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Amazon.com has a no annual fee rewards Visa card with a simple points earning structure:

• 3 Points: For every $1 spent on Amazon.com
• 2 Points: For every eligible $1 spent at gas stations, restaurants, drug stores, and office supply stores
• 1 Point: For every other $1 spent

On the plus side the card doesn’t charge an annual fee; on the minus side, the rewards certainly do not rank amongst the best in terms of points conversion i.e. most rewards convert at a value of $1 per 100 points e.g. $50 statement credit is 5,000 points. The only ones which convert at a higher rate are airline tickets e.g. a roundtrip continental U.S. flight up to $400 in value is 25,000 points or a roundtrip flight anywhere up to $1,600 is 90,000 points. It’s lame that some of the rewards are gift cards to restaurants or gas stations since it’d be better to charge those purchases on the card, get 2 points per $1 and then convert them into a statement credit. Even worse are the Amazon.com gift cards as money spent on Amazon.com purchases converts at a 3-to-1 ratio.

Lately Amazon has been pushing “pay with points” when during checkout which allows one to convert points at the 100 to $1 rate to pay for purchases. Anyone who does this loses money just as they would with the restaurant and gas station gift card redemption. The worst part is Amazon makes it so easy to lose money as there is no waiting for a gift card to arrive in the mail. If it isn’t clear why this is such a bad deal, here’s an example.

Let’s say someone spends $5,000 each year on an Amazon.com Visa card, $2,000 of which was on Amazon.com, $1,000 on gas and restaurants and $2,000 on other purchases. At the end of the first year that person would have (2,000 x 3) + (1,000 x 2) + 2,000 = 10,000 points. That could be redeemed for a $100 statement credit or $100 restaurant gift card or spent on $100 worth of Amazon.com purchases.

If the person pays with points on Amazon.com, then the next year they have still acquired $5,000 worth of products but only have (1,900 x 3) + (1,000 x 2) + 2,000 = 9,700 points, good for $97 worth of rewards. Granted that’s only $3 but why give away $3 or reframed, 3% of one’s rewards for no reason? Even more importantly, why would a company that in so many other ways focuses on what’s best for the consumer, provide an option that clearly doesn’t benefit the consumer?