Credit cards and shopping have gone hand in hand for so long, so there’s no surprise many card providers also offer the ability to earn rewards points when you use their card, which can then be redeemed as shopping vouchers.
And while this may sound like a win-win, there’s more to it than simply just getting rewarded for spending.
What are reward points?
To understand how these cards work, you need to firstly understand reward points, which are specific numbers of points assigned to you every time you use your credit card to pay for a purchase.
Card providers have reward programs which allocate different numbers of points to particular types of everyday purchases such as:
- Travel and accomodation
Sometimes providers will apply a higher point weighting, or bonus points, to specific goods or services purchased, or purchases made during certain periods of the year.
As you accumulate more reward points based on your purchases, they can eventually be redeemed in exchange for a reward. The reward can take the form of a cash-back, frequent flyer points, a gift or merchandise.
How are shopping voucher rewards redeemed?
Each credit card provider has a program with a collection of commercial partners, which are offering the rewards.
So in the case of shopping voucher rewards, the points you accrue can be redeemed for any range of items offered by the program partners. Common partners include:
- Supermarket chains
- Fashion and lifestyle retailers
- Entertainment and event groups
Most rewards are redeemed online, but many will have particular terms and conditions attached to either when they can be used, or how they can be used.
For example, there may be certain high demand periods of the year when some rewards can’t be used with a program partner; there may be restrictions placed on how many times you can claim a reward; or there may be an overall limit on a reward amount.
Which banks offer reward programs?
Many banks, building societies and financial institutions offer reward programs as they can apply a higher annual fee and interest rate to the card.
The offer of a reward incentivises greater use of the card, so more card providers are designing reward programs which will appeal to the specific shopping preferences of customers.
One program may offer rewards with premium brands to suit the lifestyle needs of a particular person, while another may offer rewards that are broader and have more mainstream appeal. Some banks may even offer multiple cards with different reward programs attached to them to cater to a wider range of customers.
What should I know before I sign up?
As enticing as reward programs are, you need to do your research so that it makes good sense for you, your everyday lifestyle and your financial goals. And this starts with being realistic and disciplined about your spending behaviour.
There are four simple steps you can take into account if you’re considering whether a rewards program is right for you:
- Ask yourself if you’ll actually use the rewards on offer
- Read the fine print on the annual fees and interest rates on the card
- Read the terms and conditions attached to redeeming the rewards
- Finally, do a cost-benefit analysis on comparable cards and programs so that you have a true financial representation of what each can offer you