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Published 27 August 2013 11:44, Updated 28 August 2013 07:40
Australians spend $130 billion on rewards cards each year, but may not be getting the rewards they bargained for. Photo: Louie Douvis
Businesses chasing perks through credit card rewards programs have been warned to re-examine their deals after a consumer comparison website found most cards failed to return significant rewards.
Banking and insurance website Mozo compared 96 rewards cards and found nearly half of them, on an average annual spend of $17,000, returned less than $20 in rewards.
“Rewards credit cards is an extremely lucrative market and many people fall for the gyp,” says Mozo’s Kirsty Lamont.
“It’s a huge market – Australians spend $130 billion on rewards cards each year. The profit margins on these credit cards are huge.
“I think it’s very hard for most people to do the math. For the average person it’s hard to understand the dollar value for each of the rewards programs.”
The comparison found just 14 cards offer more than $100 value each year, after accounting annual fees. The flight-branded rewards cards without annual fees fared the best, with Mozo recommending Jetstar’s Platinum MasterCard.
Lamont warned consumers to keep a sharp eye on fees, as high annual charges chew up the benefits. These kinds of deals look very attractive on the face of it, but you might end up in the red, she says.
“The worst cards have such hefty annual fees and paltry rewards that the average cardholder can end up several hundred dollars out of pocket each year.
“The first thing is to watch out for annual fees. Choose a card with low or no fees – if you look at the top cards, a few have no annual fees – it is one of the most important factors. Also, beware of the introductory points as they aren’t competitive in the long run.”
With any luck, Australians can look forward to greater competitiveness from rewards credit cards. The number of credit cards accounts grows each year so there’s definitely room for growth in competition, says Lamont.
“The explosion in platinum and premium credit cards is a trend set to continue.”