Credit Card Rewards Schemes

Yes it was reduced from 1 pt/$ to .625/$ as per my post.

 

Agreed except Velocity doesn't have high surcharges. Qantas does.

Business is best value but it's hard to get 4/5 reward seats in business

 

I want to ask a very silly question that may be obvious to others - sorry.
How do the plane companies, accommodations, etc actually get paid when you redeem reward points and book a holiday? Who actually pays them? How do they make money from all this? How much are they discounting it all down for the rewards /visa/mastercard companies?

I want to know how it's all negotiated between the players in the background.

 

It's quite a business. I believe Qantas FF program is more profitable than Qantas.

Basically the FF program sell the points to the CC company for money. Most people just redeem them for gift cards which the FF program can buy at a discount as the user leaves at least a few dollars on it and the retail outlet are happy to have the shopper pre-pay.

When you redeem for hotel or airline the FF program pays for the item again sometimes at a discount but realistically they got paid potentially ages ago and have event money in the money.

Very few people in the scheme of things utilise points to a point where the FF program or the credit card company lose money, and if they do they just enhance the program until they are profitable again.

 

Thank you for pointing that out @kamchatsky - I had not realised. A massive difference indeed!
Is there a card you would recommend with a strong reward program towards airline points?

 

Off topic a little, but I was showing off my new buy things with my mobile phone when my friend showed me his ING card.

He gets an immediate 2% reimbursement for every spend under $100. This to me is more appealing than FF.

 

Yeah, ING card you get 2% back on every Paypass/Paywave transaction, and refund of any ATM fees paid on ATMs across Australia. You'll need to transfer $1,000 a month into the Savings Maximiser account to get those benefits though.

 

@Ouga, definitely American Express Platinum Edge card as it uses Ascent Membership Reward program. As you said there is a huge range of airlines you can transfer the points to. Also you earn 3 points for supermarkets and 2 points for petrol stations which is a plus. There is annual fee but the included flight ticket per year more than offset it anyway. Plus if you are member of associations, you can get the association Platinum Edge card with $50 off annual fee compare with the normal card. I have an Engineers Australia version:

Engineers Australia version:
Engineers Australia Credit Cards | American Express Australia

AMA version:
AMA Credit Cards | American Express Australia

If you spend a lot and have very high income, and want a lot of perks, then Amex Platinum Charge Card would be for you. It has Ascent Premium program which contains all the airlines Ascent program has, plus Qantas.

I always try to charge as much spending on this card as possible, without paying surcharge.

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Now with your existing David Jones Amex card, given your points are already in DJ program, your points transfer to airlines should be 2:1 (again please check this). However you will get slightly more airlines miles via the Starwood Preferred Guest (hotel program for Sheraton, Westin, Four Points, St Regis hotels etc) route, There the Amex: SPG conversion should be 1000:500 (ie 2:1, please check it), and transfer for SPG points to most airlines is 1:1. HOWEVER, you get 5000 points bonus for every 20000 points transfer. So it means you get 25000 points for every 20000 points transfer. It is better than direct transfer to the Amex partners:

Starwood Hotels & Resorts

This works for Singapore Airlines (Krisflyer), Cathay Pacific (Asia Miles), Etihad Airways, Virgin Australia, Virgin Atlantic, Thai AIrlines. So for example, you have 40000 DJ Membership Rewards Points, if you convert directly to the airlines above, you get 20000 miles. If via SPG route, you get 25000 miles.

I hope this makes sense to you.

 

Velocity is pretty good for no fuel surcharges. However their routes are limited and their online award search engine is no good for non-Virgin Australia flights.

I normally transfer/collect my points to Singapore Airlines (Krisflyer) or Cathay Pacific (Asia Miles) whenever I can. They have 4 or more Business Class award seats available if you know where to look. In fact, I just went overseas and back via Cathay Pacific for all 4 of us on Business. Also they use fewer miles for awards compare to Qantas/Velocity. However, Velocity is useful for AUS-USA flights as Delta is also a partner.

 

Pretty much the only way to make airlines "lose money" is to redeem it on Business or First Class flights, where they would be sold for a lot of money. However, airlines yield management team would already work out that for some flights there will be empty seats in Business and First class, and they make some of those seats available for members to redeem those seats using points. So airlines always win, but you get "maximised value" by redeeming in Business or First class.

Alternatively, you can also redeem it in International Economy but in super peak season such as Christmas and New Year where even Economy tickets are very expensive. It also means you have to book it almost 365 days in advance. I used to do this in the past when I was starting out. I just book it, and cancel (and pay cancellation penalty, usually not much) it if I don't use it.

 

Website is woeful for partner airlines but I have found telephone booking process pretty good.

 

It is appealing.. however its a debit card so your using your money straight away (only a real problem if your you use an offset account against your PPOR).

 

Mate, thank you so much for your sensational reply - it's greatly, greatly appreciated!

 

so confused, never thought about getting a c card before i have 3 questions.

1. if i spend 1k per month (excluding rent) how much on average does this earn me in points?

2. can i use a c card to pay for rent? does this work / worthwhile?

3. when a c card say minimum credit 4k. does that mean i'll have 4k available or that i must spend 4k a month?

Cheers, Elives

 

1 depends on reward scheme, if 1 point per dollar, easy to calc
2 maybe, but will probably get a surcharge, ask if you can pay by card and if it costs more & check the scheme to see if rent is ok.

3 means you take 4 k of credit, you can use it as/when you like, it is a limit basically, the larger the limit you get, the worse it is for loan servicing as well.

 

i don't really see the point unless you're spending a bit, 1k month would be 12k - 36k points p.a 1x-3x it'd be worth it if it's 3x but that would be the minimum. i suppose most people spend more then a 1k a month?

 

I do not think it would be worth it being a focus point, but let's put it this way, you can probably get a few domestic flights or an OS one every 3 years without doing anything much, if you have a credit card with a decent rewards, you can probably x that by 2, if you make a point of it, I know someone who gets free round the world quite often & they love travel.

 

It's not really worth it however if you churn a card with good sign on points and no annual fee every 6/12 months you should get a free overseas trip every year.

 

I think the most important consideration for these credit cards is the fact that they allow your savings to sit in your offset for as long as possible reducing interest on your mortgage.

I (and i imagine most people) use there credit card for a double benefit.
First and foremost, every cent we (wife and I) earn goes into my offset account and every cent that we spend comes off the credit card.
We continue to do this until the end of the interest free period on the card approaches and we then pay the amount in full from the offset. This can be as many as 3 fortnightly payment cycles.

A very rough calculation I did is that for every $1,000 you have in your offset account, you save about 12 cents on your mortgage by average rates these days. This doesn't seem a lot but when we talk compounding over a mortgage life we would be talking YEARS off your mortgage from such a simple thing.

The points are just the cherry on top. I would be doing this regardless, the fact I get a trip every now and then just makes it all that sweeter (And before someone says the money you save on your mortgage you then spend on a trip. I take a trip every 1-2 years regardless so )

 

ok, recently a lot of the banks, pretty much all are diluting their points, eg with the bank issued amex cards you used to get 1.5Qantas points per $1 , they ve now changed this to 1.25, such as CBA, apparently the other banks will or are following,
if you put everything through on your card then you will get a bonus in a year or two or three depending on what you are wanting,

unfortunately, its getting harder and harder to justify considering points as a benefit.

Im currently looking on how to do mine, ive got a CBA diamond card with a $250 annual fee, and put everything through it. I dont have any CBA loans so dont get it for free, but would jump at a fee free option. unfortunately, fee free options are mostly non points earning

ive done well over the years with points accumulation, but its certainly getting damn hard

if anyone has any suggestions, im willing!

for the record over the past 10 years I have got 3 economy trips to asia, 1 business class to europe, 1 way trip to asia.

all of these ive paid tax on it, so the flights have been poor value for the economy.

Business class is all I save for now in terms of points

however I earn on average 100,000 points per year, most are coming from the rates I pay from IPs, and reno materials etc.