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Credit card reward schemes

Credit card reward schemes are heavily promoted, luring customers with the promise of free flights and money to spend on shopping sprees. But unless you’re a big spender, the rewards you earn can be less than impressive.

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We compared 29 cards to find which gave the most bang for your buck after spending $25,000 over two years. Best case scenario: you’ll have enough rewards points to enjoy a small treat. Worst case: the high annual fees on some cards mean you won’t even get close to the runway or the shopping mall.

Flight rewards

Reward schemes have a dizzying array of terms and conditions. Different cards (classic, gold or platinum?) have different fees, earning rates and reward systems (Airpoints, Fly Buys, Hotpoints, True Rewards …).

When we last looked at these schemes in 2011, the returns they offered were disappointing. Not much has changed.

Even spending $25,000 over two years, none of the cards would pay for a $600 return flight from Auckland to Sydney. When we deducted the cost of annual fees to get the net value, eight cards resulted in a negative return.

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Shopping rewards

High card fees also mean earning points to buy goods can be less than rewarding. Eight of the 19 cards that offered shopping voucher rewards had a negative net value.

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Rewarding behaviour

Whether you reap returns from a reward scheme will depend on the card fees, how you use your card and where you can use it.

Unless you’re a big spender, the returns are likely to be limited. And if you don’t pay off your credit card balance each month, interest charges on the unpaid balance will quickly outweigh the value of any rewards.

There’s less doubt about the value of these cards to their providers. As well as encouraging loyalty, reward schemes give companies access to a wealth of data about their customers’ shopping habits, tastes and lifestyle. It’s this data that’s the real pot of gold these schemes offer.

Companies use the personal information they collect about you to target promotions and develop their advertising and marketing strategies. They can also share the information with other data analysis companies.

Before you sign up, you may want to consider whether the rewards you receive in return for giving up this information make it a fair exchange.

We say

  • Credit card reward schemes aren’t designed to reward frugal spenders. You need to spend big to earn big.
  • Don’t spend just to earn a few extra points: the returns aren’t worth it. These schemes only make sense if you earn points as part of your regular purchases.
  • If you’re selecting a rewards card, make sure you take the annual fees into account. High fees can quickly erode the value of the points earned.

How they work

Reward schemes give you “points” for purchases bought on your credit card. You need to collect a certain number of points to claim any rewards. The value of the points differs depending on the scheme.

With a BNZ Visa, you’d have to spend $9250 to earn enough Fly Buys points (185) to buy a $40 toaster. To get a $70 dustbuster (worth 320 points), you’d need to spend $16,000 on this card.

The same dustbuster requires spending $11,850 with an ASB True Rewards Visa. On Westpac’s Hotpoints MasterCard, you need to spend $9400 before you can claim your dustbuster reward.

Gold and platinum cards provide a higher rate of return on your spending – you earn more points for each dollar spent so you accrue points faster. But you’ll pay higher annual fees for these cards. You can use our Rewards calculator to compare the net rewards earned with different cards.

Shopping rewards

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KiwiSaver cash

ASB, BNZ and Westpac allow you to convert your reward points into KiwiSaver contributions but only for KiwiSaver accounts held at the bank. If your KiwiSaver is with another provider, you won’t get this option.

Flight rewards

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Gaining status

In May 2015, Air New Zealand ditched BNZ as an Airpoints partner in favour of Westpac. The switch sparked an advertising war as Air New Zealand’s other Airpoints partners – American Express, ANZ, Kiwibank – and Westpac vied to attract BNZ customers.

It’s not only the Airpoints that are hyped as rewards. Platinum Airpoints cards and Westpac’s World card also earn Air New Zealand “Status Points”, which offer perks for frequent flyers such as lounge passes and upgrade privileges.

You can only earn a maximum of 50 percent of the required status points on your credit card. The remainder must be earned on flights.

Depending on the card, you need to spend between $200 to $250 to earn one status point: 450 status points will get you Silver Airpoints Status; 900 will get you Gold; you’ll need 1500 for the nirvana of Elite Status (at which point you might consider saving for your own small plane …).

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