Frequent flyer credit cards present an opportunity to gain rewards by simply spending money. Australians love these programs as they earn points and exchange them for cheaper flights or electronics, gift cards, or fashion from frequent flyer stores. But what is the actual dollar cost of taking part in the program? How much does any “free” item cost? We discover the true cost of frequent flyer credit cards.
Here are the main sections on why Frequent Flyer Cards are a waste of time and money. Feel free to Jump ahead.
The Verdict
Frequent Flyer credit cards sound like a great idea, but the annual fee and surcharges required aren’t worth it. If you want to earn points but not pay the fees, you are better off earning points in other ways that don’t require a credit card. For example, earning extra frequent flyer points with various sign-up offers, linked reward programs, and shopping via linked stores that offer bonus points.
These are more cost-effective ways to earn frequent flyer points if you want to put in the effort.
Summary Points:
- Earning Qantas Frequent Flyer points through a linked credit card is not worth it for an average consumer.
- $40,000 must be spent in a year using a low-cost frequent flyer credit card with an annual fee of $100 to earn a $100 gift card to break even.
- Most frequent flyer credit cards have extra fees, such as a 2% merchant fee and up to 3% foreign transaction fees.
- Even with a points bonus, the fees, and effort required make it difficult to break even using a frequent flyer credit card.
- There are various ways to earn Frequent flyer points, without needing a linked credit card.
What are Frequent Flyer Rewards Cards?
Frequent Flyer rewards cards are credit cards linked with the Qantas Frequent Flyer Program. Every dollar spent on the frequent flyer credit card can earn Qantas points. The amount of points earned per dollar spent is usually based on the annual fee attached to the card. For example, a higher annual fee will generate more points for every dollar spent.
Are Frequent Flyer Credit Cards Worth It?
Frequent flyer cards are not worth it if you are an average consumer, paying an annual credit card fee. It feels great to accumulate points and exchange those points for a free flight or item. However, the majority of frequent flyer credit card users will never earn enough points in a year to justify the cost of the annual fee.
How Can You Maximize the Points for Your Frequent Flyer Credit Cards?
The standard way to max out your points is to pay for everything on your credit card. If you are disciplined and pay off your credit card amount owing every month, you will not pay any interest. If you pay for everything on your credit cards such as bills and groceries, you can accumulate a lot of points.
However, the effort to maximize your points requires enough money in the bank to pay off the entire amount every month. And it also requires discipline to ensure the credit card isn’t used excessively and leads to severe debt.
This leads to the next question, how many points do you need to justify the cost and effort of owning a frequent flyer credit card?
How Many Frequent Flyer Points Do I Earn per Dollar Spent?
The number of points received per dollar spent can vary. All frequent flyer credit cards offer different annual fees and different amounts of points can be earned based on that fee. Using a low annual fee and a high annual fee for comparison, we can see how much money must be spent to accumulate points.
The Figures in Red are the amounts needed to be spent to justify the Annual Fee
Low Annual Fee Analysis
Take the basic frequent flyer card, where you will pay a $100 annual fee. These cards usually give you 0.5 points per dollar spent. If you wanted to exchange your points for a $100 gift voucher, you will need to spend roughly $39,460 to generate the 19730 points for the gift card. So you will need to spend over $40,000 a year on your credit card a year to justify the fee. That’s $3288 a month on average.
High Annual Fee Analysis
If you get a premium frequent flyer credit card, the annual fee can cost you $350 in annual fees. These cards can give you $1 per point spent which is great. But it means more money must be spent on the frequent flyer credit card to justify the fee. In this scenario, to break even and get $350 in gift cards will require 68980 points. This means you must spend $78,920 on your frequent flyer credit card in a year to justify the annual fee. This averages to $6776 a month.
These premium cards have higher annual fees, but they offer other perks and sign-on bonuses. It’s recommended to read the fine print to understand the conditions on these cards. For example, when bonus points are distributed, payment of fees and other surcharges are attached to the card.
Summary of Analysis
Basically, a card with a low annual fee will require spending $364 for every frequent flyer gift card dollar earned. While a card with a higher annual fee will require $197 spent for every gift card frequent flyer dollar earned.
To put this another way, using a low-cost credit card with an annual $100 fee, I need to spend $364 to earn $1 on a Frequent Flyer gift card I could spend at JB-Hi Fi.
Looking at the data, it seems like you will be lucky to break even every year. These programs are designed to acquire credit card users and reward them, even though the cost is greater than the reward. As you will see with all of the additional fees.
What Are the Additional Fees of Frequent Flyer Credit Cards?
Along with your annual fee, there are additional fees and surcharges such as merchant fees and overseas transaction fees. The details of these are usually buried in the fine print of your credit card contract.
A credit card surcharge of up to 2% can be applied to your transaction by a merchant to cover the cost of accepting your credit card transaction. This happens often when paying a bill online with your credit card.
Foreign transaction fees of 3% on average are almost standard on most credit cards. Whenever you buy anything from an International country, the credit card provider can charge you an excess of 3% on the amount you paid. This may not sound like a lot but it all adds up.
As an example, looking through my frequent flyer credit card statement, in the last 90 days I paid $13.68 in overseas transaction fees. I’m estimating that it would cost me an extra $40-50 a year on top of the annual fee.
And to maximize my spending to earn more points, I have been paying all of my bills online using my frequent flyer credit card. I can only imagine the amount I have spent in transaction fees over the years trying to accumulate points.
Is It Worth Using Frequent Flyer Credit Cards to Earn Qantas Points?
If you want to accumulate frequent flyer points by using a credit card, you need to spend a lot of money to justify the annual fee. Looking at the data above, you need to spend at least 40K on your frequent flyer credit card to break even when using a card with the cheapest annual fee. And this doesn’t account for any additional fees or surcharges you will receive from the card.
Having used a frequent flyer card for many, many years. I have come to the realization that the answer is NO. it is not worth using a frequent flyer credit card to earn points.
However, there are better ways to earn points without needing a Frequent flyer credit card.
What Are Other Ways to Earn Qantas Points Without Frequent Flyer Credit Cards?
There are various ways to generate frequent flyer points without needing a Qantas frequent flyer credit card. The best way, of course, is by flying and earning points with Qantas and any airline linked with Qantas. However, if you don’t fly very often there are still other ways to earn points.
There are three methods of earning frequent flyer points.
1. Link with Other Rewards Programs and Transfer to Qantas Points.
There are various rewards programs that can be used to earn points that can then be transferred into Qantas frequent flyer points.
- The Woolworths Everyday Rewards Program is the best way to earn Qantas frequent flyer points. Everyday Rewards points can be earned by shopping at the network of Woolworths stores, such as Woolworths, Big W, and BWS. Woolworths offers at least 1 point per dollar spent for its linked stores. Then every 2000 Everyday Rewards points you earn can be exchanged for 1000 Qantas Points.
- Zip Pay is now linked with the Qantas Frequent Flyer Program. Zip offers cashback on various items purchased through their linked partners and stores. The cashback offers can then be transferred into Qantas frequent flyer points. Zip also has an offer to earn 3000 bonus Qantas points if you are a frequent flyer and sign up and activate a Zip account.
Zip also allows the ability to Buy Now Pay Later (BNPL) a Qantas flight using Zip Pay. This is available through Qantas.com and customers can earn 1 Qantas point for every $3 spent.
- Emirates is a partner of Qantas and has its own Skywards rewards program. Any points earned with Emirates can also be transferred into Qantas points by completing a form on this link.
Utilizing other rewards programs is a cost-free way of earning points and transferring them into Qantas Frequent flyer points. There are also other ways to earn huge amounts of bonus points.
2. Sign up & Bonuses Through Affiliate Programs
The best way to earn Qantas frequent flyer points is through sign-up bonuses for other products and services. These sign-up bonuses are not overly advertised but they are worth being aware of if by chance you sign up and want the bonus points.
- Bupa Health Insurance offers the biggest bonus. 130,000 Woolworths Everyday Rewards points can be earned for a family health insurance policy and up to 80,000 points for singles. And Bupa signups get 3X points booster deals as an extra bonus. As mentioned earlier, these Everyday Rewards points can be transferred into Qantas Frequent flyer points. This is a great deal if you are already looking for health insurance and want to sign with Bupa.
- Superhero is a new share trading platform that offers up to 30000 Bonus Qantas Points for signing up and trading on the platform. There is an extra 20000 point bonus for transferring 20K worth of shares into your Superhero account. And you can earn ongoing points by transferring money into your account and trading. For regular traders, this sounds like a great deal to maximize your frequent flyer points while trading on the stock exchange.
3. Buy Items Through Linked Online Stores
There are various online stores that let you link your frequent flyer membership at the checkout to earn points on every transaction. For example, online stores like Kogan.com and Booktopia. The extra points are a nice bonus if you are already shopping at these stores.
- The Qantas Shopping Portal is the best way to discover all the stores where you can earn frequent flyer points. The Portal is very similar to the zip pay and cash rewards websites. There are over 400 stores available, such as the Microsoft Store, Myer, Big W, and Calvin Klein. This handy portal displays all of the available offers, such as bonus points, double points, triple points, or free shipping.
The best part of this portal is you don’t need to use a frequent flyer credit card. Using the portal is free if you are a frequent flyer member. This organic way of generating points is a nice bonus if you are already buying an item from these stores.
As you can see, you don’t need a Qantas frequent flyer credit card. If you want to earn points, there are numerous ways to do so.
Final Thoughts
Frequent Flyer credit cards are simply not worth it.
Mailbox Moneyman has used Frequent Flyer credit cards (to get into debt) for the better part of 10+ years. It’s always nice to say, “I got this for free with my Frequent Flyer points”. The reality is you probably spent a lot of money on fees and surcharges for that free flight or item. And it would have been cheaper if you had simply bought the item outright.
At this point in his life, Mailbox Moneyman just doesn’t care enough about trying to earn points anymore. He craves simplicity and after doing the sums, he just doesn’t see the value in chasing Qantas frequent flyer points anymore.
Let me know what you think. Do you love chasing points? Or are you over it like MM? Tell me all about it. Thanks
M. Moneyman
FAQs
What Are the Main Frequent Flyer Programs in Australia?
The three main frequent flyer programs in Australia are:
- Qantas (frequent Flyer program)
- Virgin (Velocity Program)
- Emirates (Skywards program)
What Are the Two Main Retail Rewards Programs in Australia?
The main retail reward programs in Australia are offered by Woolworths (Everyday Rewards) and Coles (Flybuys rewards). These two programs are linked with various retail stores and programs. The biggest link between them is the Woolworths program (with Qantas). Meanwhile, Coles is linked with Virgin, where points can be transferred and earned in various ways.
What is the Best, Cheapest Credit Card in Australia?
Any cheap credit card MUST have no annual fee, low-interest rates, an interest-free period, and no international fees. Most banks should have a credit card available with all of these features. Mailbox Moneyman does like the ING Orange One Low Rate card. MM doesn’t have an ING credit card because he is trying to use Visa Debit cards as an alternative. But if he gets a credit card in the future, this is what he would likely consider.
What About Those Bonus Points Deals?
There are many deals around where you can earn over a hundred thousand points when you sign up. These credit card deals sound great but you need to read the fine print. There are usually conditions on when you get those points and when fees need to be paid. Ultimately, the cards with those bonus points will still cost you.
Are There Any Frequent Flyer Credit Cards Without an Annual Fee?
I have heard about some banks offering a frequent flyer credit card linked with a home loan. This could be a good deal if you need to have a home loan. However, they will still have various fees attached to the card. And it could make things more complicated if you want to move banks for a cheaper mortgage rate. But if the card is free, the fees are minimal and the mortgage rate is good, it could be a great deal. But I’d rather have a no-fee credit card and earn frequent flyer points independently from a linked credit card as detailed above.
