Reward cards review 2009

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

01 .Introduction

Reward cards

  • We analysed 63 reward credit and charge cards, looking at frequent flyer points, shopping vouchers and cash rewards.
  • If you spend only $1000 per month or less, you’re probably paying more in annual fees than you get back in rewards. Always pay your balance in full, of course.
  • New credit cards from David Jones, Myer and Woolworths compared well in the shopping voucher category.

Changes to Qantas Frequent Flyer rewards cards

If you have a credit card with Qantas’ Frequent Flyer (QFF) rewards, you're faced with a decision by March 31. Many rewards cards no longer offer QFF points; those that do now transfer points directly to a QFF account. You usually have the option to opt in for a card that exclusively transfers your points to Qantas or otherwise stay with your current card but lose the option of transferring yor point to the Qantas’ Frequent Flyer scheme.

We surveyed 41 cards offering QFF or Velocity points. On average, frequent-flyer programs give you the best value, but you have to be very flexible to get a seat for the standard points program we’ve used in our analysis. Otherwise, you can book any available seat and fork out the corresponding points, which vary greatly. If the flight you want is in high demand, you’re likely to pay a premium. So you should also consider whether your frequent flyer card offers the best value, especially now flights are so cheap, we show you the best ones.

CHOICE Verdict

In general, the more you splurge, the more you benefit. Spend $5000 a month and your best option is Qantas or Velocity (Virgin Blue’s frequent-flyer scheme) points worth about $1200 per year, even after deducting the annual fee.

On the other hand, at a $1000 monthly spending level, converting your points into shopping vouchers can drop you into the red by up to $760 per year.

Please note: this information was current as of March 2009 but is still a useful guide to today's market. For more recent information, see our Rewards cards 2010.

 
 

Sign up to our free
e-Newsletter

Receive FREE email updates of our latest tests, consumer news and CHOICE marketing promotions.

 

02.Frequent flyer Best Buys

 

We surveyed 41 cards offering QFF or Velocity points. We found the best frequent-flyer cards are American Express ones, as they offer better point conversion. There was little difference in value of the Velocity and QFF associated cards.

Qantas Best Buys

For the full results see the table.

$1000 monthly spending level

Best overall

  • Westpac Earth - all spending on American Express

Best Visa/MasterCard

  • ANZ Frequent Flyer Visa

$2000 monthly spending level

Best overall

  • Westpac Earth Platinum - all spending on American Express
  • Westpac Earth - all spending on American Express

Best Visa/MasterCard

  • ANZ Frequent Flyer Visa

$5000 monthly spending level

Best overall

  • Westpac Earth Platinum - all spending on American Express
  • NAB Qantas Platinum - all spending on American Express

Best Visa/MasterCard

  • CBA Platinum Qantas Frequent Flyer MasterCard

Velocity Best Buys

For the full results see the table.

$1000 monthly spending level

Best overall

  • Westpac Altitude - all spending on American Express
  • NAB Velocity - all spending on American Express

Best Visa/MasterCard

  • ANZ Rewards Visa
  • CBA Awards Velocity Frequent Flyer MasterCard

$2000 monthly spending level

Best overall

  • Westpac Altitude Platinum - all spending on American Express
  • Westpac Altitude - all spending on American Express

Best Visa/MasterCard

  • CBA Platinum Velocity Frequent Flyer MasterCard

$5000 monthly spending level

Best overall

  • Westpac Altitude Platinum - all spending on American Express
  • American Express Platinum Ascent

Best Visa/MasterCard

  • CBA Platinum Velocity Frequent Flyer MasterCard

03.Frequent flyer results tables

 

We surveyed 41 cards offering Qantas Frequent Flyer or Virgin Velocity points. We found the best frequent-flyer cards are American Express ones, as they offer better point conversion. There was little difference in value of the Velocity and QFF associated cards.

Results for all cards are shown in the table below.

Results table

04.Shopping voucher rewards

 

How do the new store cards measure up?

In the second half of 2008, David Jones American Express and Woolworths Everyday Money MasterCard entered the fray, giving the Myer Visa card competition. These three major retailers’ cards offer loyalty points that can be converted into gift cards to use in-store – a limiting factor compared with other reward programs that offer the choice of shopping vouchers for a large number of stores.

This aside, the Myer Visa and David Jones American Express cards scored well compared with other cards offering shopping vouchers. If you spend between $1000 and $2000 per month, Myer Visa gives you the best value of all shopping voucher cards, but does not rate well for higher spending levels as points earned outside the store are capped at 2000 per month. David Jones American Express is a Best Buy for $2000 to $5000 spending levels.

While the Woolworths MasterCard is not a Best Buy, it’s the most flexible of the three as its vouchers can be used at the supermarket and some Woolworths-owned shops (such as Dan Murphy’s and Tandy). Our analysis looked at points earned outside the stores, but all three cards give you more points when you shop with them.

Table 

Are they worth it?

Cash rewards work similarly to other rewards, but instead of choosing a toaster or shopping voucher out of the rewards catalogue, you usually get cash credited to your credit card account. An added bonus, of course, is that you can use the cash in stores of your choice or just repay your card.

Table

06.How we calculated

 
To calculate the total rewards value in a given category, we
  • Divided the number of points needed for a sample of rewards in the category by the dollar value of those rewards, which gives us the number of points needed for $1 reward value.
  • Then calculated how much value you would get from your total annual reward points depending on your monthly spending level, and deduct the total annual fee (including annual card fees and rewards program fees if a separate fee is charged) from the total amount.
  • The result is the dollar return on a card after fees.

We looked at the standard points earned, which doesn’t include bonus points or promotional point offers. Point conversion rates and any point caps were taken into account.

These are the sample rewards we used:
  • Shopping voucher $50 voucher for a department or large store (David Jones, Myer) and $50 voucher for another store (Bunnings, Officeworks). Higher points can be earned by shopping at the retailer: David Jones rewards shoppers with two points within the store compared with 1.5 points outside; Woolworths, two points in a Woolworths-owned store (includes Woolworths Liquor, Dick Smith and Big W) and three points for Woolworths Select products, compared with one point outside; Myer, three points in store compared with one point outside (Myer has a cap of a maximum of 2000 points per month earned outside its store).
  • Cash rewards $50 and $100 cash reward.
  • Frequent flyer Total of QFF or Velocity points for four return, economy-class flights spread over peak, off-peak and shoulder seasons, and booked three months in advance using standard-point options without taxes and charges. The flights used were Sydney-Melbourne, Melbourne-London, Brisbane-Auckland and Sydney-Bangkok.

Do reward credit cards offer value for money?

On average, you need to notch up at least $2000 in purchases per month (the Australian average is about $1200) to get any positive return after deducting the annual fee, which ranges from zero to $900, but the average is $150.

The higher fees for platinum and gold cards mean these are really only suited to above-average spenders. Some of the perks include free travel insurance and better point conversion, unlimited concierge service at hotels and personalised rewards.

Table

Plunging points value

It’s frustrating trying to save your points for more expensive rewards when their value takes a large drop every few years, as David from Sydney found out. Although the reward points earned via his credit card have unlimited life, David says they’re now only worth a fraction of what they were when he first opened the account 14 years ago. At that time, 100,000 points could be redeemed for about $1100 in David Jones vouchers, but now only translate into about $640 of value at the same retailer.

Penalty fees

All the credit cards we looked at charge penalty fees for missing the payment due date ($33 on average) and for spending over your card limit ($31 on average).

CHOICE believes:

  • The amount of these fees bears no relation to the cost incurred by the financial institution as a result of the consumer’s default. For this reason they may be unlawful as well as unfair.
  • Penalty fees have increased far more quickly than inflation.
  • Banks could easily help consumers avoid fees by offering credit cards that cannot have their limit exceeded, however, they choose not to.