Have you got a rewards credit card?

Yes? Ok…next question.

Is your rewards card the right one for your spending habits and financial needs?

Not all rewards cards are created equally, so while some have excellent rewards programs, others can actually be a bit of a rip off.

Take for example the ANZ Balance Visa. On this card you get cash back rewards for your repayments rather than your expenses. You can compare this to the Bendigo Red credit card which requires you to spend over $8000 more to get just a $50 reward.

So what do need to know?

Well if you’ve got one already you’ll no doubt be able to find out the information pretty easily from your bank. But if you’re searching for a new card, make sure you check what the rewards earn rate is (how much money you need to spend to earn a rewards point), and also the rewards redemption rate (how many points you need to redeem to get a certain reward).

Usually credit card providers will quite happily offer up the earn rate in their information pack as a way to entice you into getting their card. However, this is not the case with the redemption rate, which usually requires quite a bit of searching in order to get wind of it.

Why?

Because it’s the telling factor into the real value of your rewards card. So if you’re a big spender with your rewards card or there are a number of other features that are of great value to you (and the rewards are just an added bonus) then the rewards earn and redemption rates are maybe not so crucial to your finances.

However if the opposite is the case and you really want a rewards card then checking the rates mentioned above is vital for your financial well being.

There is another element to this issue though, and that is when you take into account such rewards programs as the one available at St George.

The reason this credit card rewards program gets a special mention is because rather than spending money and earning points for a reward, you actually get instant discounts at a huge range of retailers around Australia when you use your St George credit card.

So the benefits you receive are instantly received rather than having to wait until you’ve earned enough points for the rewards that you want.

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The problem with reward credit cards – or the most forgotten problem, for there are several – is collecting the points, cashback or other rewards once they’ve been accrued.

This is an issue frequently overlooked by those that compare credit cards with reward schemes but it can end up being an irritating or even costly mistake – as unclaimed rewards stack up and undo the cardholder’s good work.

The problem is particularly significant in the case of point schemes such as supermarket rewards and airmiles.

These schemes often require the bearer to spend more in order to redeem the points. For example, in the case of airmiles the miles can often only be redeemed as a discount on an expensive flight from a major carrier such as British Airways or Virgin.

This is also often true of supermarket reward points schemes such as Sainsbury’s Nectar points and Tesco’s Clubcard points although their scope tends to be greater: allowing card holders to get money off cinema tickets and days out as well as groceries.

They tend to be eliminated, on the other hand, when one conducts a cash back credit card comparison.

In almost all cases, these forms of borrowing credit the rewards directly to the account so they are effectively distributed.

On the other hand, the return on such forms of spending tends to be lower. Another alternative are utility bill cash back credit cards.

For example, the MBNA BT card rewards credit card users who use it for purchases.

The money that comes back in cash back comes directly off the card holder’s BT phone bill – no messing around with points schemes and a lot more genuinely useful than cashback.

If the card holder’s bill is less than their cashback the amount will be rolled over so they’ll start the next month with a credit on their phone bill.

This is just an example of the kind of reward card scheme which makes it easier to collect rewards on plastic but there are many more in a similar vein.

For those who are still keen to take their rewards on plastic with points there are a number of points to keep in mind.

First, setting up a goal for the points – a particular set of tickets or amount of discount that you want to achieve – could help. In this case, collecting the points would be easier since it would come as the peak.

Second, investigating the ways to collect the points schemes available thoroughly before application is essential.

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