We’ve all sat next to those genius shoppers who use credit card reward points to score expensive stuff for free.  Does it really work? Susan Burchill helps navigate the hype.

Apply for a new card with sign-up bonus points

Get a new card and you can score up to 100,000 points within three months – points which otherwise might have taken you a year or more to earn. (Finder has a list of cards here.) Some punters game the system by continually closing down accounts after a year and signing up to a new card for more bonuses.

BUT it won’t be a good deal if:

  •   The card has an annual fee that’s more than your points are worth. Try to find a card that has no fee, or no fee for the first year, or a low annual fee.
  •   You have to spend a minimum amount in the first three months, which is way more than your budget. (NB. People have found ways around this – e.g., buy an Amazon gift card for $1000 and spend it over the course of a year on things you would have purchased anyway.)
  •   If you apply for too many cards (and get knocked back), that may affect your credit rating, as Canstar explains.

Follow the money

If you spend thousands on fuel per year, then a rewards card that gives you two points per dollar spent is a no-brainer. The excellent Point Hacks blog talks about two Amex cards that do just that, as well as earning you up to three points per dollar spent at supermarkets. NB. Point Hacks focuses on converting rewards to travel points, but you can use membership rewards to spend on gift cards, or even to convert to credit on your account.

BUT it’s pointless if:

  •   The benefits you derive from the rewards don’t equal the annual fee (which could be up to $400)
  •   You don’t end up spending enough on fuel or groceries
  •   You don’t travel much – these cards sometimes give benefits like $200 in travel credits annually, which can offset the annual fee.

Buy gift cards that keep on giving

If there’s a retailer you want to purchase from that doesn’t earn you points on your rewards system (or doesn’t accept your Amex), go to a supermarket that does earn you points, and buy gift cards to that retailer, earning points in the process.

Even better – if your rewards card gives points per dollar spent at the supermarket, use that card to buy discounted gift cards (e.g. 10 – 20% off) at the supermarket (watch for promotions). So you not only get the goods cheaper, but you’ve earned points in the process.

BUT, it’s not worth it if:

  •   You don’t use the full amount of the gift card, or close to it.

With all credit cards, check the fine print of each card including the interest rate – if you don’t get your balance down to zero each month, you could be wiping out the rewards earned.