Bash The Plastic And Collect The Cash

Sun Herald

Sunday November 30, 2008

Debra Cleveland

Cash-back on credit cards can pay off, writes Debra Cleveland.

IF YOU are tired of the usual array of flights, toasters and other consumer items on offer in your credit card rewards program, take heart from a far more practical trend that delivers dollars rather than goodies for your custom.

Instead of accumulating points and having to decide between travel, whitegoods or a shopping voucher from a particular retailer, the same dollar amount is credited to your account, leaving you free to use it for a shopping spree at stores of your choice or to help pay off a looming bill.

American Express's Platinum MoneyBack and Citibank Cash Back are the only two cards that focus just on cash back and offer no other rewards, says research house Cannex. But many other cards offer the concept of a cash reward as part of their wider loyalty programs. Shopping vouchers to specific retailers are common but perhaps more useful to consumers - especially in these troubled economic times when every extra dollar helps - are cards that credit your account with the dollar value of your points.

BE SMART

Credit card specialist Mike Ebstein of MWE Consulting says there's nothing new about cash being offered as a reward. What's changed, though, is that as airfares have become cheaper, cash and vouchers have become more popular among consumers looking for value.

A big plus is that cash back offers flexibility. But Ebstein says it comes at a cost - often you need more points for cash back than for a shopping voucher of an equivalent value, for instance.

On Citibank's scheme, 16,500 points are needed for a retail voucher worth $100 but 20,000 for the same $100 to be credited to your account. ANZ has the least differential with 13,320 points for the voucher and 13,750 for the $100 credit.

So be a smart consumer - check the interest rate, the annual fee and how the cash back kicks in. If you are a "revolver" (don't pay off your card balance in full each month but keep revolving it by paying just the minimum monthly repayment) forget about rewards and get a no-frills card with a low fee and lower interest rate, says Cannex analyst Peter Arnold.

READ THE FINE PRINT

It's really important to find out how each card works. With the Amex card, for example, cash back can be earned only if the balance is paid in full each month. But on the Citibank Cash Back card, how much you get in cash back depends on the opening balance, which means you're paying interest anyway. And with the ANZ Balance Visa points are earned by paying off the card.

The Citibank card offers "tiered" cash rewards, so if you have a balance of up to $1999 it offers cash-back of 0.5 per cent; from $2000-$3999 it becomes 1 per cent; $4000-$5999 is 2 per cent; and upwards of $6000 it's 4 per cent. But you're still paying the bank interest at 20.74 per cent!

On the Amex card you can earn 5 per cent money back for the first three months (up to a limit of $300) and after that 1 per cent with no limits. So if you put through $3000 in a month , your card will be credited with $150 if you're a new account-holder or $30 if you're an older customer.

Annual card fees range from $59 for the Commonwealth's Standard card to $200 for its platinum card.

KEEP IT SIMPLE

If you like the sound of getting a credit on your card instead of other rewards, ask your current card provider what's on offer and how it works. Then work out whether it's worth chasing a better deal or whether what you're getting is a pleasant bonus for a no-frills card.

Take the FlyBuys scheme if you've got a linked NAB credit card, for example. If you have loads of points that are about to expire and you don't fancy what's in the catalogue, convert 50,000 points and you'll get a $400 credit to your credit card.

CASE STUDY

STEPHEN DAVIES ditched his last credit card because although the rewards program had a broad range and a good points-earning rate, he found the customer service poor. He switched to the American Express Platinum MoneyBack card about four months ago, attracted to the direct benefit of having a cash reward put back on the card. "The way I'm using it means the cash-back just comes off the top of my bill and helps make it a little less each month," he says.

DEBRA CLEVELAND

© 2008 Sun Herald

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