Rewards Schemes: Worth it?

$150 cash back sounds pretty great right? In fact it probably sounds too good to be true; surely they don’t mean they will literally give you $150 cash in exchange for buying this one fridge with a specific credit card…

Well it might indeed be too good, even though it is true.

Cash back, along with other credit card based rewards systems (flybuys etc) often have hidden pitfalls that you might not be comfortable with, and other factors that are down right hazardous to your budget.

Behaviour tracking

One thing that every single “loyalty” program does, what you might even call the very reason they exist, is to track your behaviour as a consumer. You’ve probably wondered at some point how stores can afford to keep offering free items, or discounted services to people who use their loyalty cards, but then thought “it encourages repeat business, so overall it works out for both of us” and never bothered yourself with it again.

Well that’s true, but it’s not the entire story…

Loyalty programs (yes, every single one) actually use your purchasing information, tied in with the personal demographic info that you filled out to register the card, to collate consumer data into specific profiles for each customer. Using that data they can predict your actions, entice you back with specifically targeted rewards, even tailor it’s marketing specifically to you as an individual. American companies have even used this data to know when someone is pregnant, even before they know themselves!

Rates and Fees

If you have a flybuys card, you were probably told when you signed up you could link up your credit card and effectively double your points. Or if you have a credit card, chances are flybuys was mentioned as an incentive to choose a certain one when signing up.

Well this might seem like simply maximising your benefit with no harm to you, but you have to consider how this could affect your spending habits: knowing you get potential rewards if you use your credit card, will that encourage you to use it more? If it does, that means you’re paying more in fees and rates on your credit card than you otherwise would, costing you potentially hundreds of dollars in the long run, only to earn you rewards that are worth maybe a few dozen dollars.

Points Expiration

Almost all rewards points expire, which means if you don’t use them before they’re gone there’s no benefit, and there’s often a lower threshold you need to reach before you can spend those points.

So, if you spend too slowly to accrue enough points within the time limit, then you will never get any benefit from the rewards scheme.