With so many rewards credit cards to choose from, many with similar interest rates and perks, credit card companies use loyalty programs as an incentive for customers to choose their product. These programs exist to encourage people to spend more money on their credit cards. They accomplish this by offering reward points based on how much you spend. These points can then be redeemed for 'rewards'. Depending on the program, the credit card may be linked to a reward scheme such as Virgin Velocity or Qantas Frequent Flyer, allowing the customer to use their points to pay for airline tickets and other items. Other credit cards have their own reward schemes and allow customers to purchase products from a catalogue of items using their points. The value of the points will vary from card to card, and certain retailers may offer more points per dollar on the purchase of specific items.
Comparing reward programs
If you're in the market for a new credit card and don't know where to start, here are a few things to consider in terms of reward programs:
- Dollar value of each point
- Credit card annual fees
- Amount of free days before you incur interest
- Spend required to qualify for perks such as free flights
- Monthly point caps
- Minimum repayments Once you have this information, you should be able to calculate whether you're spending enough on a regular basis to make the most of any reward points. For example, if a credit card's annual fee outweighs the value of your average monthly points, you won't stand to gain anything. If you often travel by plane for business, however, then choosing a credit card that offers frequent flyer points is a wise idea.
Easy ways to earn points
While each reward program has different rewards, most usually offer:
- Points for every $1 spent on eligible purchases
- Bonus points for applying online or spending a certain amount within a set period of time (e.g. 100,000 points for spending $5,000 within the first 90 days)
- Bonus points for birthdays or for every year you've been part of the program
- Complimentary travel insurance or flights Here are some tips to help make sure you're earning as many points as possible:
- Shop with partner brands: Most reward programs partner with other brands and stores to offer additional points for every dollar you spend on purchases with them. By using your card when shopping online or in-store with these partners, you can earn more
- Pay with your card: Use your credit card to pay for more. Using your credit card to pay for groceries, utilities, your daily coffee or even meals out, you can earn more points. Don't forget to transfer money from your regular transaction account onto your credit card as soon as possible to avoid any interest charges
- Don't split the bill: When dining out with friends, offer to pay the bill with your card and ask your friends to pay you back. You'll get more points, without spending more money
- Link all credit cards: If your household manages more than one credit card, make sure all additional credit cards are linked to the same reward program. This way you don't even have to be present to take advantage of the points on offer. You'll keep earning points when someone else is doing the shopping.
Take your reward points further
While it's not advisable to spend beyond your means and risk accumulating debt, being strategic with your credit card purchases can end up really paying off. Start by looking at the amount of 'free days' your card offers before interest is incurred - this is how long you have each billing cycle to make interest-free purchases on your card. To qualify for these days, you'll usually need to have your credit card paid in full by the due date on your statement. If you have enough money in the bank to cover ongoing expenses, it can be beneficial to pay your bills on the credit card and simply pay off the credit balance before your free days expire. Depending on your card, you may only have to pay the minimum monthly repayment to avoid interest, or you may be required to pay off the entire card.
Reward points rules
Follow these rules to truly make your reward program work for you:
- Limit your spending to one card: Don't be fooled into thinking more reward programs are better. If you spread yourself too thin in order to earn multiple rewards, you're unlikely to have enough points on any one card to make the most of the rewards
- Keep track of reward point expiry dates: Certain cards require you to spend your points within a set time, otherwise they expire. If you only use your credit card sporadically, then this is not the reward scheme for you
- Capitalise on big expenses: As many cards require frequent use to justify their reward programs, it's advisable to take advantage of any big purchases by putting them on your credit card. This could be a new car, a holiday or paying off hefty bills
- Maximise your loyalty reward points by comparing what's available and finding a credit card that aligns with your spending needs.