Money: Would you credit it?

By Ann Cunninghame

What began as an airline move to fill empty seats has turned into a marketing frenzy as the credit and charge card issuers evolve their own schemes.

The advent of the Qantas Telstra ANZ Visa (QTAV) card and GlobalPlus (BNZ MasterCard, Telecom and Air New Zealand) here just over a year ago cemented some powerful alliances.

Others have jumped in with their own versions and the likes of Fly Buys have already shaped the way we spend.

Noel Rugg, general manager of AA Developments, has been involved with most of the loyalty programmes operating in the South Pacific.

As vice-president Asia Pacific for the Carlson companies, he set up some of the airline schemes among others, and he admits he cannot keep up with the details of the different programmes.

So did other senior people interviewed, leaving little hope for the rest of us.

One of the newest programmes is linked to the American Express blue credit card, launched here last month.

The public affairs consultant for American Express, Mark Reynolds, says local market research turned up a lot of people who just wanted the cash, thanks very much. The result was MoneyBack - a refund of up to 1 per cent of spending.

And there is the rub. You can knock yourself out shopping at chosen retailers and warp your credit or charge card through frequent use only to find that, as Mr Rugg puts it, "instead of the trip to Fiji with swaying palms, you've got enough points for three golf balls and a coffee mug."

He says most programmes pay an average of about 1 per cent only back to the customer and can spend the same again on marketing and administration. He claims AA Rewards averages a 2 per cent return.

Mr Rugg also says that, worldwide, most programmes pay out on only 30 to 35 per cent of all the points they issue. This can happen by making it tough to get enough points for a reward and by sticking an expiry date on them.

Trying to find a good deal is complicated by the different ways the programmes operate and by people's individual spending patterns. But there are some features to look for:

* How many points your spending earns you, what they're worth and what you can get for them. For example, air travel, accommodation, shopping vouchers or discounts. Check the ratio at which reward points convert to airline points.

* Any minimums before you qualify for points or can buy anything. Any expiry dates - usually three or five years, but Diners Club and American Express points do not expire. Can you top up with cash to get rewards?

* If the programme is linked to a credit or charge card, check the card's terms and conditions, annual card fees and programme fees. For example, WestpacTrust charges $50 a year for its Gold Visa and MasterCard plus an extra $30 a year to join its hotpoints programme. Find out what interest is charged on outstanding balances. Standard credit card rates are averaging 18.6 per cent, show Reserve Bank figures, but the rate for the new American Express blue card is 16.99 per cent.

* Are the retailers associated with the programme offering good value and would you have bought the goods or services anyway? Going to a more expensive store may not add up in the long run.

While spreading yourself thin on different programmes does not make sense, some forethought on combining them can boost your totals. For example, you might shop somewhere linked with Fly Buys or AA Rewards and pay with your credit or charge card to get points on those schemes as well.

Where your totals can crack along, too, is with bonus points.

Samantha Shaw, ANZ's national manager for customer relations and public affairs, says 24 per cent of all points earned by QTAV cardholders are bonus points earned for shopping at specific retailers, on top of points awarded for every dollar of spending. She claims that cardholders can "fly much faster" than with other schemes.

"When you look at base expenditure, QTAV, GlobalPlus and ASB True Rewards are very similar. For a flight Auckland-Sydney return, you need to spend about $30,000 to get enough points. It's slightly higher with ASB than the other two, but only by about 10 per cent."

But she says no other scheme has bonus reward points and QTAV cardholders can earn up to six points a dollar by shopping at the scheme's bonus partners. They now earn double points on all overseas purchases plus, if they are a Qantas Frequent Flyer member, shopping somewhere that is linked with both the QTAV and Qantas schemes gives them extra Qantas points as well.

Taking a different tack, if you have a GlobalPlus card you have the option of turning Fly Buys and Telecom Talking Points into Air New Zealand air points.

While you can argue the merits of different schemes, recent trends have been:

* More achievable rewards. Fly Buys, for example, now offers some merchandise along with air flights and accommodation.

* The chance to "top up" with cash to get rewards. AA will discount your annual membership if you do not have enough points for a voucher.

* Simpler schemes. With WestpacTrust's hotpoints, you get a voucher or money off your annual card fee. National Bank's Thoroughbred programme automatically credits any savings to your credit card account.

* Better deals. For example, American Express now has a bonus point programme running while GlobalPlus is offering 10,000 extra points for taking out a mortgage with the Bank of New Zealand.

Ahead, even more competition is on the cards (and more spending on cards to boot).

Mr Rugg says the Australian experience is one to watch. Credit card spending there over Christmas ballooned out at 42 per cent higher than the previous Christmas as consumers switched from cash, cheque and eftpos to cards with loyalty programmes. He says that is causing a scramble by other card issuers to lure back business.

AA itself will launch its One Day Soon rewards card in a few months' time, so people can collect points at AA partners to redeem if they ever join the association.

The trend to simpler schemes is also likely to continue. Barry Girvan, senior manager for cards at the National Bank, says cash-back programmes are popular in North America and Britain. The bank's research found that New Zealanders were being turned off by complex schemes with unattainable rewards.

Thoroughbred users receive a 0.5 per cent refund on their annual spending as long as it is more than $4000. "But I believe we will need to review that percentage," says Mr Girvan.

"The competition is getting sharper all the time."

* Ann Cunninghame is a freelance financial journalist, better off by two magazine subscriptions, a return flight Auckland-Wellington, a family pass to the International Antarctic Centre and a bottle of perfume. Her latest credit card donates money to a university scholarship fund.