Businessman with bonus sign

Here are five things to keep in mind when it comes to loyalty points.

1. Money for Nothing

At first glance there’s nothing not to like about points, loyalty bonuses or whatever your airline or financial institution calls them. They are simply a gift from your institution to you. And that’s true – provided you don’t change your buying behaviour to get them.

2. What Are They Worth?

Like everything, this depends on the scheme but as a base case, air mileage points in Australia are generally worth less than a cent. That’s a dollar in every $100. It would be nice to have that dollar but would you cross the street for it?

3. What Do I Get?

If you are flying, then how many points you earn comes down to how much you spend. It’s nothing to do with how far you fly anymore. Sometimes that isn’t much – especially if you buy cheap tickets. A recent Choice article showed that you could expect to earn about 400 points on a discount economy flight from Sydney to Singapore. That’s about $4 worth. Up to you if you think that’s worth it.

Credit card points have a slightly better earn rate. Although another example from Choice shows that to earn $1,000 in points value on a typical credit card you would have to spend $60,000 a year – that equates to an earn rate of about 1.6 percent. Useful, but probably not worth changing your behaviour for.

4. Look at the Costs

Given the low earn rates, it’s very important to look at any fees you might have to pay to join points schemes. If a points scheme has an annual fee, that might make a significant dent in their cash value to you.

5. Don’t Change

The bottom line is, don’t change your behaviour to get points – keep shopping around. The earn rate, even on big purchases, is low so a lower price may very well be a better deal. The spend rate is also variable. You’ll get a better deal if you wait for special offers because one cent on the dollar isn’t a lot.

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