Credit card rewards to match your own spending style

Credit cards with rewards are tempting – just don’t get distracted solely by benefits attached to the credit card types. Reward yourself first by finding an incentive scheme to match your spending style, rather than the other way around!

Credit cards with rewards are certainly one of the more enticing bank product offers, with lenders offering everything from flight rewards to luxury goods and cash-back offers. With all the rewards programs attached to all the credit card types, it really does seem like there is a benefit to suit all ages and lifestyle.

What are credit cards with rewards really about?

Credit cards with rewards really stem from the providers’ desire to the loyalty of their customers. And, the more you put on your plastic, the more rewards open up to you. Figures on New Zealand shoppers spending reveal putting items on the credit card is already a popular way of financing purchases. In fact, according to Statistics New Zealand’s June 2016 figures, credit card holders made 128 million transactions during the month, with an average value of $49. The total amount spent across all transactions was $6.3 billion. This is an increase of 1% on the previous month.

With all this money being spent on all the various credit card types, it makes sense to have a little sweetener to go along with any associated fees. But making the right choice for you from all the credit cards with rewards on offer is also about making sure it aligns with your current spending habits. In other words, it’s a false economy to start spending more than you normally would, just to get closer to a “free” washing machine, for example.

Compare Credit Card Rewards

Calculating the value of your credit card rewards points

To help you calculate the value of your points, CANSTAR has created a simple concept called Net Reward Return (NRR). Here’s how it works:

POINTS EARNED IN A YEAR = REWARDS RETURN
POINT REQUIRED TO REDEEM $1 OF REWARD

Let’s have a look at an example:

$24k-24,000 points =$160
150 points/$1

 

REWARD RETURN, LESS ANNUAL FEE = NET REWARD RETURN

For example, $160 Reward Return less $89 annual card fee and reward program fee = $71 NET REWARD RETURN.

In the example above, if you are only spending $12,000 per annum on the card but still paying an $89 annual fee, you would in fact have a negative reward return. So it would pay to look around for a card with a lower annual fee in that situation.

Credit Cards with Rewards:  are you really seeing a benefit?

When looking for value CANSTAR looks at credit cards that provide either a general reward or specifically a flight reward.

On a general rewards card, for consumers seeking a credit or charge card that gives them the optimal return on their everyday spending, CANSTAR looks at the following things:

General rewards card

  • Reward return is calculated at different spend levels.
  • Net benefit over 12 months is calculated after ongoing fees and the interest on a one month revolving balance.
  • Includes annual fee waivers where applicable. Feature Score
  • Terms, conditions and features of the credit card.
  • Choices and conditions of the rewards program.
  • The card must offer a rewards program that provides direct access to merchandise, cashback, or gift cards.

On a flight rewards card, for consumers seeking a credit card or charge card that will allow them to redeem points for flights, CANSTAR looks at the following things:

Flights rewards card

  • Includes annual fee waivers where applicable.
  • Terms, conditions and features of the credit card.
  • Choices and conditions of the rewards program.
  • Other features relevant to a frequent flyer such as airline lounge access.
  • Rewards points must be able to be transferred to one or more frequent flyer programs that collectively offer flights between Auckland and the three destinations considered.
  • Reward return is calculated at different spend levels.
  • Net benefit over 12 months is calculated after ongoing fees and the interest on a one month revolving balance.

 

Once you find which category matches you, it’s easy to get an overall picture of whether credit card rewards will be of great benefit or not.

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