Well maybe, but sometimes the cost of accruing those rewards can outweigh the cost of using a credit card rather than, for instance, a debit card or cash. A case in point is the good old credit card surcharge situation.
It costs businesses money to accept credit card payments and they are able to pass these costs on their customers in the form of a credit card surcharge. These surcharges can vary significantly and some businesses, particularly taxis and airlines, have been accused of levying surcharges far in excess of their costs.
Back in March 2013, the Reserve Bank of Australia gave the go ahead to card providers (think American Express, Diners Club, MasterCard and Visa) to limit surcharges and address cases where merchants are clearly surcharging at a higher level than is justified. While average surcharge rates have apparently fallen over the two years since, they can still be oppressively high. Not that high surcharges stop all consumers: according to a RBA discussion paper, around 5% of us are willing to pay more than a 4% surcharge. Crazy!
So – is it worth paying a credit card surcharge to boost your rewards points balance? Or should you reach for cold, hard cash instead?
Of the cash rewards programs researched by Canstar in the most recent Credit Card Rewards Star Ratings Report, none had a return (before annual fees) greater than around 1.5% on spend through the card. Most returned considerably less than this – in the range of 0.5-1%. Credit card surcharges on the other hand typically in the range 1-3% depending on the card scheme. Whilst there might be a few cards whose rate of return will outpace that surcharge, the vast majority of them won’t. You will almost always be better off using another payment method rather than chasing rewards points.
Having said that, there are occasions where it makes sense to pay a credit card surcharge – for example, some credit cards come with an extended warranty cover or merchandise protection insurance.
Even if you’re not looking to change your rewards card, it?s always interesting to see how your card stacks up. The market is constantly changing and you need to be sure you’re not being left behind. Check out our latest report and compare credit card rewards here.
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