Frequent flyer programs are booming in Australia. According to consumer watchdog, the ACCC, the Qantas Frequent Flyer program currently has just under 13 million members, which is the equivalent of over half of Australia’s population. Velocity Frequent Flyer, the second-most popular scheme, has about 9.8 million members.
But despite their popularity, loyalty programs, such as those offered by Qantas and Virgin, are not without their critics. For example, they recently came under fire from the ACCC who warned that consumers have little control over how their personal information and data can be used. It called for a raft of changes to how these programs work and are regulated, such as improving consumer communication and tightening privacy laws.
That said, if you are careful about how you use it, a frequent flyer program may offer benefits you otherwise wouldn’t have access to. If you are a member of a program already or are considering joining up, here are eight point hacks that could help you top up your balance.
1. Look for the right credit card
While it may seem obvious, one of the first steps is comparing credit cards and finding one that suits you.
Consider looking for a credit card with a high earn rate (the number of points earned per dollar spent) while factoring in any conditions or points caps that may apply. We’ve written about the cards in our database offering the highest earn rates for Qantas Points and Virgin Velocity Points.
Please note that as of 21 April 2020, the Velocity frequent flyer program has paused reward redemptions. However, Virgin has announced that members can redeem their points for certain domestic flights for travel from 1 September 2020. During the pause, customers with an eligible credit card may still be able to earn Velocity points, but will be unable to redeem their points for certain flights, goods and services. Please check with your credit card provider directly for details before making any decision relating to your card or points.
However, it’s also important to consider the card’s annual fee, as well as its purchase rate if you aren’t able to repay your balance in full each month.
“Most frequent flyer credit cards will have a high interest rate, so it’s important to repay your balance in full each month,” Canstar’s Ratings Manager, Joshua Sale, says.
According to Canstar Research, the average interest rate for a frequent flyer credit card is 20%, while the average annual fee is $193 (as at 13 December 2019). This is based on frequent flyer credit cards rated in Canstar’s October 2019 Star Ratings.
“If you’re likely to carry some debt on the card, you might want to consider looking at low rate credit card options instead, because any interest you accrue is likely to outstrip the benefits obtained from the card,” Mr Sale says.
2. Consider sign-up bonuses
Many providers offer a large number of sign-up bonus points for new credit cards. You can check out some of the latest offers in our credit card bonus offers article.
Be sure to check if any conditions apply – for example, some providers will require you to spend a certain amount of money within a set time period in order to get the bonus points. Also be wary of signing up for a credit card based purely on the sign-up offer. Consider the overall impact of a credit card on your finances before applying, taking into account factors such as its interest rate and annual fee, and of course whether a credit card is appropriate for your situation more generally.
In addition, as a general rule, try and avoid the trap of applying for lots of credit cards in order to get sign-up points. This will be recorded on your credit record and could have a negative impact on your credit score, which may make it more difficult to get credit in the future.
3. Could you use your card for some everyday expenses?
Consider using your credit card to pay for everyday or recurring expenses such as groceries, petrol, phone bills and rent (if you can). However, if you do this, make sure you can pay off your balance in full each month. For example, if you just made the minimum repayment on your credit card each month, you could be charged a large amount of interest on these expenses and this interest would continue to build up over time.
“Work out how much you spend in a typical month and find a card that maximises the frequent flyer points you will earn based on that spend level,” Mr Sale advises. “And be mindful of monthly spend caps.”
Remember, only ‘eligible’ purchases will earn you points. For example, generally you can’t earn points on cash advances, interest payments, banking fees and charges or gambling. Check the T&Cs with your credit card provider.
4. Shop at partner retailers
Qantas, Velocity and other frequent flyer programs allow you to earn points by shopping with their partner retailers or using partner services. For example, you can currently earn points on everything from shopping at department stores like David Jones and Myer through to ordering takeaway from delivery services like Deliveroo and Menulog.
You can also earn points through everyday spending at partner supermarkets and service stations. For example, Woolworths Rewards points can be converted into Qantas Points, while Coles’ flybuys points can be transferred to Velocity Points. You can also earn Qantas Points by filling up at a Caltex Woolworths, and Velocity Points for heading to a BP (although BP is set to change allegiances to Qantas in January 2020).
5. Pool points with a family member or partner
Most programs will allow you to transfer your points to a family member. However, there may be a cap on how many points you can transfer each year.
You could also have a joint credit card with a family member or partner or add them as an additional cardholder on your credit card. Bear in mind that as the primary cardholder, you will be responsible for the additional card and will need to pay for transactions made. You may also need to pay an annual fee for each additional cardholder.
6. Factor in any ‘free’ extras
It may be worth finding a card with additional perks or bonuses to help offset some or all of your annual fee, Mr Sale says.
“An example would be cards that may have an annual fee of around $200, but provide you with an annual free return domestic flight or a travel credit. This can be beneficial if you travel regularly,” he says.
Canstar’s credit card star ratings take into account the Net Flight Reward Return of frequent flyer cards. That is, the dollar value of the rewards while taking into account the annual fee, interest charged and free extras. According to Canstar Research, the average 5-Star Rated frequent flyer credit card with a $12,000 annual spend has a positive Net Reward Return of $158.72. The market average for the same type of card is -$43.55, meaning that many cardholders come out at a loss once fees, interest and extras are factored in. This is based on credit cards rated in Canstar’s October 2019 Frequent Flyer Credit Card Star Ratings.
7. Consider other points-earning products
Another way of earning points is to take out financial products that offer frequent flyer points. For example, you can earn Qantas Points on Qantas Insurance products such as health insurance, life insurance and travel insurance. The Qantas Wellbeing App also lets you earn points for everyday activities like going for a run or walking the dog. Qantas has also partnered with home loan providers such as Qudos Bank and Macquarie Bank, so you could earn Qantas Points for paying off your home loan.
You can similarly earn Velocity Points by taking out certain Virgin Money products, such as home insurance, car insurance, superannuation and home loans.
Of course, you shouldn’t decide to take out or switch financial products based on earning frequent flyer points alone. It’s more important to consider the price and features of each product and whether it will suit your circumstances and needs. Canstar’s Star Ratings may help you to determine if a product represent good value overall.
8. Spend your points wisely
When it comes time to redeem your hard-earned points, make sure you get the best value out of them. According to point-hacking site Point Hacks, you’ll get the best value out of your Qantas Points if you redeem them for Qantas flights or flights with partner airlines such as Qatar Airways and Japan Airlines. Likewise, Point Hacks says you’ll get the most bang for your buck on Velocity Points by cashing them in for flights with Virgin Australia or one of its partner airlines, such as Singapore Airlines and Etihad.
Even if you manage to pay for your whole flight with points, bear in mind that you’ll still need to fork out for fees such as government taxes, airport fees and other surcharges. For example, Qantas Frequent Flyer and Velocity Frequent Flyer have ‘carrier charges’ that must be paid in addition to taxes and fees.
“When you do decide to book your flight, get in early,” Mr Sale advises. “The good quality reward seat redemptions can fill up quickly.”
Pitfalls to watch out for in a frequent flyer credit card
If you decide to take out a frequent flyer card, it’s important to keep track of your spending and pay your credit card on time to avoid interest or late payment charges. Some other possible drawbacks to watch out for include:
While you’re busy building up those points, don’t forget that they may have an expiration date. Qantas Points currently expire if you don’t earn or spend any points for 18 months, while Velocity Points expire after 24 months of inactivity. Other programs may have ‘hard’ expiry dates, where points will expire after a set period of time regardless of your activity. For example, Cathay Pacific Asia Miles currently expire three years after you’ve earned them (however, this is set to change in January 2020).
Data and other concerns
It’s also important to be aware of the potential concerns associated with frequent flyer programs, such as how they use your personal data. These were recently brought into the spotlight after the ACCC released its final report on customer loyalty schemes.
Among other issues, the ACCC found that customers had limited control over how their personal information and data could be used by loyalty schemes, such as frequent flyer programs. It noted that these schemes could be used to ‘profile’ consumers and their purchasing behaviour and then sold to third parties. The ACCC called on companies offering loyalty schemes to improve their data practices and communication with consumers and to prohibit unfair contract terms and practices.
Main image source: Patty Chan (Shutterstock)