Rewards points are worth something

Monday, October 16th, 2023 at 08:27pm

I have been thinking about changing some things around in regard to my credit card so I decided that I should look up what the options are with my current card. It has been a while since I compared the value between types of points or the difference between how the points are redeemed, so I was pleasantly surprised to find that I might already be on the best option for my use case.

I learned that with my current main credit card there are three ways to get cash value for the points:

  1. Cashback to the card
  2. Purchase gift cards to use for regular shopping
  3. Transfer to another loyalty program, then in that program use the points in some way

Before I checked the numbers I would have assumed that cashback to the card should have been the best. There are no third parties involved so the costs should be minimized, however (spoiler alert) that is not the case.

The rate at which points are awarded is between 1 and 3 points per $1 depending on the type of transaction and/or who the transaction is with (eg some large retailers), but for comparison purposes I am going to use the rate of 1 point per $1. So $1000 will result in 1000 points.

  • 12,500 points gives a $50 cashback directly to the card
  • 10,210 points can be redeemed for a $50 Coles/Woolworths gift card
  • 10,000 points can be converted into $50 Flybuys dollars

My card is currently covered by the $8/month fee for my home loan, that is $96/year or essentially the same as the $95 annual fee for existing customers. I will also round it up to $100 to keep the calculations simpler.

So what is the minimum spend to cover the annual fee?

  • $25,000/year or $2083/month if getting cashback to the card
  • $20,420/year or $1701/month if getting gift cards
  • $20,000/year or $1666/month if getting flybuys dollars

The cashback option might be the most convenient to the consumer as there is zero involvement once it is set up (there is no actions needed to get gift cards and then remember to use them), but it is also the least cost for the bank to offer.

But what other benefits does the bank get from the other options? Converting the points to Flybuys is best for me, but does this mean the bank then has access to all the data Flybuys has collected about my purchase history? Does Flybuys also get information about my credit card activity?

Is the $5000/year difference between cashback and Flybuys dollars the value of my data?

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