Gaming the loyalty schemes

Shoppers aren’t making the most of credit card benefits such as cashback or travel points, writes Susan Edmunds.

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

Almost a quarter of respondents to an American Express survey 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.

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.

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.

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

The first card offered would not always be the best 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 using a points-earning card for supermarket shopping, and swiping the shop’s loyalty card too. Bills could be paid via credit card rather than direct debit, to maximise the points earned.

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.

But Peter Chisnall, country manager for Mastercard New Zealand, advised earning points only on existing spending.

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

A Consumer NZ survey showed that found someone spending $25,000 on their card over two years 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 shoppers needed to think about how they would use their cards before they signed up. They should try to work out the net reward return after fees.

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 zerointerest offer from another bank.

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