Credit Card Reward Points: Perks, Pitfalls & Practical Advice

Conor's Corner

"Primarily gimmicks & be wary of major loyalty point providers quietly downgrading entitlements….because they can…. Surely not… An airline?"

---

Credit card reward programs often promise enticing benefits—free flights, gift cards, & exclusive perks. However, as highlighted in a recent ABC News article by Anna Chisholm, these rewards may not be as advantageous as they appear, especially for the average spender.

Understanding Reward Points

Credit card reward schemes typically offer points for every dollar spent, redeemable for various perks like travel discounts, gift cards, or retail purchases. Some cards also provide exclusive benefits such as airport lounge access & concierge services. 

The Hidden Costs

While the allure of rewards is strong, consumer group Choice warns that unless you're a significant spender, these programs can be more gimmick than gain. High annual fees & interest rates often accompany reward cards, potentially nullifying any benefits.

Professor Angel Zhong from RMIT University emphasizes the importance of financial literacy when engaging with reward programs. She notes that the extra perks come at a cost, & failing to pay off balances in full or on time can lead to increased expenses. 

The Trend Among Young Adults

A survey highlighted in the ABC article reveals that over half of individuals aged 18 to 29 sign up for credit cards primarily to earn travel rewards points. However, 60% of them struggle to clear their debts each month, indicating a disconnect between the perceived benefits & the financial reality.

The Practice of 'Point Hacking'

Some consumers engage in 'point hacking' or 'credit card churning,' where they open & close multiple credit cards to capitalize on sign-up bonuses. While this strategy can yield rewards, it carries risks such as potential damage to credit scores & complications when applying for loans. 

Making an Informed Decision

Before committing to a reward-based credit card, consider the following:

• Spending Habits: Ensure your spending aligns with the card's reward structure.

• Fees & Interest Rates: Assess whether the benefits outweigh the costs.

• Financial Discipline: Be prepared to pay off balances in full to avoid interest charges.

• Program Terms: Stay informed about changes in reward programs, including point expiration & value fluctuations.

  
  

In conclusion, while credit card rewards can offer value, they require careful consideration & financial discipline. For many, especially those not spending heavily, the costs may outweigh the benefits.