Reward Program Credit Cards
If you tend to use your credit card a lot, you can capitalise on your spending by holding a Rewards Credit Card. These credit cards convert the money that you spend into a point value, or reward, that you can then redeem. To make a Rewards Credit Card beneficial, however, you have to spend a larger amount annually with it. If you are likely to spend less on your credit card, you may want to consider another option, such as a No Annual Fee Credit Card or a Low Interest Rate Credit Card.
- Is a Rewards Credit Card suitable for me?
- The Downside of Rewards Credit Cards
- How to get the most from your Rewards Program
- The Rewards you can earn through Rewards Credit Cards
Is a Rewards Credit Card suitable for me?
To determine whether a Rewards based credit card is the best option for you, you have to take a few factors into account.
To begin with, you must think about how much you will be spending on your credit card. Typically you have to spend over $12,000 p.a. for the rewards that you earn to be greater than what you will pay for the annual fee. You also need to be as up to date as possible with repayments, as any interest that you have to pay detracts from the benefit of having a rewards card. You also need to investigate whether there is a card with rewards that you are interested in, to make sure you are collecting points towards a reward that you will be happy to take advantage of.
If you feel that you will not be spending a sufficient amount on your Rewards Credit Card, then you would be better off looking into an alternative option, such as a No Annual Fee Credit Card. Similarly, if you feel like the amount you will pay on the higher interest rates associated with Rewards credit Cards will outweigh the rewards that you eventually receive, a Low Interest Credit Card may be a more suitable alternative.
Rewards Credit Cards can be greatly beneficial to those who spend large amounts in credit, and are able to pay it off before it gathers interest.
The Downside of Rewards Credit Cards
To accommodate for the rewards available on a Rewards Credit Card, you will end up paying more in other areas compared to a card that has no rewards program. This means that to make this option preferable, you need to either find ways to minimize your debt and increase your rewards, or else find a different type of credit card.
Rewards Credit Cards usually have high interest rates, typically more than 18% p.a. This is higher than the interest rates on most other credit card types, and means that an overdue balance on your Rewards Credit Card can gain interest quite fast. If you are likely to delay paying your debt, or have an irregular income, this can be an unwise option.
Another drawback to Rewards Credit Cards is the considerable amount they usually cost in annual fees. It is not uncommon for Rewards Credit Cards to charge several hundred annually; if you are not making sufficient use of the rewards side of the program then you will end up spending more in annual fees than the amount you gain in return.
You should consider a different option to a Rewards Credit Card if you:
- Commonly have trouble paying back your balance in full at the end of every month. (a Low Interest Credit Card may be for you)
- Only use your Credit Card sparingly. ( consider a No Annual Fee Credit Card)
- Won’t use the rewards, or can’t find rewards that interest you.
How to get the most from your Rewards Program
If you own, or are thinking of getting a Rewards Credit Card, then you will no doubt want to maximise the benefits that you receive from it. There is no use paying the inflated fees and interest that come with a Rewards Credit Card if they outweigh the rewards you are receiving from it. Described below are a few of the ways that you can employ to gain the most rewards, while minimising the excess that you have to pay.
Most Rewards Credit Cards have a point-for-dollar system, where for every dollar that you spend, you gain a point which you can later redeem. This means that the more you spend on your card, the faster you can achieve the benefits associated, or you can save more points for greater rewards. There are also ways to gain bonuses at certain stores to boost your points. These stores are referred to as “Bonus Partners”. Most Rewards Credit Cards have about 20 stores that offer bonus points, increasing the points you collect by as much as 6 points per $1. It is worth researching the stores that your potential Rewards Credit Card is affiliated with so that you can select a card that offers bonus points at stores that you regularly shop at.
Another key to increasing the gain you receive from your Rewards Credit Card is to maximise your credit card usage. The more you spend on a Rewards Credit Card, the more points you receive; you will achieve the greatest benefit if you use your Rewards Credit Card as your primary form of payment. This doesn’t mean buy things you don’t need just to increase your points – simply use it whenever possible for your regular purchases.
While increasing your usage, you also want to decrease the excess that you have to pay. If you let your interest grow too high, you will be paying more in fees than you receive in rewards. To make a Rewards Credit Card beneficial, you must try to keep on top of your repayments so that interest doesn’t have time to accumulate.
The Rewards you can earn through Rewards Credit Cards
There are many types of Rewards Credit Cards, with benefits ranging from Petrol discounts and Frequent Flier points to Shopping Vouchers and Gift Cards. It is important to choose a Rewards Credit Card that offers the most appropriate rewards for you. If you enjoy travelling, Frequent Flier points will benefit you greatly, while if you spend a lot of your time driving, you could gain the most savings with a card that offers Petrol discounts. Similarly, if you want to treat yourself while shopping, you can work towards Shopping Vouchers or Gift Cards.
Frequent Flier Points were among the first rewards offered by Rewards Credit Cards. There are a variety of different banks that have systems of exchanging the credit that you spend into travel related rewards, and therefore you can find the one that will suit you best. For instance, some Rewards Credit Cards add all the points you gain to your Frequent Flier points, whereas with others you accumulate undefined points that you can choose to redeem either for flights or for other rewards.
You can also claim rewards in the form of Shopping Vouchers or Gift Cards, ranging in value from $25 to $250. There is a great variety of products and services that you can choose to be rewarded with, including:
- Department Stores – Myer, David Jones etc
- Service Stations – Shell, Caltex etc.
- Jewellers – Michael Hill, Goldmark etc.
- Book Shops – Dymocks, Boarders etc.
- Liquor Stores – Liquorland, Dan Murphy’s etc.
- Accommodation – Hotels, Inns etc.
- Entertainment – Concerts, Plays etc.
- Cinemas – Greater Union, Hoyts etc.
- Theme Parks – Gold Coast etc.
Restaurants – Large variety of restaurants.For regular readers of magazines, there is an option to exchange your reward points for a variety of Magazine Subscriptions. This covers a range of magazines for various interest areas;
- Cooking and Dining
- Home and Gardening
- Fashion, Gossip
- Lifestyle and Health
- Entertainment
- Technology
- Finance
- Science
- Car and Auto
Some Credit Card Companies offer Car Hire as a reward that you can redeem. This can be a great option if you are travelling, or else just need to rent a car for a short period of time.
With some credit cards, there is also the option of donating your rewards to Charity. There are many organisations that the Credit Cards will allow you to convert your rewards points into donations for, including charities for Cancer Research, aid for the Homeless and many others.
Some banks also give the option of collecting points towards paying off some of your balance, or going towards your Annual Fee.