Here's how to get the most from rewards schemes

Wednesday, 24 July 2019

The key to getting out of credit card debt is to act early, before it gets out of hand.

Most of us have a stack of loyalty cards in our wallets.

There might be a fuel discount card, a travel rewards card of some description, a loyalty card from the local cafe.

But are they just taking up space, or are you making the most of them?

Here's how to maximise your membership and make rewards schemes a little more rewarding.

* Shoppers told to 'game the system' to maximise loyalty points

* A look at New Zealand's loyalty schemes**

CREDIT CARDS

One of the places most of us collect reward points, without even noticing it, is via our credit cards.

There are three main types of credit card reward schemes: cash back – where you get a percentage of your spending back at the end of a set period, provided you put a required amount on your card; flight rewards; and shopping rewards.

The key with all the rewards schemes is to use your card a lot. To maximise your returns, you need to funnel all your spending through the card.

Cards with rewards generally cost more each year in fees than a card without rewards would, so you need to get enough out of them to make it pay off.

Consumer NZ research shows that you need to put about $12,500 a year on your credit card before rewards are obviously a good deal.

Of the 22 cards it surveyed offering flight rewards, only four delivered any return for someone spending $5000 a year, even after they had spent $10,000 over two years. Most cards left someone in that position out of pocket.

Consumer NZ said American Express' Airpoints Card was the best value of the flight rewards schemes it surveyed. It has no annual fee. Someone who spent $25,000 a year on their card could earn enough rewards for a $500 flight after two years.

Consumer NZ said the least generous card was Westpac's Hotpoints World Mastercard. Even spending $50,000 over two years would not deliver enough rewards to offset the annual fee. it also delivered the worst shopping rewards.

It said the Warehouse Purple Money Visa provided better value. An annual spend of $5000 would give you $35 in rewards, but they have to spent at The Warehouse.

BNZ and ANZ offer cashbacks – to break even with ANZ you'd have to spend $12,500 a year for two years.

But $50,000 spent over two years would give you $250 cashback with ANZ's Platinum card and $487 with BNZ's Platinum offer.

MoneyHub's Senior Researcher Christopher Walsh said it was hard to compare the schemes on offer.

Air New Zealand's Airpoints programme has significant reach.

'Would you rather have 100 hotpoints, 100 truepoints, 100 onepoints or 100 Airpoints?

'The most suitable reward card for an individual depends on their annual spend and reward priorities. If you spend under $5000 a year on a credit card, generally, you won't earn enough rewards to make it worth it, so it's probably better to get a low-fee credit card or cash back card.'

He said many schemes offered reward stores for people to use their points in but these were of questionable value.

'We challenge how essential these items are, and tell our users that a freebie isn't valuable if you didn't want it in the first place.'

If you are not clearing your balance each month, no amount of rewards will offset the extra you pay in interest charges. You are better to look for a low-interest off.

COFFEE CLUBS

If you have a cafe next door to your work, or near home, that offers you a free coffee every fifth purchase, it's probably worth signing up.

Whether you get value from a cafe loyalty scheme depends on how frequently you go there, and whether you'd be buying coffees there regardless.

Research from Finder showed the average New Zealand customer would save $7 a month if they used their coffee card to buy a brew every weekday.

Those who bought from Muffin Break would get $21.60 in freebies a month. Coffee Culture was next at $16 and Wild Bean at $13.50.

Coffee Club offers a loyalty programme that gives a free coffee with every coffee purchased. This is a good deal if you're buying with a friend but limited value if you're alone.

PETROL

Who actually pays full price for petrol any more?

Whether you get value from a coffee card depends on how often you go to the same cafe, and whether you'd go there, regardless.

At BP, you can get a discount with a AA Smartfuel card (or your AA membership card). Smartfuel is expecting to announce new fuel partners by the end of July.

At the most basic level, you'll get 6c off a litre when you spend $40 or more. You can also increase your discount by accumulating points at the gas stations and other retailers. If you use the BPMe app, you can load your Smartfuel (or AA) card details so they're automatically applied.

New World and Pak 'n Save have partnered with Z Energy to run a supermarket fuel voucher scheme. How much you can save depends on the offer running at the time. Swiping a Fly Buys or Airpoints card at Z will also give a discount.

Some Foodstuffs supermarkets also have fuel pumps attached. You can use the vouchers at those outlets, too.

Mobil has the Mobil Smiles card, which gives members a fuel discount and access to other deals.

TRAVEL

Airpoints

Air New Zealand's loyalty programme has significant reach.

You can earn Airpoints with credit cards, on flights, or by shopping at retailers including Mitre 10, New World and Z.

When you fly, the number of Airpoints you earn depends on where you are going, the type of ticket and which airline (Air New Zealand or Star Alliance_ you're with.

Finder says a one-way flight from Sydney to Auckland would earn three to six Airpoints Dollars for a basic economy seat, and 50 to 76 Airpoints for a business class seat. The same flight with Virgin Australia would only earn five to 20 Airpoints Dollars.

Walsh said credit cards were a good way to add to an Airpoints balance.

'As an example, Kiwibank's Platinum Mastercard offers one Airpoints Dollar for every $75 spent.

'Flying Air New Zealand, of course, is the easiest way to earn Airpoints Dollars, but the fare category determines how much, with seat-only earning the least, and full-flexi earning the most. You would need to fly between Auckland and Wellington quite a few times to earn enough for a free ticket.'

Fly Buys

You can earn Airpoints with credit cards, on flights, or by shopping at retailers including Mitre 10, New World and Z.

Fly Buys can be collected at a range of retailers - $25 at New World gets one point, as does 20 litres of fuel at Z.

You can then redeem them for merchandise or travel bookings, or use them towards a reservation with HelloWorld. You need at least 50 points to get a reward.

Lizzy Ryley, chief executive of Loyalty NZ, which runs Fly Buys, said the scheme had 2.8 million members.

'Three times a year, we offer all Fly Buys members the ability to swap the points they've collected across the programme for New World gift cards,' she said.

'This is an eagerly anticipated option and one of our top rewards, saving Kiwis money on their grocery spend.

'Our members also love their fuel discounts at Z and on average every three seconds a Fly Buys member gets at least 6c off their fuel bill, saving where they need to most.'

SUPERMARKET

With two main supermarket chains, there are two main supermarket loyalty schemes to choose between.

The New World Clubcard offers Fly buys or Airpoints dollars - but you have to choose which you're collecting. You also get access to store specials.

Countdown has hooked up with Smartfuel and you can choose whether to collect Onecard points or add to your Smartfuel balance when you do your grocery shopping.

You choose which reward you want to collect when you register the card.

A $15 supermarket voucher requires spending of $2000, Consumer NZ notes. At New World, you'd need to spend $2125 to get enough points to convert to 15 New World Dollars.

OTHER RETAIL

Farmers recently changed its Farmers Club system so you earn a point for every dollar spent at Farmers but those points expire at the end of every three-month period.

You need 100 points to access discounts.

One of the places most of us collect reward points, without even noticing it, is via our credit cards.

If you spend $200 in the beauty department within six months you get a $20 voucher - but you can only use this on specific beauty brands.

This is a bit of a downgrade from the old system, where you would get a point for every $1 spent on beauty items and a point for every $10 spent elsewhere - then a $20 voucher at 200 points.

Life Pharmacy and Unichem offer a point for every dollar spent - at 150 points you get a $10 voucher.

Whitcoulls gives a $5 reward for every $100 spent.

Or you could opt not to bother with any loyalty cards at all and just look for the best price on whatever you want to buy.

Jessica Wilson, head of research at Consumer NZ, said rewards usually only worked if you were going to buy, anyway. 'Reward schemes may be a benefit if you can earn points along with your regular spending. But if you're changing your shopping habits just to get rewards – rather than shopping by price – you're unlikely to be better off.'