Chapter 14 – Rewards and Referrals

The illusion of choice and our own feelings of complicity hide the fact that debt is embodied domination, that the purpose of consumer credit is to keep you in debt perpetuity.” ~Brett Williams[1]

In the previous chapters, we discussed tracking your expenses and making sure you save at least 10% of your income.  Except for your mortgage or rent payment, almost all other expenses can work for you if you take advantage of rewards and referrals.  In my opinion, this is one of the most overlooked aspect of finances for people.  Many companies offer reward and referral programs that many of us don’t take advantage of.  In the financial counseling world, I think we’ve gone too far with trying to convince people not to use credit cards that we’re missing out on millions of dollars’ worth of rewards.

Before we get into rewards and referrals, it’s important to first understand the study of behavioral economics.  This is the study of our psychological behavior and how it impacts our decision making.[2]  In an ideal world, all participants in the financial genome would make rational, mathematically-advantageous decisions; however, we know we don’t.  Behavioral economics studies why we make those irrational decisions.  When it comes to rewards and referrals, lower- and middle-net worth people don’t participate as greatly as higher-net worth people.  High net worth people use rewards and referrals to mutually benefit themselves and others.  For some reason, lower- and middle-net worth people do not and this is irrational behavior to me.  Rewards and referrals are an essential part of the financial genome and should be used more.


Companies offer rewards to entice people to use their credit cards.  Incorrectly using credit cards and building debt can lead to financial ruin.  America has a long history of not being able to use debt wisely.  At the end of 2017, credit card debt, as well as all other types of debt, hit record all-time highs at $5.1 BILLION—well exceeding 2007/2008 levels.[3]  This has led us to shy away from recommending people use credit cards.  If used properly, though, credit cards can provide rewards to our daily spending.

If you use your credit card for daily spending and pay it off in full every month, then you can maximize credit card rewards and not incur any debt.  This is important because one month of finance charges can negate several months’ worth of rewards.  I use USAA’s Unlimited 2.5% Cash Back credit card.  Credit card rewards can be confusing and there are many stipulations to cashing in on the rewards.  This specific USAA card is very simple and its reward interface is easy to use.  I’m a big fan of cash back rewards so I can use them to reduce my bill at the end of the month.  If I use my cash back credit card on as many purchases as possible, then I’m basically getting everything I buy for a 2.5% discount.  Other reward cards give extra rewards for dining-out purchases, gas, or travel.  For example, a card may offer 5% on dining out, 3% on gas, and 1% on all other purchases.

A popular type of credit card reward is airline miles.  A well-known military blogger posted an 8-part series on her adventure with credit card churning on his Military Dollar blog.  It’s important to read her cautions about executing this strategy and the impact to your credit score.  In her series, she opens up different credit cards, meets initial purchase requirements, and scores huge initial sign up bonuses.  She’s able to amass a sizeable amount of airline miles from normal, routine spending.  It’s an impressive way to take advantage of credit card reward programs.

Another blogger, Josh Overmyer, carefully selects which credit cards he uses to maximize his rewards.  You can read his article here.  He saves 7.5% to 15% by using different cards for different purposes.  This is exactly the narrative that I’d like for us to change.  For some people, credit cards are bad and can bring financial ruin.  But for those who understand how rewards work, credit cards become tools to earn money on money we would’ve spent anyway.

They key to successfully taking care of credit card rewards is to understand the system and ensure you pay off your credit card each month.  A minor mistake can cost you months of reward points.  Dave Ramsey warns people about the dangers of credit card rewards.  The basis of his argument relies on cardholders not understanding the details of their card’s rewards.  Read more at this link:


Referral programs are used to entice new customers to open accounts or start new services.  Buying my first house was my first exposure to how high-net worth individuals use referrals.  Nearly every step of the home buying process involved someone referring me to another person.  This was mutually beneficial to both parties and cost me nothing as the purchaser of the house.  This is similar to how most referral programs work.

Before opening any type of service or financial account, consider sending out a message on your social media or talk to your neighbors and ask for referral ideas.  Many military members move frequently and due to service availability are forced to open new accounts for services.  Before starting a new television service with DirectTV, a local company, or DISH Network, consider which company you’d like to go with and ask for a referral link.  I have DISH Network and if someone uses this referral code (VCD0018969651), we’d both get 100 points which is basically $50.

Financial companies are known to offer referral bonuses for opening new accounts.  I’ve posted my referral links all over the internet as much as possible.  I’ve had readers use my links and we both benefited from it.  Here are examples of referral links for services I use.

  • Capital One 360’s savings account offers $20 to me and someone who opens a savings account with $250 or more using this link.  This is an instant 8% return on your money.
  • Lending Club is a peer-to-peer lending website that lets investors loan directly to individuals.  There safest portfolios earn close to 7% while their more risky portfolios can earn over 10%.  By using this link and investing $10K or more, we both get $150.
  • Even the new cryptocurrency brokerages offer referrals bonuses.  By using this link, Coinbase gives both parties $10 worth of Bitcoin.
  • Some companies like Betterment, the algorithmic index investment system, waive fees or commissions as referral bonuses.  By using this link, Betterment waives the monthly management fee.

These are just a few of the examples from my personal accounts.  There are many other types of rewards and referrals.  At the time of this writing, I’m unable to figure how much is lost with people not taking advantage of reward and referral programs.  During my search though, I found this great site that lists many referral and new account bonuses,  We must re-engineer our minds to consider rewards and referrals before opening new accounts.  These rewards and referrals can be considered extra income or a reduction in expenses depending on the type of reward you get.  Here’s how the rewards and referrals impact the financial genome.

Rewards and Referrals