Are reward programs worth it?

Alec: [00:00:31] Welcome to Get Started Investing a podcast where we attempt to answer the most common money and investing questions from the Equity Mates community to help us all become better investors. If you're joining us for the very first time, welcome, we strongly recommend you scroll up and start on episode one. While we are licensed, we're not aware of your personal circumstances. All information on this show is for education and entertainment purposes only, and any advice is general advice only. With that said, let's crack on. My name is Alec. I'm not normally doing the introduction, but Bryce is not here today. But I've got two great co-hosts that I think more than. Fill his shoes, Queenie and Pablo. Welcome to the studio. 

Queenie: [00:01:14] Thank you for having us. 

Pablo: [00:01:15] Thanks for having us, Alec. 

Alec: [00:01:16] Some people may be familiar with the account Invest with Queenie and some of the work you're doing, Queenie and Pablo. But for people who aren't doing it, just quickly introduce yourselves. 

Queenie: [00:01:26] Yeah, sure. So we run a channel online called Invest with Queenie and Pablo, my partner. He also works with me full time on it. So we do all of the content together and I guess mainly Al and Matias money hacks. So helping people's money go further. So whether that be investing, saving money or finding the best rewards credit cards, which you'll go through soon. 

Alec: [00:01:51] Yeah. Now that is the question that we want to ask today. It's a question we've heard a few times from the Equity Mates community. Are rewards programs worth it? Now, to be honest, I have one credit card that I'm in the process of getting rid of. I don't spend anything on it. I just have been too lazy to actually close it. And I used to have a flybuys account, but I don't sign up to any rewards programs, so I am certainly not in a position to answer this question. And you said you're making a lot of money hack content and I've got to give a particular shout out for one that I think was epic, which was your ice cream content. You took a cheap ice cream and very expensive ice cream and showed that the same size tub you were actually getting ripped off with cheaper ice cream. 

Queenie: [00:02:40] Yeah, it's actually pretty crazy. So one of our friends, he's a chef and he actually told us this, and I wouldn't believe it because it just seems weird, right? He said that cheap ice cream has a lot more air inside of it. And the reason why is because ice cream, as we know, it's measured by the volume and not by grams or mG. So when I weighed the two tubs, you can actually see that the cheaper ice cream has around 50% air with the expensive ice cream only about 15%. And so it's pretty amazing cold overrun because in the ice cream process they actually churn air into it. But it's a bit sneaky because you actually don't know what you're getting with the two ice creams. 

Alec: [00:03:22] Yeah. So if you're ever looking for an excuse to buy the expensive ice cream, go to Quennie's channel and watch that video and then see justification. But let's turn to rewards programs. Are they worth it? And I want to start with a question for both of you personally. How many rewards programs are you guys signed up to? 

Queenie: [00:03:38] Was signed up to, two. So there's Flybuys, which has velocity points, and then there's also Qantas, which is like the Woolworths rewards one, and I think they're both really good platforms. So we've used both Qantas and Velocity and honestly the flights are really, really amazing with both airlines. It really just depends on, I guess, way of flying from the locations that you'd like to travel to and the different airline partners. So with Qantas they have partnerships with American Airlines, for example, whereas with Velocity they have partnerships with Delta and Singapore Airlines. So it's worth looking at the two programs to see which one works for you. I personally think that both flights are really, really comfortable, so it doesn't really matter which one you choose. They're both really good and you can get really good value for money for both of them. 

Alec: [00:04:27] So when I was looking at the rewards program landscape, I guess it feels like there's flybuys which is connected to virgin velocity and then Everyday Rewards, which is connected to Qantas. And then there are a few other, you know, products and services that also plug into Qantas points. Are there any other major rewards programs out there or are they the main ones? 

Queenie: [00:04:48] Those would be the main ones in Australia, but overseas they're obviously other ones. They're essentially three different airlines groups. So theres Star Alliance, SkyTeam. And what's the third one, PAblo? 

Alec: [00:05:01] OneWorld is that. 

Pablo: [00:05:03] OneWorld, despite of Qantas or Qantas, is part of OneWorld. 

Alec: [00:05:07] Okay. 

Pablo: [00:05:07] And then you have SkyTeam and then you have like Singapore Airline Velocity United. Yeah, and yeah, like when you said it's like basically where you want to travel, you need to see which airline is the best and you want to travel two ways and then you can decide which program you want to be part of. And then what you're mentioning was Flybuys and Woolworths Rewards is. Basically they can help you get more points. But the best way I think to get points and the best way to get points most of the time is for our credit cards. 

Alec: [00:05:38] Great. I'm glad you mentioned credit cards, because that's where I want to go with this. When we're speaking about flybuys and everyday rewards from Woolworths. They're free to sign up too. So the question, are they worth it? Well, you're not paying anything. So if you're getting anything at all, the answer has to be yes. But credit cards you are paying for, you're paying a annual account fee. Hopefully you're paying off your credit card every month and you're not paying interest. But the interest rates are high. So how do we go about calculating if it's worth it? Well, what's the maths here? 

Pablo: [00:06:11] Well, there are some credit cards that are free and that you can start for free. And usually some of the high rewards credit card, maybe we sign on fees, but there are also sometimes some free credit cards. On the first show, you can get it for free. And I think when you have like a good way of calculating, is it worth it on that? 

Queenie: [00:06:30] Yeah. Yeah. So Pablo mentioned some free ones, so some good ones to check out would be there's a Kogan credit card where you can get a $400 Kogan credit. 

Alec: [00:06:39] Kogan do everything right. 

Queenie: [00:06:41] Yeah, it's pretty good. I'm like that's honestly, it's a really good card free, no annual fee and yes free $400 credit voucher for Kogan. And then there's some other ones with Virgin and Qantas that also no annual fee. But some of the more premium cards are definitely the ones where you definitely get more value. So there are two that I think are quite good and I actually did the math behind them. So there's one which is the Qantas ultimate card, so that has an annual fee of $450. It's an Amex card. And with that card, it depends on the offers that they have running at the time. But usually you'll get from 60,000 bonus Qantas points up to 100,000 bonus Qantas points and one Qantas point is equal to roughly 1.8 cents if you're booking economy. But here's the real kicker if you're booking a business class flight, those points can be worth anywhere from $0.04 up to $0.08 or even $0.10 per point. So even if you take the minimum, which is 1.8 cents for an economy flight and let's say you get 100,000 points, that's already like $1,800 worth of flights that you essentially get for a $450 annual fee. And this card also has a travel credit. So, yeah, you pay the $450 annual fee, but you'll also get a $450 Amex travel credit, plus you'll get free lounge invitations in Qantas and Amex, you'll get the 100,000 bonus points, which is $1,800, and also free travel insurance. So when you add up all of those extras that you get with the card, it's definitely worth it. And Felicity also has another one, which is the Velocity platinum card, $375 annual fee. But velocity points essentially are worth a similar amount to Qantas points. So you can get anywhere from 60,000 bonus velocity points up to 100,000 bonus velocity points. And yeah, they have like pretty much the same offers with that card as well. So I think it is worth it if you use it wisely you can get over it. Yeah. $1,500 worth of value from those cards. 

Alec: [00:08:49] So with those offers there, you don't get the 100,000 points every year. I'm assuming it's like a sign up bonus. Is it worth escaping your credit card? Beyond that, whatever the bonus period is, you know, I mean, they have your card for a certain amount of time. Is it worth, you know, getting this, keeping it for the second year in the third year? 

Queenie: [00:09:09] I mean, it depends because you still get the travel credit, which is equal to the annual fee. So in the next year you won't get the bonus points, but you still will get that $450 travel credit and all of the lounge passes and things like that. So it still kind of nets out. But yeah, the real, the real value is the bonus points. So yeah, it depends. 

Alec: [00:09:31] Well, let's take a quick break here. And then on the other side of the break, I want to ask Pablo and Queenie about moving between credit cards to take advantage of new bonus offers that are coming to market. Welcome back to Get started Investing. Today we're answering the question, are rewards programs worth it? And to do it, I've got Queenie from. And to do it, I've got Queenie and Pablo from Invest with Queenie, the personal finance experts and the money hacks experts. So, Queenie, Pablo were talking about rewards programs. Before the break, we mentioned that the bonus offers from a couple of credit cards are quite attractive compared to the annual fees. I guess the caveat being a lot of it's travel related. If you're not travelling there, there's probably a different question there, isn't it? 

Queenie: [00:10:21] Yeah. If you're not travelling using the points for gift cards, you can do that, but it's not going to give you as much value as using it for travel because when you actually have a look at the points more, you can redeem it for gift cards is probably one of the lowest ways that you can redeem your points. So it's worth it to travel. But there still are some credit cards that give you cashback and gift cards that you could look at some really good Citibank ones that allow you to get cash back. I think one of them I forgot the exact name, but it gives you about $800 cash back that you can use as a gift card, as a sign up bonus, which isn't as much as like the $1,800 that I was talking about with the travel credit cards. But if you're not travelling, it's still worth it. I think so, yeah.

Alec: [00:11:04] I always had this idea in my mind that if you weren't travelling you redeem points for things like a blender or a, you know, a clock radio, but they just massively overpriced them. But then I'll speak to Simon in the time before we were recording and he was saying that he got about $300 off an Apple Watch and he actually reckons the deals are pretty good. So I guess I have to go and look into it.

Queenie: [00:11:27] Yeah, Yeah, exactly. It all depends on what you want to use it for. Like essentially if your points are just sitting in your account and are not using them and you're just building up points that you're never going to use, like you might as well be using them for things that you're actually going to use, like an Apple Watch or Blender or something like that. So yeah, I think get a program that you're actually going to use. 

Alec: [00:11:49] Now I want to ask about shopping between credit cards, because I think people that really lean into this like points hacking movement, they're constantly looking for the next offer and constantly jumping between credit cards. Is that something you guys do? 

Pablo: [00:12:03] Yeah, we used to do that like when we started the credit card. So we started, I think with maybe a NZ credit card and we got the sign up bonus. But obviously, like you said, after one year when you pay again annual fee, you're not getting the bonus again. So what we did is we went to another credit card, maybe American Express, and then got the sign up bonus with that card. But then what you have to remember is that if you go, let's say you get an American Express and you get the bonus funds, and then one year later you get another American Express, you won't get the bonus fund because the season seizes. You have to cancel, I think, 18 months, the credit cards. So what you need to look at is maybe changing programs. So ANZ, maybe Westpac, Amex, and then maybe two years from now, then you're going to go back to NZ and then you need to calculate that when you start your card, when you can set it or close your account. And then when you start again, so you make sure that you're going to be eligible for the bonus funds. 

Alec: [00:13:04] So that's one good watch out that there's a time gap, a delay that you need to factor in. Are there any other watch outs if you're jumping between these cards, credit score? 

Pablo: [00:13:15] I think you want to make sure that this doesn't impact your credit score. You don't really have much visibility on how exactly it does affect it, but you need to make sure, like, I don't know, you can use Criminal Finder and check your credit score regularly to make sure that, you know, cancelling credit cards doesn't impact your credit score so that if you want to apply for a loan for a house or for a car, it doesn't impact the school. 

Alec: [00:13:41] Do your own research on this. But as a general rule, the way that banks or mortgage brokers calculate how much you can borrow for a mortgage is they'll take your income. Or if you're buying a house as a couple, you're combined income and basically time's up by five. But if you have a credit card, then they'll subtract the not how much debt you have on the credit card, but the credit limit from your income. You guys are both nodding. So, yeah, that's correct. 

Pablo: [00:14:05] So that's how it works. So we were actually doing that with the mortgage broker when we were looking at our next mortgage and we're actually looking at the software, how they use it, and they just ask, what's the limit on your credit card? If you have multiple what's on the limits and say it's 5006 thousand, they're going to do just 11,000, whether you pay every time on every month on time, because they can see that that's how much you can borrow and that's liability, I guess.

Alec: [00:14:34] So you got you're looking at mortgages. Does that tempt you to cancel your credit cards when you're going through that process? 

Pablo: [00:14:42] So, yeah, basically what we. It is liquid free credit cards, one to Amex and then one MasterCard. We can sell one of the Amex that we were not using as much because we had just mainly got that one for the bonus points. And then since it was reducing our borrowing capacity, we can set that one, which is pretty easy to do. You just call them are going to live shots and you can set it. 

Queenie: [00:15:05] And I would also say, well, for us, we usually don't have any more than two or three credit cards. So that's how we know, obviously, if you have five or six different credit cards, that would reduce your borrowing capacity quite a lot. But one or two or three, it hasn't really reduce our borrowing capacity as much. And we do try to keep a minimum credit limit. So even if Amex does want to call us up one day and hey, we can raise our credit limit, we always go, no, we like to keep it the way it is and keep it as low as possible. Something also to note about the credit score. It is really important to check that because if you do cancel a credit card, it can also affect your credit score, but it usually only does that in the short term. So your credit score might drop a little bit if you do cancel your credit card. So that is something to be mindful of. If you are looking to take on debt or go to a bank or a mortgage broker.

Alec: [00:16:01] And Pablo, you mentioned before, if people want to check their credit scores, find a and weigh money. Both let you do that. 

Pablo: [00:16:07] Yeah, you're just going to up and then basically I think you put your driving license and then they will do like the multiple credit score you can do. But they do the Experian and it gives you a score out of 100. And I think if you have above 800, then you kind of get it's pretty good school. 

Alec: [00:16:23] It's out of a thousand. 

Pablo: [00:16:24] Out of a thousand. 

Alec: [00:16:25] Sorry, it's confusing. And then one of the others, because there's three main ones out there and then one of them is two out of 1200 and the other does out of a thousand. Yeah. 

Pablo: [00:16:33] Just to confuse you. 

Alec: [00:16:34] Just to confuse you. Yeah. Yeah, yeah. And all the scores are different. 

Queenie: [00:16:38] Yeah. I would also say that if you are paying back your credit card in full on time every single month, it actually can positively affect your credit score. So even though Pablo and I have credit cards and we've had them for years, our credit score is always in the high range because we're always paying back everything that we owe, because that really shows that we are responsible with our credit cards and we're paying it back. Obviously, if you're not in a position to pay back your credit cards in full and on time, it can negatively impact your credit score. So it's something to be mindful of. If you do want to get into this world of rewards credit cards, just be mindful of paying it back in full and on time because that can positively affect it. But if you're not, be honest with yourself and maybe steer clear of it. 

Alec: [00:17:22] Yeah, I think that's an important one. Credit cards come with risk and I the reason I don't have any credit cards now is because when I was fresh out of uni working my first full time job, I was working at Coles sign up to a flybuys account, and then I signed up to the Coles credit card because it was like you got double flybuys points for being a team member and then you got double again for having the Coles credit card. And so I was like, Hell yeah, four times flybuys points. But then I started getting in a bad habit of not paying my credit card debt every month, and then you get hit with 20% interest. And very quickly I was like, This is not worth it for me. 

Pablo: [00:17:59] Yeah, and they confuse you, you know, because when you receive your statement at the end of the month, a minimum payment, it doesn't show you how much you need to pay. They just say minimum payment and you think, Oh, I just need to pay this and you've spent all that money and then you only need to pay $100. And they're like, Do I just pay this or do I pay the full set? You know, you don't know. And they don't explain it to you. They just send you the statement.

Alec: [00:18:21] Well, let us say very clearly, pay the full amount off. 

Pablo: [00:18:24] Yeah, exactly. But that's how they make money. So that's how sneaky they are. And even when we started using credit cards, I guess we spent more than we used to spend. So that's also something to consider is like, you know, you be like even if you are disciplined, you're going to most of the time that's what we did. They spend more money than we used to spend because we don't see the money coming out of our bank account until the end of the statement. And you need to remember that's actually money going out every time you pay, even if you pay at the end of the statement.

Alec: [00:18:54] You guys are building a business. Invest with 20, you've hired your first staff member. Things are going well. Do you think about credit cards and getting points and stuff from a business perspective as well? 

Queenie: [00:19:04] Yeah, it's honestly, I think especially since we do have a business, it has been really useful for that. So we have a business Amex card, which we use for all of our business expenses and we are able to get points for that and with a business credit card. So usually with personal, the most you could get is 100,000 points. But with some of the business cards, you can get 150,000 bonus points or even 180,000 bonus points. So yeah, it is really useful, and especially even from a business cash flow perspective, being able to pay your statements a little bit later as well, that also really helps. 

Alec: [00:19:38] Any additional watch outs if people are running a business and thinking about doing this. 

Pablo: [00:19:43] Seeing the business card they come with no limits is very unclear. So that's maybe something to watch out for. 

Alec: [00:19:51] Yeah, well, we currently don't have a credit card or an equity mate's credit card, and I don't think I want to trust Bryce with one, because who knows what we would have in the studio. 

Pablo: [00:20:01] There's always, like, one first, you know, like tapping the card. Yeah, I got this, like, massive TV screen for this. 

Alec: [00:20:09] Yeah, we need it for the studio. Yeah. I think to close out. You know, the question we wanted to ask here are rewards programs worth it? If I can just summarise. There is value to be had, especially if you're travelling. The key caveat being that value is very quickly eroded. If you start overspending on your credit card and end up paying the monthly interest rate as well as the annual fee. 

Pablo: [00:20:34] Yeah, exactly. First, like fund what program you want to fly with. And upon getting a credit card just to get points and not fly with the airline, that it's going to give you a plan. So find the right program in the right credit cards and then ensure that you're going to be eligible for the bonus points, because usually you have to spend maybe $3,000 in the first 90 days. So try to, you know, be eligible for those because that's the most important thing. And then after that, don't overspend. 

Queenie: [00:20:59] Yeah. I would also like to add, when you do have your points, so let's say you have 100,000 bonus points, it is important to treat them like a cash card because it is kind of like money. So you can waste points on flights that are really, really expensive. And this is something that I think a lot of beginner people don't know. So when you go on to the velocity or the Qantas websites and you search for points flights, you may not know that there are actually some really good deals when it comes to points for those flights. So a lot of people come to us and they say, Oh, it's so expensive to get flights at points. It costs like hundreds of thousands or millions of points. But what you need to look at is the classic reward seats or the reward seats, and that's when you can get the best value for points. So we were able, usually our flights cost, I don't know, maybe around 50,000 points for something like a really good long haul international flight. But if you're not booking the classic rewards since then, that same flight could cost you 200,000 points or 300,000 points if you don't know. So that's important. Just be savvy with it. 

Alec: [00:22:03] And where is that something that's labelled on the website? 

Queenie: [00:22:06] Yeah, you usually have to be pretty flexible with your dates and have a look in advance like a couple of months in advance. Click around on different days and then see how much it costs for those flights with points on different days. Because you can save so many points just by doing that. 

Alec: [00:22:22] You guys were saying that you've booked some America flights and you paid like $6 or something. 

Queenie: [00:22:26] Yeah, crazy. Yeah, it costs because we have points. We were able to get some flights for like $6 that would have costed us 250 or $500. We're able to fly really comfortably like business class, premium economy. And yeah, our flights usually only cost us maybe $100 or $200 for like 14 hour flights. So it's pretty amazing when you do them well, it can save you quite a lot of money. But there are obviously risks. And yeah, it's important to note way up, way up the pros and cons and see if it's right for you. 

Alec: [00:22:59] So as we close out this episode, my big action, I'm not going to sign up for a credit card. I'm just going to start by actually signing up to the rewards programs with Coles and Woolies. Given that I'm already spending money there and then maybe credit cards in my future, but you might have to come back on and convince me a little bit more before then. Quennie, Pablo, thanks for joining me. If people want to follow your journey, consume more of your content, watch that ice cream video, which I highly recommend. Where are the best places to go?

Queenie: [00:23:27] Where on pretty much all of the platforms say Instagram, Tik Tok, YouTube. And we also have a podcast just launched, both of us, Pablo and Queenie. So yes, you can check us out there. Anything else to add, Pablo? 

Pablo: [00:23:39] Yes, we are everywhere. Everywhere. You'll be there. 

Alec: [00:23:42] No, I love that. All right, guys. Well, thanks for joining me and we'll pick it up next week. 

Pablo: [00:23:47] Thanks for having us. 

Queenie: [00:23:47] Thank you.