rewards cards

3 reasons reward cards aren’t the answer

The choice of consumer spending cards in Australia is astounding. There are so many different products with different interest rates and conditions, it’s hard to know where to start. One path many people take is a rewards card, where you get ‘points’ or gifts based on your spending reaching particular milestones. These are not credit cards, but are often company-specific loyalty programs.

While these cards provide a great incentive for spending, recent research from Finder shows they might not be for everyone. Here’s why a low rate credit card might suit you and your finances better.

1) The rewards often aren’t worth it

Do the rewards outweigh the flexibility a credit card can offer?

Finder’s research indicated that 51 per cent of people who left a rewards or loyalty program in 2016 did so “because of earning miserly rewards”.

These rewards or loyalty programme systems often start with a one-off discount if you sign up for the program, however further benefits may require a significant amount of spending for little actual reward. Before you decide to use a rewards or loyalty card instead of a credit card, it’s important to look at the benefits of each. Do the rewards received outweigh the flexibility a credit card can offer?

2) Reward deals might not be the best deals

There are nearly three times as many rewards and loyalty cards in Australia as there are credit cards (58 million compared to just over 16 million). As Bernie Hassan from Finder notes the overabundance of rewards cards can make people blind to the realities of a good deal.

“When shoppers receive catalogues and emails from a variety of different stores, it becomes hard to cut through the clutter and assess whether deals are good value.”

Just as you would shop around for a home loan, consumers should always seek out good deals on their everyday items, and rewards cards may not always be the best deal.

3) They can be a lot of effort

A 2016 survey from Directivity found that 19 per cent of people who left their rewards programs felt that continuing with them was too much of a hassle, which introduces our final point.

Rewards and loyalty schemes may often require you to spend regularly, or spend minimum amounts, or even enter personal information you don’t want to share on a regular basis.

Sometimes, they don’t give you enough freedom to spend how you want to. That’s where credit cards can prove extremely useful. To find out more about whether a credit card is a better fit for you, talk to the team at Beyond Bank.