getting slightly more than a 1% discount on the price of the original item.

E.g. take our $100 item, with 6% tax ($6),  you pay $106.

Now, the credit card company gives you $1.06 back (1% of the $106)

So your discount on the $100 item is actually 1.06%,  not just 1%!

Your math is right, but your last line (conclusion) is questionable: depends on perspective.  Denominator at that point is no longer $100 but $106 because $106 is your payment.  So you are still at 1% discount of your payment.

In any event, when the percentage discount is the same percentage as money back, apply now or later doesn't matter.   It will cost you the exact same amount.  Some simple algebra will prove that:

Money back case, your total cost is:
   (N*1.06) - (N*1.06)*0.01; // the second term is the money back.
Percent discount case, your total cost is:
   (N*(1-0.01))*1.06;  // (N*(1-0.01)) is post-discount amount.
Both evaluate to N*1.06*0.99, you spend exactly the same.

The difference is merely spending extra and get the extra back, verses not spending the extra and keeping it in your pocket.

However, the comparison is if one gets a higher saving with cash-discount vs % money back.

Earlier you replied that you get a 4 cents discount per litre of gas.
- If it is $1 per litre and you get 4 cents discount, that is a 4% discount.  4x the 1% money back.
- If it is $5 per litre and you get 4 cents discount, that is a mere 0.8% discount.  1% money back would be a better deal.

[SilverSolder]

Because the credit card gives you 1% back of the full payment including taxes etc., it is actually equivalent to getting slightly more than a 1% discount on the price of the original item.

E.g. take our $100 item, with 6% tax ($6),  you pay $106.

Now, the credit card company gives you $1.06 back (1% of the $106)

So your discount on the $100 item is actually 1.06%,  not just 1%!

Your math is right, but your last line (conclusion) is questionable: depends on perspective.  Denominator at that point is no longer $100 but $106 because $106 is your payment.  So you are still at 1% discount of your payment.

From a "simple buyer" perspective, buyer is getting a straightforward 1% discount on the total payment.

From the state tax authority perspective, no discount at all was given on the $6 sales tax - the state tax authority collects the full $6.

Now the important bit:  no part of the 1% cash back that buyer received came from the $6 paid in tax.  The 1% cash back was entirely funded from proceeds from the $100 part of the transaction that seller controls.

From seller's perspective, therefore, the cash back is 1.06% (and seller actually has to pay that, it is included in the merchant fees charged by the credit card company).

The Buyer can actually choose to look at the transaction two ways:
(1) I got 1% cash back on the whole transaction including tax, or
(2) I got 1.06% cash back on the item pre tax price, and paid 6% sales tax as is usual in my state

Now comes the crunch:
If buyer can deduct the sales tax somewhere (for example, buyer runs a small business) then the 1.06% is actually the correct discount received!

Earlier you replied that you get a 4 cents discount per litre of gas.
- If it is $1 per litre and you get 4 cents discount, that is a 4% discount.  4x the 1% money back.
- If it is $5 per litre and you get 4 cents discount, that is a mere 0.8% discount.  1% money back would be a better deal.

That may have been someone else's post -  In this case, I would say you should double dip!   I.e. buy gas station gift cards with your credit card and get immediate cash back on that transaction.  Then use the gift card at the pumps and enjoy discounted gas as well, since the gas station gift card counts as cash when buying the gas!  I usually manage 5% - 10% discount overall, by this method.   

Doing all these little things adds up to thousands each year.  Which I then spend on wine, women, and song! 

[Rick Law]

...
...
Now comes the crunch:
If buyer can deduct the sales tax somewhere (for example, buyer runs a small business) then the 1.06% is actually the correct discount received!
...
...
Doing all these little things adds up to thousands each year.  Which I then spend on wine, women, and song! 

I agree with all your points in that reply.  I particularly like your "Now comes the crunch"...  I totally missed deductions angle.  It may be fun to research that sometime.

As to the second point quoted.  "...[Saving] adds up to thousands each year..."  Good going!  I'm impressed.