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Fr. John Hardon, S.J., defines "merit" in his Catholic Dictionary:
Divine reward for the practice of virtue. It is a Catholic doctrine that by his good works a person in the state of grace really acquires a claim to supernatural reward from God. "The reward given for good works is not won by reason of actions which precede grace, but grace, which is unmerited, precedes actions in order that they may be performed meritoriously" (II Council of Orange, Denzinger 388).
Fr. Hardon enumerates what can increase merit:
Factors that increase a person's supernatural reward for good works performed in the state of grace. There are four such factors:
the degree of sanctifying grace in which a person does some morally good action;
the intensity of will with which an act is done;
the sublimity of the action performed; and
the purity of love or selflessness that animates the performance.
Difficulties of themselves do not increase supernatural merit, but, provided that a difficulty is not culpable, it normally demands additional effort of will and thus indirectly adds to the merit derived from a morally good act done in the state of grace.
See St. Thomas Aquinas's Summa Theologica I-II q. 114 ("On Merit") for more detail.
source: this answer to "Does canonisation make one more meritorious before God?"
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Jesus' Parable of the 10 pounds (in Luke 19) speaks directly to how our actions in life directly influences how God is able to reward/bless us. Focusing on verses 20 and 21:
And another came, saying, Lord, behold, here is thy pound, which I have kept laid up in a napkin: For I feared thee, because thou art an austere man: thou takest up that thou layedst not down, and reapest that thou didst not sow.
This isn't the kind of "God-fearing" person that God wants us to be... that we "trust" God in such a way that it DOESN'T lead us to act. We say "God is all-powerful, He can bring anything to pass. So I'll just stay in my comfort zone, practically do nothing, and let God bring things to pass." For example: Let God grow the Church. Let God improve my relationships. Let God direct my health. Let God make the money... All while I 'keep on keepin' on.' In a sense, do nothing...
If we claim that it is our "trust in God" that leads us to do nothing, Jesus calls that being a wicked servant. Ouch. Jesus says, "If you KNEW that God is all powerful, and THAT is why it led you to do nothing!?, then out of your own mouth I will judge you. You SHOULD HAVE used this 'trust in God' to go out on a limb, get out of your comfort zone, AND ACT, take a risk, KNOWING that God is all-powerful and will protect you and will work out all things for good in the end." In this parable, that meant taking a gamble with just ONE pound, investing it, possibly losing it!, and watch it turn into 10x its worth. Or 5x. Or...
We don't hear about the other 7 servants. Maybe they made different gains as well with their pound. Or (perhaps a reason the text doesn't mention them) they experienced a loss? They invested the pound and didn't get anything from it... Was the Master angry? It seems that he was most angry with the servant who did nothing. It seems the Master would have accepted it if you had taken a gamble and lost the 1 pound. He would say "at least you tried, I accept that." Because in the end, the Master gave out 10 pounds, and received 16 back (from the first 3 servants anyway). Pretty wise calculations of the Master - give 10 servants 1 pound each, tell them to invest, and based off the chance that AT LEAST TWO will more than quadruple their earnings, he can expect some kind of profit. So he took a gamble on behalf of the 10 servants. And if anything else, his biggest profit was to learn who he could trust to make rulers in his new kingdom.
So God takes a gamble on us. When we're really honest with ourselves, we are RICHLY blessed with everything we need to run our race in life. When we say we "Trust" God, does it lead us to ACTING in faith? In our studies, our work, our finances, our relationships, our health, our discipleship... Or do we lay back and say "Let's wait and see what God will do here..." It seems that Jesus says in this passage: God has already acted. He's brought you this far and given you all you need. Now it's time for your TRUST in God to lead you to TAKE ACTION and get moving!
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Here's St. Paul on the distinction between getting into heaven and getting further reward:
1 Cor 3:10-15 10 According to the grace of God which is given unto me, as a wise masterbuilder, I have laid the foundation, and another buildeth thereon. But let every man take heed how he buildeth thereupon. 11 For other foundation can no man lay than that is laid, which is Jesus Christ. 12 Now if any man build upon this foundation gold, silver, precious stones, wood, hay, stubble; 13 Every man's work shall be made manifest: for the day shall declare it, because it shall be revealed by fire; and the fire shall try every man's work of what sort it is. 14 If any man's work abide which he hath built thereupon, he shall receive a reward. 15 If any man's work shall be burned, he shall suffer loss: but he himself shall be saved; yet so as by fire.
Here he speaks of striving for a reward that he may miss:
1 Cor 9: 24-27: 24 Know ye not that they which run in a race run all, but one receiveth the prize? So run, that ye may obtain. 25 And every man that striveth for the mastery is temperate in all things. Now they do it to obtain a corruptible crown; but we an incorruptible. 26 I therefore so run, not as uncertainly; so fight I, not as one that beateth the air: 27 But I keep under my body, and bring it into subjection: lest that by any means, when I have preached to others, I myself should be a castaway.
I don't think he's speaking of missing heaven entirely, because he's made clear that it is by grace ye are saved through faith, lest any man should boast. So it's possibe he could miss out on that crown, or not. This suggests different levels of reward.
Jesus also said there are distinctions between believers "in [His] glory":
Mark 3:37-40: 37 They said unto him, Grant unto us that we may sit, one on thy right hand, and the other on thy left hand, in thy glory. 38 But Jesus said unto them, Ye know not what ye ask: can ye drink of the cup that I drink of? and be baptized with the baptism that I am baptized with? 39 And they said unto him, We can. And Jesus said unto them, Ye shall indeed drink of the cup that I drink of; and with the baptism that I am baptized withal shall ye be baptized: 40 But to sit on my right hand and on my left hand is not mine to give; but it shall be given to them for whom it is prepared.
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Careful readers cannot help but notice a certain tension in the biblical text between the idea of salvation by grace alone and the idea that we are rewarded in the next life in proportion to our good works.
One way to deal with this is has been suggested by @Ray Butterworth: "Good deeds are an essential sign that one has fully converted to Christianity." In other words, a truly saved person naturally does good works. But does it follow that good deeds don't "earn rewards"?
Catholic theology teaches that good deeds do correlate to one's standing in the afterlife. Those who live saintly lives reside in heaven, while those who have not perfected themselves reside in purgatory. The Catholic Encyclopeida explains:
Purgatory (Lat., "purgare", to make clean, to purify) in accordance with Catholic teaching [is the] place or condition of temporal punishment for those who, departing this life in God's grace, are, not entirely free from venial faults, or have not fully paid the satisfaction due to their transgressions.
So clearly, Catholic doctrine holds that even those who die in a state of grace (and are thus "fully converted to Christianity") may not proceed to the highest realms of "heaven," as compared to true saints who do not need further purification.
If the OP does not refer to Purgatory, then the question becomes one of "degrees of sainthood" or higher and not-so-high realms in Heaven. Catholic doctrine is clear that all who reside in Heaven share in the Beatific Vision:
We define that the souls of all the saints in heaven have seen and do see the Divine Essence by direct intuition and face to face, in such wise that nothing created intervenes as an object of vision, but the Divine Essence presents itself to their immediate gaze, unveiled, clearly and openly; moreover, that in this vision they enjoy the Divine Essence, and that, in virtue of this vision and this enjoyment, they are truly blessed and possess eternal life and eternal rest" -Benedict XII (1336):
In that sense, there is no distinction between lesser and greater saints. However, this does not mean that everyone receives the same reward in terms of position and honor. As the Book of Revelation teaches:
Hold fast what you have, so that no one may seize your crown. He who conquers, I will make him a pillar in the temple of my God; never shall he go out of it, and I will write on him the name of my God, and the name of the city of my God, the new Jerusalem which comes down from my God out of heaven, and my own new name. - Revelation 3:11-12
In the end, not every believer can be a "pillar," like the greatest of the saints who endured persecution or lived truly exemplary of service. But even those who were far from perfect Christians and once resided in Purgatory will share fully in the state of blessedness.
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St Therese of Lisieux compared Heaven to a family dining table, at which both the parents and the children sit together. Small children are served milk in small cups, and the parents, in big ones. The children are not envious of the parents who get to drink more, because they themselves have milk to the fill. Parents on the other hand, do not feel sorry for the children, for the same reason. Thus, each one is perfectly happy drinking from his/her own cup, though different in size. As per Therese, our life on earth is an opportunity given to build `capacity' to imbibe the Love of the Lord, which stays on with us in the life to come.
In Mtt 25:15, the Lord narrates how the Talent of Faith is given to each according to his/her abilities.
(Sorry that I am not able to quote the exact words of St Therese. I heard them from a Bishop four decades ago. )
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Good deeds are an essential sign that one has fully converted to Christianity:
"So you see, faith by itself isn’t enough. Unless it produces good deeds, it is dead and useless." — James 2:17 (NLT).
But good deeds don't "earn rewards". One can't earn rewards by any means.
Jesus and the Apostles did use the word "reward", but the original Greek word (misthos, μισθός, G3408) has two very different meanings. According to G3408 - Strong's Greek Lexicon, its primary meanings are:
The first is a wage that one earns. The second is a reward, the natural consequence of what one is doing. The difference is that wages can be earned, rewards can't. The translators chose the English word "reward", not "dues" or "wages".
What one can and should do is to develop a Christ-like character that is suitable for the position one will eventually receive.
One won't receive that position because of having earned it, but as a result of having developed a character that naturally fits the position. One in effect creates one's own perfect job.
(Compare this with the more profane example of two people writing novels. One toils for years but no publisher wants to buy the books, while the other produces books that everyone loves to read. The latter's resulting fame, money, power, etc. are the rewards of having become a great writer. Hard work is required, but no amount of hard work can earn these rewards.)
Jesus used parables to illustrate what positions in the Kingdom of God would be given to this era's Christians once they are reborn as immortal spirits at Christ's return, such as:
Matthew 20:1-16 — Labourers in the Vineyard
Luke 19:11-27 — The Parable of the Ten Pounds
Matthew 25:14-30 — The Talents
The saints are expected to train themselves for their future positions, teaching and ruling on Earth with Christ during the Millennium. Those with the best developed skills will receive the senior positions, not because they've earned them or deserve them, but because they naturally belong in those positions.
"His lord said unto him, Well done, good and faithful servant; thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord." — Matthew 25:21