The Problem with Credit Cards & Points

jhmtaylor on 20/07/2018 - 17:06
Last edited 20/07/2018 - 17:22 by 1 other user

I saw this article on news.com.auand I thought it would be worthwhile sharing here. The bottom line is that for most of the population they would be better off with a no fee, no points, low interest card.

I confess, years ago they did offer value and I have had many "free" airfares and upgrades. But now with the low earn rate, high surcharges and reduced opportunity to use points, they encourage the user to make expensive and poor decisions in the hope of an upgrade. A similar psychological stimulation to gambling.

To use points prudently, we all know that you only use them for upgrades because the out of pocket surcharges make using points a waste of money. But to have any hope of an upgrade to Premium Economy or Business Class you have very little chance buying the cheapest economy tickets because the full price and flexible ticket holders are before you in the upgrade queue. If it weren't for points Qantas would not have the "loyalty" they currently have. A consequence being more travellers would support other airlines and Qantas would reduce their fares to be competitive.

On the purchasing side, we would not tolerate surcharges for credit cards or ask for discounts for cash or debit cards.
The bottom line is that for most people having a credit card to earn points is a wasteful marketing trick.

Financial Credit Card

Comments

  • Diji1 on 20/07/2018 - 17:19

    They cause the user to lose money that they would not have if they weren't a credit card user.

    • Ughhh on 20/07/2018 - 17:22
      +15

      Not everyone is financially irresponsible like you. You must be a liberal/labour voter.

  • try2bhelpful on 20/07/2018 - 18:02
    +2

    I agree with the OP in that we are getting points for supermarket shopping and it is causing us to build up a store of non perishable items to make our weekly shops. However, we pay off our credit cards at the end of each months and we pay no more than $60 per annum fees for any of our card. Our major cards are fee free because we are share holders in NAB and they waved the fees when we threatened to walk.

    People need to ensure they keep on top of their spending. Credit cards are the worst sort of interest to be carrying because they tend to be the highest. (Apart from those daft payday loans - don't get me started on how irresponsibly they are advertised).

    I agree that upgrades from Economy to Business are not going to be possible for most people but the points jump from Economy to Business Class is roughly double for Qantas (Emirates). Even if you fly Business class one way, and use the economy points for return, it is still a nice treat.

  • Kenb0 on 20/07/2018 - 19:31
    +6

    "we all know that you only use them for upgrades because the out of pocket surcharges make using points a waste of money."

    This isn't true. It's still worth the points if you can use them to redeem business/first class flights, even with the surcharges. Just make sure you're redeeming them for classic reward seats, not using the points to pay for a normal seat with points because then those are definitely not worth it. If you're using the points to redeem economy flights(classic or any seat), then yeah, you're not going to get much value out of that exchange either.

  • CLoSeR on 20/07/2018 - 19:59
    +8

    Oh spare me, the media said creditcards are bad.

    I've never paid a cent of interest and getting upgrades/redeeming points for flights is not difficult at all. At least with Qantas anyway.

    What is correct is that the earn rates for bank issued cards such as Visa/Mastercard are very poor now and it's only really AMEX that continues to deliver!

    Yay for AMEX!

    • cypher67 on 20/07/2018 - 20:09

      Not sure if you are aware but bank issued Amex cards will be no more by the end of the year, all major banks are backing out of them

      • miwahni on 21/07/2018 - 00:44

        Amex offers cards directly, you don't need to go through a bank. Also some of the banks who pulled out of their own Amex branded card are now offering a different kind of Amex - see Westpac's new Amex for example. It's issued by Amex directly rather than by Westpac but has Westpac logo on it. It was offered to all previous holders of the Amex-branded Westpac card.

    • Samsungnote10 on 01/08/2018 - 19:11
      +1

      I would make love to amex if it were a person

  • endolphin on 20/07/2018 - 21:10
    +1

    I did have a good chuckle at that article. In the last 6 months I've spent about $24k on cards and earnt roughly net 20% return.

    • kipps on 20/07/2018 - 21:53
      +1

      How? Please show workings. 20% on 24k is $4,800. Is this all sign on bonuses?

      • endolphin on 20/07/2018 - 22:47

        I'd rather not provide specifics but yes, mostly introductory offers.

      • endolphin on 21/07/2018 - 09:59
        +3

        Geez I'm getting down votes for that last comment. It isn't hard if you are organised. Have a look at the current credit card deals going. Let's say the average is 75k points sign up bonus from $3k spend, with an average annual fee of $50 (some are free, some about $100-$150). Multiply by 6 and you have a lot of points (to sell) for not much in fees.

        • kipps on 22/07/2018 - 15:25

          I didn’t downvote but just curious as to how you’re valuing and using points. 75,000 points at least in QFF I barely value more than 1 cent a point so $750. And that’s a pretty good offer if it pays without an annual fee. It is not like you can apply for 5 of those offers a year without getting problems with too many credit enquiries on your credit file. I must be missing something?

        • endolphin on 22/07/2018 - 16:31
          +1

          @kipps:

          Well I'm here to tell you that I've had more than 5 credit card applications in the last year and my equifax score has barely moved (always remained in the 700s). Same with experian, although I had a massive drop in January, which fully rebounded back up by March (I think it was an error TBH).

          Have a look in the classifieds. Many people are willing to buy points for at least 1.0c per point.

  • maverick1 on 20/07/2018 - 21:23

    completely disagree with OP. I've had some great vacays coz of points & miles..you need to know how to make the best use of it and plan ahead…
    some inspiration and ideas if needed -
    5 nights in maldives worth $5K for free…
    5 nights in Disney World Orlando (dolphin)for free
    5 nights in Miami South Beach for free
    6 nights in Mauritius for free..
    round the world qantas hack for for $700 + 140KPoints - itinerary SIN>MALE>BNE>MIAMI>ATL>SYD…
    I need to write a blog!!
    you need to invest time to see & understand how this space works…that was an rubbish piece of article..

    • Lunarboogie on 21/07/2018 - 09:08
      +2

      No need for a blog. Plenty of folk here, myself included, who put you in the shade when it comes to milking the points system. Your 140k round the world trip shows you did it in economy. Talk to me when you do it in first and we can compare notes. I agree with you though that the OP is BS. There's plenty of value in the points game.

      • mbck on 21/07/2018 - 09:54

        bit hard when you have to accommodate the partner in the calculations haha.

      • maverick1 on 21/07/2018 - 12:16
        -1

        Yes, I did it in economy, as it wasn't just me travelling - it was 3 of us and given I started my points journey end of 2016-beginning of 2017. I am very pleased with the effort. Business/First don't appeal to me as much as staying for ex: at AL MAHA, DUBAI does. Desert Oasis, all inclusive worth 3K a night..I wana get most of miles than blow up on business given my plans are always with the family…ATM completely absorbed in making most of the upcoming SPG/MARRIOTT Merger have 100K+ SPG lying around which I wana make most of..

    • try2bhelpful on 21/07/2018 - 12:20

      Maybe you should put together a posting so people can explain their hacks.

  • Gelato on 20/07/2018 - 23:34

    imo it depends on your personal needs..lets say if you're a frequent traveller, stacking up reward points for flight may actually help you save.
    myself as an example i have gone 2 overseas trip this year by redeeming flight tickets and have only paid $700 tax in total
    as a matter of fact just dont binge spend on unnecessary stuff for the stake of getting points

  • AusGP on 21/07/2018 - 09:17

    If in doubt about how to get the maximum value out of points, read Point Hacks.

    It is true for a lot of people it isn't worthwhile because their net spend on a card isn't enough to cover the annual fee in terms of value in the first place. Then they don't maximise use of the points anyway and get poor value.

    However there's actually a lot of opportunity to churn and burn through different cards for the sign up bonuses. For myself I've gotten a bit lazy recently and haven't done this as much but the added benefit is keeping my credit score relatively steady.

  • donbot on 21/07/2018 - 10:00
    +2

    Yeah, paying for points makes no sense at all.

    I mean, who would pay a net of $4k in annual fees over two years for 18 international return trips in mix of first and business class flights (ex taxes) and 38 nights free accommodation across Tokyo, New York, China and hawaii.

    So yep. I agree credit card points are a waste of time and money and I should use that $4k for buying a holiday instead. Where do I hand my ozb badge in?

    • maverick1 on 21/07/2018 - 12:18
      +1

      as humble as one can get ;)

  • Lunarboogie on 21/07/2018 - 12:30
    +1

    The other lark - and one I've starting using this year as I no longer have time to travel - is selling points right here on ozbargain. I've netted close 15k since January and all of it from churning cards. But don't settle for less than 1.2cpp or else you're under pricing their value.

    • try2bhelpful on 21/07/2018 - 12:31

      You do run the risk that the companies will check where your points are going to and lock both accounts.

      • Lunarboogie on 21/07/2018 - 12:42
        +2

        True. It's not without risk but play it smart, use family member accounts to spread risk and establish fake ones when needed and you'll be okay. I'm only doing this for another 2 months after which I'll go back to accumulating points for travel. I changed jobs in Jan so couldn't do much traveling this year. Therefore I was stoked when I discovered another outlet for points. Gotta cut your cloth to suit.

  • jhmtaylor on 21/07/2018 - 21:29

    I have a good friend who is at management level in the operation of the major points scheme. He told me there is over $300m profit every year for them and partners being made from points. Less than 10% of users gain any significant benefit.
    They make these profits from CC fees, interest, penalties,overpaying for services/product (customer loyalty) in order to earn points. Just saying, look at this beyond the obvious.
    A side story, I have another friend who in recent times has become very successful in business. He has never had a credit card and claims to be $100ks better off because he never bought anything he could not pay cash for. Because he was paying cash he was acutely aware of what it took to earn it and rarely bought tat (that he really did not need).

    • bazza1980 on 22/07/2018 - 08:55

      Great story…

      Nothing beats anecdotal evidence to back up your claims.

      • jhmtaylor on 22/07/2018 - 17:58
        -2

        There is nothing anecdotal about the rewards scheme. Qantas submit audited financial reports to the ASX twice per year. For many years QF made more money from the rewards scheme than selling tickets and flying aircraft.
        As @Lunarboogie has pointed out it is a license to print money and arguably the most perfect business model. Ie The controller of the scheme (Qantas) make an absolute fortune every year plus they can also charge considerably more for their retail offering and create brand loyalty. The distributor (Banks, Credit Card providors, Woolies et al) are generally happy because they can push their prices up by +/-2% and create brand loyalty due to the rewards. They are not over joyed because QF take the cream for bugger all effort whilst they are doing the heavy lifting and they would like a bigger slice of the pie.
        90% of users see this as a wonderful free benefit and not realising they are the ones actually paying for this through higher prices, fees, penalties and interest. Consider it as like gambling at a Casino where all punters think they can beat the house but the house is using psychological triggers to manipulate the punter behaviour and only 20% of punters have any hope of a win and if they too play long enough they will lose.

    • Lunarboogie on 22/07/2018 - 09:34

      Yup. It's commonly known that Qantas Loyalty is the most profitable arm of the company. They reckon if it was spun off as an independent company it would be valued at over $2 billion. Qantas makes a mozza selling the illusion of points (it floods the market with points currency yet controls the rate of redemptions - talk of a licence to print money), which means that every time you can give them a paper cut by getting something for nothing, than go for it.

      • try2bhelpful on 22/07/2018 - 09:41

        It depends on how you play it. We've used frequent flyer points to get airfares on a couple of occassions, the last one for two business class airfares to Brussels. If you look at the website, and you are far enough ahead, you can usually get a classic fare ticket.

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