So many credit card rewards, so little time to choose
(we’ll help you with that)

Are you good at asking yourself tough questions? Try this one: are you prepared to pay your credit card bill in full and on time every single month?

If you can’t (or won’t) do that, then a rewards card really isn’t worth it.

And you know what? Most people don’t keep to the straight and narrow. What proportion of people don’t pay their card in full each month, would you say? Care to take a guess? How about 30%? Or maybe 60%? Keep going, it’s even more than that.

Okay, with the stern parental warning taken care of, let’s take a look at credit card reward schemes.

If you really know how to work the points system, credit card rewards can put you on a plane to Tahiti, to Los Angeles, to Berlin, to Barcelona, for trip after glorious free trip. Do a lot of big purchasing for your business on your credit card, for example, and you’ll just see those numbers climbing. You can turn that into some serious reward action.

Sounds good, doesn’t it? But there’s a bottom line here. This is business, and in business you’re very lucky to ever get anything for nothing.

The concept behind a credit card rewards scheme is simple enough: for each dollar you spend on your credit card, you earn points and one day you cash them in for rewards – maybe travel, maybe accommodation, maybe an iPhone, or pages of exotic treats in the rewards catalogues.

But a loyalty scheme is there to encourage you to spend, so unless you spend heaps on your card, you won’t be seeing any great mountain of points. And unless you pay it off in full each month, it’s probably not going to be worth your while, not once you allow for the annual fee (large) and also the fee for being a part of the rewards scheme (also large).

What that means is you need to be spending more than $12,000 a year just to cover your fees. If you’re not that kind of spender, it’s really not worth a look.

The other thing to know about rewards schemes, and if you’ve looked at it for even three minutes you’ll already know now this, is: it’s a colossal mission to compare all the schemes and work out which is the best deal for you.

Fortunately, there are people who are prepared to do this work diligently, painstakingly and routinely. We have a sneaking suspicion they might be the sort of people who pay their card in full each month. Anyway, if you want to get a serious league table there are three equally seriously helpful places you could look at: Canstar, Consumer magazine online, and Interest.co.nz. 

Consumer magazine created a useful test in their most recent report on credit card rewards – well worth using for your own comparisons, especially if what you’re really after is a flight to somewhere nice.

They asked, if you spent $25,000 over two years on your reward card, would that earn you a $600 return flight from Auckland to Sydney? The answer was no, not for any of the cards. The one that came closest was the American Express Air New Zealand card. It earned net rewards equivalent to $250 – 42 per cent of a return flight to Sydney.

We’d also say that the side perks are pretty good, so do factor them into your decision –  free travel insurance, airport lounge discounts, various extras that make flying a nicer experience, on top of already being for free, of course.

Just don’t try to do any of this on a modest budget, and don’t try to do it if you’re paying that bill in full each month. Seriously: who ever wants to buy themselves their own presents?

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.