Frequent Flyer Credit Cards

Most Australian banks and financial institutions now offer credit cards linked to frequent flyer programs. The idea of free flights may seem great, but are these programs really worth it?

Credit card reward programs have been popular in Australia for many years. Some cards have their own rewards programs, whilst others are linked to frequent flyer accounts with airlines such as Qantas and Virgin Australia. There are even cards available linked to some overseas airlines.

The attraction of frequent flyer credit cards is that you can earn free flights just for spending the money on your credit card that you probably would have spent anyway.

For a couple who put all of their monthly expenses on their credit card, it is not unreasonable to expect at least a couple of free flights per year, depending on your monthly spend of course.

How they work

Frequent flyer credit cards are fairly straight forward in their operation. For each dollar you spend you will be rewarded with a number of points towards your selected frequent flyer program. Two of the most popular programs are available with Qantas Frequent Flyer credit cards and Virgin's Velocity Frequent Flyer cards.

In order to make the most of such cards you must be a member of the frequent flyer program, and of course you need to ensure your card is linked to your membership correctly. Generally your points balance will be transferred from your credit card to your frequent flyer account at the end of each monthly billing cycle.

What to look out for

The first thing to consider when choosing a frequent flyer credit card is the number of dollars you must spend for each point. Many cards offer one point per dollar spent, however there are an increasing number of cards only offering one point for every two dollars spent.

Clearly you would want a card which offers the maximum points for the money spent, however you also need to take into account the fees payable, as well as the interest charged if you are carrying a balance on your card from month to month. There’s no point chasing extra points if the benefit is offset by higher costs.

Many cards have limits on the number of points you can earn per month or per year. If you are a high volume credit card user, this is something you definitely want to look out for. There are frequent flyer credit cards available with unlimited points, however generally these attract higher monthly or annual fees.

A trap that some people fall into is to spend more on their credit card just to obtain more points. If you are spending extra on your credit card and are not clearing the balance, you will be charged interest on that amount, which will likely offset any benefit from the rewards points.

Is a frequent flyer card right for you?

When determining whether or not a frequent flyer credit card is right for you, you need to assess whether or not your monthly spend is high enough to gain any real value from the program.

Credit cards earning frequent flyer points will generally attract higher fees, and if your monthly credit card spend is low you might not earn enough points to make the high fee worthwhile.

If this is the case for you, you may be better off with a low rate credit card rather than a fully featured card linked to a frequent flyer program, or any rewards program for that matter. For high volume credit card users who clear their balances each month, and especially business credit card users, the right frequent flyer credit card can certainly be of benefit.

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