First of all... If you heard another parent talking about monetary rewards for his/her kids' grades, then you need to recognize that what other families do is irrelevant to how you want to or should handle your own. Really think about that now, b/c it won't get easier as your little one gets older. But the decisions about what is best for your family, your child and the best way to parent will get more difficult and convoluted... and you need to have a better "center" of what you are using to make those decision on than... what the other parents are doing.
Next, mehh.. they have to do something to record how they are behaving, right? I mean... if there were not some sort of grading system, you'd still expect a "report" of some sort, right? If they were following instructions regularly, being disrespectful to the staff or other kids, being helpful with their classmates, having a good or poor attitude about projects or work they are doing... right? That sounds like all this is. So, yeah. I'd be fine with it. When my daughter was in academic K4, she had a folder that came home every single day with a calendar on the front. She had a red, yellow, or green light bubbled in for each day, and if it wasn't green there would be an explanation. They also did report cards, but that is because they were learning their letters, numbers, basics of reading and adding and coloring within the lines, following directions regarding colors, etc.
Third, how many children do you have? The answer to this question can help you figure out what you consider "good grades". As you noted yourself, it was different in your wife's household than in your own. It is different within our household just between siblings! Kids are not equal. For my son, a "good" grade, is any A or high B. For my daughter, a Poor grade is pretty much any B (as a final grade or a test grade... daily work is just daily work... it's practice. As long as it trends high, then the occasional B or even C is no big deal at all). For our son, not so. He has struggle mightily in some subjects/classes over the years. Mostly b/c he is not very motivated to extraordinary effort. He is happy with the minimum. Which is not happy for us, but is "ok". He gets no rewards for the minimum. He will lose driving to school privileges for just the minimum this year. A solid B in any core subject is good. An "A" is fabulous!
For my daughter, any B is a let down. In any subject.
Different kids. Different motivations. Different skills. Different aptitudes. Different interests. Different habits. Different worries. Different personalities.
If you have more than one child, you will soon see that you can't just slap a "this is what is good and this is unacceptable work" label on things... because no effort from one child might produce a higher quality of work than tons of effort from another child produces. Focus on the effort and difficulty for the child. Not of the material mastery itself. Perhaps the two will converge and it will be smooth sailing. But be prepared for the other possibility. A child who struggles and works hard, but does so-so, or a child who is lazy and puts in almost zero effort and breezes through with As all year in everything. Now tell me... would you punish the low scoring child and reward the high scoring one?
And every family is different. So don't base what you "should" do on what others do. It's fine to get ideas. But they're just that. Ideas. :)
For what it's worth... when I was a child, a good grade was an A. An ok grade was a B (80-89). I never had any C's so I don't know what they would have said about one of those.