How to tell if your credit card is rewarding you
More than one-third of Aussies don't think their rewards credit cards offer good value, so how can we get more from our points?
Collecting points with your credit card can be a great way to reward your spending, but how do you know the perks are enough to offset the cost? According to new research from Australian bank ME, more than a third of Australian rewards cardholders don't think their credit cards are rewarding.
Out of 1,000 people surveyed, 37% believe their credit cards offer negative value and are costing more than they were rewarding. Meanwhile, 20% of participants thought their rewards card only offered up to $50 worth of value each year. Some thought their cards offered better value, but in dwindling amounts. Other Australian research has reached similar conclusions.
How much value do we think our rewards credit cards offer?
This survey considered perceptions of value rather than the actual monetary value presented by rewards credit cards. It's interesting that most people think they're getting little value from their cards considering rewards cards usually charge higher annual fees.
ME argues that banks need to do a better job communicating the value of rewards credit cards and points earned. For example, more than 1 in 3 rewards cardholders said they didn't know what the dollar value of their card was, despite 37% saying they have a credit card purely for the rewards.
Are rewards getting less valuable?
The survey found that general sentiment towards rewards credit cards has dropped. 50% of rewards credit cardholders believe the dollar benefits have changed or diminished since they first applied for them. Changes in the market over the last two years have seen the value of rewards credit cards decrease, so this isn't entirely surprising.
In 2017, a number of credit card issuers dropped the earn rates and removed dual credit cards (that offered both Amex and Visa or Mastercard) from the market. American Express also reduced the number of points you can earn per $1 across a number of its rewards credit cards in April. You can compare the old and new earn rates in this guide to the changes.
How to calculate what your points are worth
The value of your rewards depends on what you redeem them for and some options offer better value for your money than others. To give you some examples, let's look at the differing value you can get from 1,000 Qantas Points.
At Finder, we use a general rule of thumb that you should get at least $20 for every 1,000 Qantas Points you spend. In the table, we've shown how the value of your points will vary depending on your reward. When looking at flight rewards, the value of your points will depend on where you're flying and the fare class of your ticket. You'll also find that you generally get more value if you redeem your points for flights rather than gift cards or products from the online store.
|Reward||Qantas Points required||Cost||Value per 1,000 points|
|Sydney to Melbourne (economy return)||16,000 points||$321||$20.10|
|Sydney to Melbourne (business return)||32,000 points||$998||$31.20|
|Sydney to Los Angeles return (business)||192,000 points||$10,416||$54.30|
|Sydney to Los Angeles return (economy)||90,000 points||$1,503||$16.70|
|David Jones gift card||16,350 points||$100||$6.05|
|iPhone X 256GB||281,110 points||$1,829||$6.51|
You can see our analysis of how much 1 Qantas Point is worth for more examples.
How do I know if my rewards credit card offers good value?
If you're unsure how much your credit card rewards are worth, start by calculating how many points you could collect based on the card's earn rates and how much you're likely to spend in a year. If it's a new card that offers introductory bonus points, you should also factor this in. Use the total number of points to compare rewards that you could redeem. This will help you understand the value of your rewards. If you pay your balance in full each month to avoid interest costs and the value of the rewards are worth more than the annual fee, then your credit card offers good value. Rewards credit cards often offer extra perks like airport lounge passes, flight vouchers and complimentary travel insurance which can also help you get more value from the card.
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