Little reward in some credit card schemes

Rewards cards only worth it with $2000+ spend per month.

Consumers need to spend at least $2000 a month on rewards credit cards to get any return, while those who spend $1000 a month or less are paying more in annual fees than they get back, according to a CHOICE analysis of loyalty schemes.

The survey of 63 reward credit and charge cards found at a monthly spending rate of $1000 it would take, on average, five-and-a-half years to earn the points equivalent of a digital camera worth $500. Likewise you would need to spend $6600 on an average card to earn enough points for a $50 toaster.

The report says the cards are only viable if consumers repay the balance in full each month as the higher interest rates will wipe out any potential benefit. It also found the annual fees were $150 on average with the highest at $900.

The review comes as millions of loyalty card holders are being asked to chose between remaining with their cards and rolling their points into Qantas Frequent Flyer direct-earn credit cards.

CHOICE found big differences in the benefits for different direct-earn Qantas cards. If you spend $2000 a month with the worst card (after the paying the annual fee) you are over $320 behind, with the best card you’ll earn Qantas Frequent Flyer points to the value of about $330.

On average, frequent-flyer programs give better value than cards that offer cash benefits or shopping vouchers but only if you can be flexible with travel dates and book flights well in advance.

The average time to earn rewards worth $500 after spending $1000 a month on Qantas Frequent Flyer points was 2.7 years, compared to the 6.4 years for a shopping voucher, and 7.4 years for a cashback rewards scheme.

“There’s a lot of marketing hype about rewards cards but if you look at the figures they can hardly be considered all that generous in the way points are converted to flights, vouchers, goods and even cash,” said CHOICE spokesman Christopher Zinn.

“Those consumers who can’t pay the monthly balance off in full should avoid these types of cards altogether and instead opt for a low-interest credit card. But those who can churn business and other expenses through credit cards at no direct cost to themselves can still notch up significant benefits.”

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Reward cards review 2009

CHOICE crunches the numbers to find the most rewarding cards for frequent flyer, shopping and cash rewards.

19 Mar 2009 | We analysed 63 reward credit and charge cards, looking at frequent flyer points, shopping vouchers and cash rewards.


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