Making the most of your rewards card

It’s easy to see why people are enticed by a credit card with a rewards program. The idea of getting ‘free’ flights, giftcards or even new products for your home can be hard to resist.

However, RateCity research has revealed there are a number of traps consumers fall into in the search for the right card.

Firstly, not all rewards programs are equal.  If you were a young professional in the market for a new car, you wouldn’t buy the family wagon. And the same is true for credit card rewards.  There is no point signing up to a Qantas frequent flyer scheme if you never fly anywhere.

Getting started 

Start your research for a new card by thinking about what you are going to use it for and the type of program that would best suit your personal needs.  It’s easy to be enticed by clever, glossy marketing, but step away and consider whether the perks on offer are in line with your lifestyle.

Consider how much you spend 

Next, realistically think about how much you are going to spend on the card. Rewards programs are built on a spend more receive more basis, so if you only use your card occasionally, it is unlikely you will ever accumulatethe points required to redeem you dream reward.

Also, if you don’t pay your credit card off in full each month, you may void your rewards points altogether.

Weight up the cost of the annual fee 

Now consider the annual fee on the card. If the value of the rewards you are likely to get in any given year is less than the annual fee, we have a problem. No fancy toaster is worth paying an annual fee of $400. You may be surprised to learn there are a handful of rewards cards on the market with no annual fee whatsoever, such as theAmerican Express Essentials card and Coles No Annual Fee Mastercard.

Check earn and burn rates and points caps 

One of the ways people get caught out signing up to the wrong rewards card is by forgetting to check ‘earn’ and ‘burn’ ratesand points caps. This is where it gets a bit tricky and using a comparison site can sometimes help with some of the homework.

Consider how much you are likely to spend in any given month on the card and work out the maximum number of points you can earn.  Then compare yourresults with the company’s product table or points required to fly to your dream destination.  If yourcard falls short of expectations, it’s probably not the right card for you.

Watch out for complicated fine print 

When trawling through potential rewards cards, also check the eligibility requirements required to redeem points.  There’s nothing the credit card company lawyers enjoy more than writing fine print.  And let’sbe honest, we could all think of better things to do than spending an evening reading terms and conditions, but if you have the stomach for it, it’s worth seeing how your card stacks up.  

Some cards have strict requirements on where you can earn points, e.g.specific supermarkets, petrol stations and restaurants. There’s no point signing up for a Woolies card if you do the majority of your shopping at Coles.

And finally, if you have a rewards card with points, make sure you use them.  There’s no point having these perks if you never get around to redeeming them.

REWARDS CARDS

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