Are credit card reward programs pointless?

Like all blanket statements, this one contains elements of both truth and fiction.

It’s certainly true that reward programs are not for everyone. Individuals who tend to carry a balance on their credit card accounts, for example, should be more concerned about their interest rate than the expiry date of their points; and those people who carry a credit card for emergency use only are more likely to be turned on by one without an annual fee than by any accumulation of frequent flyer points.

However, for individuals who pay off their credit card balance in full every month, reward programs are not only of interest; they can be of real value. Often there is no shipping charge for merchandise obtained through the redemption of reward points, and therefore this is truly an instance of something for nothing.

One should never make an unnecessary purchase in order to accumulate reward points, of course; that would be foolish indeed. However, if the purchase under consideration is one that will or must be made regardless of the means employed, for example, a monthly utility bill or grocery purchase, and if one has the means of paying the balance in full, then one may as well use a credit card, and earn the reward points offerred, as not.

If the merchandise offered through one’s credit card reward programme is not of interest—if the cardholder has already accumulated all the electronic and kitchen gadgetry she’ll ever need, and she hates travelling—perhaps the new generation of green or charity reward programs may raise her pulse rate. Through accounts at certain banks or with certain cards, reward points can be donated to good causes ranging from disease research to wildlife preservation to the RSPCA, or used to purchase carbon offsets to reduce greenhouse emissions. As a last resort, reward points can be redeemed for prepaid gift cards or vouchers, and given as Christmas gifts to the staff at the office. The staff, at least, will appreciate it.

Things to remember:

• Never use a credit card to make a purchase if it will become more expensive by doing so, for example, if the utility company charges a credit card processing fee, or if the credit card balance must be carried over to the following month and will therefore incur interest charges. Chasing reward points is only worthwhile if they do not cost extra.

Article correct at its author date: March 2008. Copyright Virtual Office Space, Any unauthorised reproduction of this article will be prosecuted to the full extent of the law. Credit Cards Australia.

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