Why credit card reward points aren't all created equal

Why credit card reward points aren't all created equal

Whether searching for a new credit card or giving an existing card its regular check-up, many people focus on the number of ‘points’ that can be earned per dollar spent, but that doesn’t always reveal the entire picture.

For example, on Qantas- and Velocity-branded credit cards, one ‘point’ earned on plastic means one ‘frequent flyer point’ in your account – simple enough – but many credit cards take a different approach, first delivering ‘points’ in a bank’s own loyalty program, which are instead converted into frequent flyer points at a later date.

This can be confusing for some beginners, because each bank sets its own ‘conversion rates’: that is, the number of ‘bank points’ cashed-in for every actual airline frequent flyer point credited to your account, and these rates can vary from one bank to the next, even when crediting those heard-earned points to the same airline.

Take St.George’s Amplify Rewards program as an example: the loyalty program attached to the bank’s points-earning Amplify Platinum with Amplify Points and Amplify Signature with Amplify Points Visa credit cards.

Amplify Rewards has three airline frequent flyer partners attached – Virgin Australia Velocity, Singapore Airlines KrisFlyer and Malaysia Airlines Enrich – and adopts a 2:1 points conversion rate from Amplify Rewards to each of those frequent flyer programs.

That means every 2 Amplify Points in your Amplify Rewards account are worth 1 frequent flyer point: 2 Amplify Points = 1 Velocity point, for example, and once you know what the ‘points’ you’re earning are actually worth, you can then better-evaluate and compare each card’s true earning rate.

In this example, St.George’s Amplify Signature Visa with Amplify Points card offers 1.5 Amplify Points per $1 spent. Using that 2:1 conversion rate, we can see that the true reward per $1 spent is 0.75 Velocity points, 0.75 KrisFlyer miles or 0.75 Enrich miles, being the end result of those ‘1.5 points’, divided by 2, given the 2:1 exchange rate.

That’s not to be sniffed at – the Amplify Signature Visa is Australia’s highest-earning Visa card for KrisFlyer miles, especially with the bank’s 10% 'birthday bonus' thrown in on top – but it shows that you need to know not just a card’s earning rate, but also its frequent flyer conversion rate, to understand the true value of the rewards you’re earning.

Let’s look at another example: Westpac’s Altitude Rewards program, as you’d find attached to a number of cards including both the American Express Westpac Altitude Black Card and the Westpac Altitude Black Mastercard that form part of the Westpac Altitude Black Bundle.

Firstly, Altitude Rewards’ frequent flyer partners include Virgin Australia Velocity, Air New Zealand Airpoints, Cathay Pacific Asia Miles, Malaysia Airlines Enrich and Singapore Airlines KrisFlyer.

Westpac adopts a 3:1 conversion rate when transferring Altitude points into Velocity points, Asia Miles, Enrich miles or KrisFlyer miles, and a 180:$1 conversion rate to Airpoints (AirNZ’s program is based on ‘dollars’ rather than points, so operates a little differently).

Zoning-in on the American Express Westpac Altitude Black Card, which provides a generous 5 Altitude points per $1 spent on overseas purchases, we can see that what you’re really earning is 1.66 Velocity points, Asia Miles, KrisFlyer miles or Enrich miles, or about 2.7c in Airpoints value.

Simply take the number of bank points earned per dollar spent – 5, in this case – and divide by the digit on the left-hand side of the conversion rate (that’s 3, for a 3:1 rate), to show how many actual frequent flyer points you’re earning for every $1 spent on your card.

This works with any bank: once you know the card’s earning rate, and its conversion rate to your preferred frequent flyer program, you’ll be able to work out the true value of any credit card ‘point’ in Australia.

Stuck trying to find your bank's conversion rates?

The frequent flyer conversion rates attached to bank-operated loyalty programs aren't always easy to find, but Australian Business Traveller has done the legwork for you!

Here's a handy reference chart covering a range of credit card reward programs and the conversion rates they use when shipping points across to some of the more popular frequent flyer schemes.

Loyalty program

Virgin Australia Velocity

Singapore Airlines KrisFlyer

Cathay Pacific Asia Miles

Etihad Airways Guest

AMEX Membership Rewards (all tiers)

2:1

2:1

2:1

2:1

ANZ Rewards

2:1

3:1

3:1

N/A

Commonwealth Awards

Diamond: 2:1
Platinum: 2:1
Gold: 2.5:1
Awards: 2.5:1

N/A

3:1

3.5:1

Citibank Rewards

Prestige: 2:1
Signature: 2:1
Platinum: 2.5:1

Prestige: 2.5:1
Signature: 2.5:1
Platinum: 3:1

Prestige: 2.5:1
Others: N/A

Prestige: 3:1
Others: N/A

Diners Club Rewards

1:1

2:1

2:1

2:1

HSBC Rewards

2:1

Premier: 2:1
Platinum: N/A

Premier: 2:1
Platinum: N/A

N/A

NAB Rewards

2:1

3:1

3:1

N/A

St.George Amplify Rewards

2:1

2:1

N/A

N/A

Suncorp Rewards

2:1

2.5:1

N/A

N/A

Westpac Altitude Rewards

3:1

3:1

3:1

N/A

This isn't a comprehensive list of the frequent flyer partnerships of each bank, of course, but highlights that different banks do indeed use different conversion rates – not only from one frequent flyer program to the next, but in some cases, between different types of points-earning cards.

It's also worth keeping in mind that the number of points needed to book a flight varies from one frequent flyer program to the next, when it comes time to make that all-important conversion.

While some overseas-based frequent flyer schemes may appear attractive by requiring fewer points to book a flight compared to an Australian program like Virgin Australia Velocity, if those points are coming from your credit card, and your bank uses a less-generous conversion rate to that overseas frequent flyer scheme, taking this path could actually cost you more points overall!

For example, a one-way business class flight from Sydney to Singapore can be yours for 65,000 Virgin Australia Velocity points, or a slightly lower 62,000 Singapore Airlines KrisFlyer miles.

While KrisFlyer looks better on paper, if those points came from a program like ANZ Rewards (which uses a 2:1 conversion rate for Velocity, but a less-generous 3:1 rate for KrisFlyer), you'd end up burning 186,000 ANZ Rewards points to book that flight, versus only 130,000 ANZ Rewards points if booking that flight through Velocity instead.

Ultimately, however you choose to earn and redeem your hard-earned points, knowing not only your bank's earning rates, but also its conversion rates, is the key to getting great value from any credit card rewards scheme.

Chris Chamberlin
Chris Chamberlin is a senior journalist with Australian Business Traveller and lives by the motto that a journey of a thousand miles begins with a single step, a great latte, a theatre ticket and a glass of wine!
 

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20 Jun, 2019 01:24 am

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