Credit Card Awards Programs – are they for you?

Credit card ‘Rewards’ programs are basically loyalty schemes where cardholders earn rewards points from targeted and general spending using their credit card.  Most credit card rewards programs have tie-ups with a number of suppliers and service providers (bonus partners) that offer additional points for certain transactions with them (targeted spending).

Depending on the credit card Rewards model adopted by the credit card issuer, Reward points can be redeemed for such things as domestic and overseas travel, small electrical and electronic products, cinema and theme park tickets, gift cards, some personal services, wine and even cash-backs on the total spend.

Your spending pattern and history with credit card repayments should largely dictate the type of credit card to choose.  Credit cards with Rewards programs usually have higher interest rates and annual fees than plain-vanilla credit cards.  So, if you don’t normally fully repay prior month purchases by the due date, your interest rate must be an important consideration.

The next item to examine is the number of Reward points needed to make a purchase. The Basic or Classic credit card with an attaching Rewards program normally earns one point per dollar purchases.   A $50 David Jones Gift Certificate from Commonwealth Bank’s Commonwealth Awards program for example, requires 8,400 points; 79,900 points are needed for a Nintendo Wii Console.   An Economy class return flight from Sydney to Melbourne requires 16,000 Qantas Frequent Flyer points – or 22,000 points to cover all taxes as well.

If you’re spending (say) $400 a month on your card, it is going to take considerable time to accumulate enough points to get anything worthwhile – which is why you should look at ways of boosting the number of points earned on each transaction.

Shopping with Bonus partner organizations is one way you can earn more points.  Some partners also run special promotions from time to time offering extra bonus points with particular purchases.

By putting most of your household spending through your credit card and paying the outstanding balance in full each month, you get maximum points on your expenditure and the benefit of interest-free purchases.   Some card companies calculate points on the amounts spent, billed and paid during the month.

You can also generate more points from your spending by applying for a premium credit card (Silver, Gold or Platinum).  Each step-up in card grade raises the number of points earned on transactions but also costs more in annual fees.  You need to work out whether the redemption value of additional Rewards points earned this way more than offsets the higher annual fees.

Look for offers that maintain a constant ratio between point numbers and spending – which is far better for cardholders. Still not sure which offer is for you? Take your time, browse through our listings until you are sure you’ve found the card that’s perfect for your spend. At Credit Card Application we make this process easy, once you’ve made your decision, click on the apply now button next to your card and fill out the online application form.