Everyone loves something for nothing and rewards credit cards, if used cleverly, can lead to a free flight to Paris, a new espresso machine or gift cards for the relos this Christmas. But choose unwisely and your rewards card could lead you into a financial black hole.
If you’re eager to join in on the freebie goodness, it’s time to skill up. Here are some of the top tips from seasoned rewards card buffs for getting the most from rewards programs.
Choosing a rewards credit card.
Your spending habits. This is more important than you think. Our research shows that the best card for someone spending $17,000 a year is different a card to someone spending $60,000 a year. Use Mozo’s Rewards Revealer to shortlist cards that are best suited to your planned annual spend level.
Watch annual fees. High annual fees will chew up more of your benefits so look for cards with low fees but good points earning ratios.
Compare points programs. Each program will have different points earning rates but don’t just assume the more points earned the more rewards you’ll get. What you need to look at is the number of points needed to redeem rewards. For instance, with the Bank of Queensland Platinum card you earn 2 points per dollar spent and to redeem a $100 gift card, it will cost you 28,000 points. By comparison, the American Express Velocity Escape Card only has a 1 point per dollar spent rate but you only need 13,500 points with this card to redeem a $100 gift card. That’s a cost difference of $500 for the same reward.
Match rewards to your lifestyle. There’s no point in getting a rewards card with great airline rewards if you’re only interested in shopping rewards.
Watch introductory offers. Bonus points can be a great way to get you jetsetting fast but if you need to spend $10,000 on the card in three months to get the reward, it may not be such a great deal.
Getting the most out of your rewards program
Avoid interest charges. Nothing will deflate the value of rewards than credit card interest. Most rewards cards have higher interest rates and failing to pay off balances in full each month will undo any benefit you might gain from the points.
Get familiar with bonus partners. While we totally discourage buying things for points, knowing who your card’s bonus partners are can help you to redeem rewards quicker. You could be surprised to learn that you can earn bonus points from everything from hotels, flowers to movie tickets.
Redeem points wisely. Not all rewards are created equal so do some rewards comparisons before pressing that redeem button. For instance, with Westpac’s Altitude Rewards program, a Village Cinema’s Double Gold Class Movie ticket will cost you 12,925 points (retail value $50) but for just 8,800 points you can get a $50 David Jones gift voucher. That’s $4125 less you’ve had to spend (on Visa) to get the same value reward. Be strategic about what you use your points on so that you get the maximum value.
- Don’t let points expire. Get into the habit of regularly monitoring your points balance. There is no point earning them and just watching them expire.
MORE in this month’s Moneyzone
Which rewards cards give the most bang for your buck? We reveal all. Australia’s best rewards cards of 2013 >>
Are you part of the credit card elite? Find out which pieces of plastic rewards you most. Top picks for big spenders >>
See which credit cards are throwing in special perks to win you over. Top cards with bonus extras >>