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

Friday, 28 October 2016

Amber Peebles says she never used to consider whether she was getting as many rewards as possible from her credit card.

New Zealand shoppers are being urged to give more thought to their credit cards, to maximise their rewards.

American Express recently ran a survey, asking New Zealanders for their thoughts on credit card rewards schemes. Almost a quarter of respondents knew very little about the rewards and benefits their credit card provider offered.

Thirty-two per cent did not think the schemes were worth the effort and almost half said they did not make the most of what was available.

WHAT'S ON OFFER?

Credit card reward schemes fall into three camps: Cash back, travel rewards and shopping rewards.

How quickly you can accumulate points - and what they will get you - varies a lot. Generally, the more you pay in annual fees for a card, the better the rewards will be.'

Offers include 0.5 per cent cashback from ANZ if you spend up to $9999 a year, or $1 cashback per $150 on a basic BNZ card.

Westpac will give you two Hotpoints per $1 spent on a platinum card. You need at least 2000 points to start claiming Hotpoints rewards. Westpac also offers Airpoints, at a rate of one Airpoints dollar per $125 on a basic credit card through to one per $65 on its most expensive card.

American Express this week launched a new Airpoints platinum card, offering one Airpoints dollar per $59 spent, and a reduction in its annual fee from $395 to $195.

WHAT DO YOU NEED TO CONSIDER?

Rob Bourne, head of American Express in New Zealand, said New Zealanders could be doing a lot more to get the best deal they could from their credit card providers.

He said people needed to realise that the first card they were offered would not always be the best deal for them. 'They need to start playing the system.'

The best way to maximise rewards was to put all spending on a credit card and pay it off in full monthly, he said.

With every purchase, think about ways to maximise points - that could mean things like buying supermarket shopping with a points-earning credit card, and swiping the shop's loyalty card too. Bills could be paid via credit card rather than direct debit, to maximise the points earned.

'Think about: Am I earning the most rewards possible on things I'm buying every day? People need to get a bit savvier,' he said.

Bourne said someone using the new American Express card for $800 in spending a week would have enough airpoints for a flight to Hawaii within a year, with the current offer of 300 bonus points to those who sign up for a new card.

'A lot of people are not tapping into the offering that is there.'

But Peter Chisnall, country manager for Mastercard New Zealand, said people should aim to earn points only on spending they were doing anyway.

'You have to look at points as an added bonus, paid for by your bank.'

Bigger spenders do better out of rewards schemes.

Consumer NZ did a survey that found someone spending $25,000 on their card over two years would get a negative return from many cards because they would pay more for the card than they would receive in rewards.

A spokeswoman said the new deal from American Express had improved the offer for consumers - with a caveat.

'While the earning rate is now more generous, if you don't pay off the card balance each month, interest charges on the unpaid balance will quickly outweigh the value of any rewards,' she said. 'Reward schemes only make sense if you earn points as part of your regular purchases: there's no value in spending just to earn points.'

Jose George, general manager of research site Canstar in New Zealand, said people needed to think about how they would use their cards before they signed up. They should try to work out the net reward return they would get, after fees were deducted, he said.

George said people who were not big credit card spenders, or who did not clear their balances each month, should look at other factors instead of a reward scheme when choosing a card.

He said a low-interest card might pay off for someone carrying a balance they were chipping away at. These also have a higher annual fee but offer interest rates around 13 per cent, instead of 20 per cent on standard cards. Or you might be able to transfer the balance to zero-interest offer from another bank.

People who only used their cards occasionally could opt for a card without rewards but a low annual fee.

CASE STUDY: AMBER PEEBLES

Amber Peebles said she had previously never given a lot of thought to what was the right credit card for her.

'Like most people, I just sort of ended up going with the simple option and didn't even think about researching what I was getting back on the credit card.'

But she said once she started looking into it she was surprised at the range of options on offer.

'People should spend a lot more time shopping around, understand what is in it for them,' she said.

'If you are on the right type of card [your points] can be racking up. It's not about spending more, that normal daily spending can end up being quite a bit – it's just amazing for me how much you can get rewarded just for the normal spend you would do any way. You don't really think day-to-day how much you put through your credit card and what life ends up costing.'