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Use Science to Get More Happiness Out of Credit Card Rewards

March 8, 2019
Cash Back Credit Cards, Credit Card Basics, Credit Cards, Rewards Credit Cards, Travel Credit Cards
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You can’t redeem credit card rewards for happiness, but they can get you a lot closer. It’s science.

Decades of research have shown that while money might not ensure happiness, the way you spend it can indeed have an effect. Credit card rewards aren’t exactly money, but they still give you the power to make similar mood-enhancing purchases. If you’re already getting the best dollar value out of your points and miles, here are some research-backed ways you can squeeze more delight out of your next redemption.

Book a trip

We may be living in a material world, but material possessions actually aren’t the key to happiness. Experiential purchases — such as vacations or concert tickets — make us happier than material purchases, according to a study in the Journal of Personality and Social Psychology.

In this study, researchers asked one group of participants to rate their happiness with their last experiential purchase over $100, and another group to rate their happiness with their last material purchase over $100. Overall, experiences got higher happiness marks than the material possessions.

How to redeem: If you have a travel card, redeeming your rewards for an experience is easy: Use your miles to pay for a weekend getaway. With certain airlines, you might be able to stretch your rewards even further by snagging cheap award tickets.

While you’re organizing your trip, see whether your issuer is offering any tickets to plays, shows or other events in exchange for points or cash. In the past few months, American Express has sold tickets to the eternally sold-out “Hamilton: An American Musical,” and Chase has offered tickets to the Emmy Awards.

» MORE: NerdWallet’s best travel credit cards

Give gifts

All the adults in your life were right: Giving is better than receiving. Spending money on others really does give us the warm fuzzies, according to one study published in the journal Science.

In this experiment, researchers gave participants either $5 or $20. Some were told to spend the money on a bill, expense or gift to themselves by 5 p.m. that day; others were told to spend the money on a gift to someone else or a charitable donation. Those who gave money away reported more happiness than those who kept the money for themselves, regardless of the amount.

How to redeem: Redeem rewards for gift cards to your favorite coffee shop, if you can get at least 1 cent per point on the deal. The next time you visit with friends, say, “This one’s on me.” If you want to give to charity, opt for cash back (again, if you can get at least 1 cent per point) and make a donation to your favorite cause. Or, donate your rewards directly through your issuer.

» MORE: NerdWallet’s best cash-back credit cards

Invest in a retirement account

You know what could really put you in a good mood? Knowing that you can retire comfortably.

Almost 90% of retirees say they’re either satisfied or very satisfied with retirement, according to an Employee Benefit Research Institute analysis of data from the University of Michigan’s ongoing Health and Retirement Study. But those with more wealth and higher incomes reported greater satisfaction, it noted. If you want to do your future self a solid, contribute more to your retirement account now so your money has time to grow over time. You might have to wait 30-plus years to enjoy those savings, but what can we say? Happiness is happiness.

How to redeem: Some credit cards, like the Fidelity® Rewards Visa Signature® Card and the BankAmericard Cash Rewards™ credit card, let you funnel rewards directly into an affiliated IRA or other investment account. If your card isn’t linked to your retirement account, redeem your rewards for cash back and use the money to contribute on your own. You’ll thank yourself later.

Claire Tsosie is a staff writer at NerdWallet, a personal finance website. Email: [email protected] Twitter: @ideclaire7.