Card reward schemes not always the best option

Collecting reward points for flights and shopping freebies is a waste of time and money for the average credit card customer, researchers say.

Some schemes leave consumers out of pocket because the annual fee costs more than what you get back in return. On the flip side, big spenders who carefully choose whether they want flights, cash or shopping vouchers and pay off bills before being slugged the stellar interest rates on rewards cards are reaping benefits.

More than 10 million credit and charge cards of Australians are linked to rewards. The loyalty cards account for more than half the market, and typically attract the highest interest rates and an annual fee.

The latest report follows a separate survey by consumer group Choice that warned cardholders spending $1000 a month were taking on average more than five years to earn enough points for a $500 digital camera, and needed to splurge $6600 on an average card to earn enough points for a $50 toaster.

Credit card analyst Mike Ebstein, of MWE Consulting, said consumers putting less than $30,000 a year on their plastic and failing to pay off accounts in full each month should opt for a no-frills card with a low interest rate.

Providers had been steadily increasing annual fees or lifting the number of points needed to get rewards since Reserve Bank regulation of transaction fees cut their income, he said.

Source: Herald Sun