The key to getting the most value from rewards programs is to shop smartly rather than extravagantly.
Supermarkets, airlines and credit card providers use reward points as a way to promote consumer loyalty and encourage extra spending.
These brands like to make consumers think they’re winning by giving them hundreds of points for relatively small transactions. That can tempt people to make unnecessary purchases. But while all those points might seem valuable, they might translate into just a few dollars of rewards.
So the number one rule with rewards programs is to recognise that brands don’t give something for nothing. That means avoiding two traps – buying things you don’t need and paying high annual fees to access a rewards program.
Here are five other secrets to getting the most out of reward programs.
1. Use them more
Many people fail to rack up as many points as they could because they sometimes avoid using their rewards programs – either out of forgetfulness or embarrassment. The way around this problem is not to spend more money, but to use a rewards program every chance you get.
For example, if you have a credit card rewards program, you can maximise your rewards by switching from cash to plastic. That means pulling out your card not just for expensive items like holidays, televisions and insurance but also everyday purchases like meals, coffees and petrol.
Traps to avoid: First, never use the card if the business charges a transaction fee, because that will always exceed the rewards on offer. Second, always pay off your credit card each month, because extra interest payments will also exceed any rewards.
2. Double up
Following on from the point above, you’ll earn even more points if you get other people to make their purchases through your rewards programs.
For example, if you and a friend go to a restaurant, you can double your points if you pay the bill and your friend reimburses you with cash. Or if you and your partner go on holiday, you can double your points if you handle the bookings and your partner makes an online banking transfer to pay you back.
Traps to avoid: You’ll lose a lot of money if they don’t pay you back!
3. Do your sums
Different brands offer different exchange rates, so make sure you do your maths if you have several options to choose from.
For example, Supermarket 1 might give you 400 points for every $100 you spend and might give you $1 cashback for 1000 points you accrue. So you would have to spend $250 to get $1 back.
Supermarket 2 two might give you 300 points for every $100 you spend and give you $1 back for every 600 points. So you would have to spend $200 to get $1 back.
In this hypothetical example, Supermarket 2 would have the superior rewards program – despite giving fewer points per dollar spent.
Traps to avoid: When comparing supermarkets, the rewards program should be a minor consideration. Location, prices, quality, service and product range are far more important. Similarly, when comparing credit cards, interest rates, annual fees and repayment terms are far more important. Rewards should play only a small part in your choice of brand.
4. Spend strategically
Your airline might give you bonus points if you travel during a specific period. Or your supermarket might give you bonus points if you buy specific products.
To access those extra points, you might have to change your annual leave or switch from one brand of ice cream to another.
Traps to avoid: Only alter your purchase plans if it won’t cause any inconvenience. It’s not worth taking leave at an inconvenient time or buying products you don’t want just for the points. In other words, don’t give up too much for too few points.
5. Cast your net more widely
Rewards programs sometimes allow you to earn points at unrelated businesses.
Traps to avoid: Don’t use partner businesses if you can get better value elsewhere, because the extra rewards points won’t be worth it.