Make large Amazon purchase with 5% cash back or gift card balance?
I’m an Amazon prime member, and I have their 5% back credit card. I’m also recently engaged, and after two wedding showers we have a $1000 Amazon gift card balance. I’m making some ~$300 purchases in the near future. I recognize the benefit is negligible, but theoretically, is it better to make this purchase with the credit card and “earn” $15 cash back, or make this purchase with the gift card balance (considering inflation and other factors)? I generally spend around $1000 on Amazon a year, and I always pay my credit card balance in full.
Use up the gift card balance.
One way of thinking about it is that with inflation, future purchases will be more expensive than current purchases. So you’ll get more cash back from future purchases than current purchases. Not sure how much that matters, since it’s the same $1000 balance either way. But this is the only way that I see to apply inflation to the problem.
Another way to look at it is that at this point, your $1000 balance costs you $0 to use. Your $300 purchase would cost you $300 to buy and return $15 to spend in the future or $285 net. Spend the free money first.
The 5% cash back comes in the form of gift card balance. If you always delay using the gift card balance, it is worth nothing to you.
You can’t leave your gift card balance to someone else. If you were to die tomorrow, the gift card balance would disappear. Your estate would have to pay off your credit card bill regardless.
Finally, however unlikely it seems now, Amazon could go out of business. Then you’d negotiate with the bankruptcy trustee to get compensation. A judge might not give you 100% of your balance.
Use up the gift card balance. The 5% cash back will still be there tomorrow. If you were canceling the card or your Prime membership, it would be a different story. Then it might make sense to build your balance before termination. But if you plan to keep both card and Prime membership, then just use up the gift card balance while you are sure that you can.