the mozo blog

What’s the real cost of frequent flyer miles or cashback points using a rewards credit card?

We’ve all fallen for the promise of free, see-through kitchen scales paid for by credit card rewards points, magical points. Because, let’s face it, we all know the allure of something for nothing, whereas the exchange rates for credit spend, points earned and rewards purchased are anything but transparent. So are you getting value for rewards points?

On behalf of everyone whose free return flight to Dubai is looking more like Dubbo, Mozo has cracked the rewards credit card code, to reveal the true value of all those points, cashback deals and discount programs.

The results are kinda scary, so deep breath.

We thought the main difference between the 100-plus different rewards credit cards would be how many toasters / flights / gift cards you get for your annual credit spend. But in many cases, the points expire before you can cash them in, or the rewards offered takes years to attain; worse still, the value of rewards earned is often less than the annual fee.

So how do you beat the rewards card market? Well, it all depends on your credit card spend — but our new Rewards Revealer lets you plug in your numbers for a personal solution. And you’ll find the results are wildly different for flights, giftcards and cashback offers.

If you spend $15,000 a year, the best rewards cards (determined by the value of rewards minus annual fees) are:

for gift cards: Myer Visa Card — $111
for cashback: American Express Blue Sky Credit Card — $103
for domestic flights: Jetstar Mastercard — $101
for international flights: Westpac Earth — $100

Whereas for $50,000 a year, it’s a completely different story:

for international flights: Citi Emirates Platinum — $1,021
for domestic flights: Jetstar Platinum Mastercard — $851
for gift cards: ANZ Rewards Gold — $621
for cashback: Westpac Altitude Platinum — $603

Remember, the interest rates on rewards credit cards nudge up to an outrageous 20%, so unless you pay off the whole balance every month, you’re unlikely to benefit from a rewards card.

Why not check out where your credit card ranks, or who gives you the most covetable appliances a year?

Get to the points at http://mozo.com.au/credit-cards/rewards.

Headlines were made yesterday when Westpac announced it will charge interest on interest charges and fees on all its credit card accounts, starting in June. While media commentators and consumer groups savaged the bank, and the Treasurer labelled it a “serial offender”, the new charges are more or less standard practice — at least among the big banks. So why all the fuss?

On the one hand, as Westpac itself points out, the changes will have a “tiny effect on balances”, apparently 67 cents a month for those affected. Moreover, Westpac is simply coming into line with the other Big 4s – so why single it out for being a late adopter of minimal charges?

The problem is that, at the end of the day, it is another tricksy initiative: fiddling with the fine print to raise revenue without altering the headline rate. And if the net result is in fact tiny, is it really worth the media storm that’s now engulfed the bank?

You have to think Westpac’s PR department has either had a really big St Patrick’s Day or been taken hostage by the bean counters. Consumer sentiment towards Australia’s largest home loan lender is at an all-time low, following its 45 basis point rate rise in December and the subsequent smoothie-fueled furore. Gail Kelly’s leaked comments about rising funding costs – and possible interest rate hikes of a further 30 to 40 basis points – have hardly helped. And profits are already up a third on the previous year, while Westpac was awarded the double-edged title of “World’s most profitable bank” by the famed Boston Consulting Group.

Justifying new charges in a general banking climate of fee cuts is a difficult proposition. At the same time, slamming a bank for catching up to its peers on a minor new charge is more media stunt than serious consumer advocacy.

Stay tuned for our wrap up of sneaky credit card fees — who’s leading the charge, and who simply has bad PR.

Compare credit cards at mozo.com.au