Play your (credit) cards right
The easiest way to kickstart things is by choosing a credit card that can earn you frequent flyer points on every dollar you spend, and then using that card as often as possible. Don’t change your habits to buy more expensive items just for the points, but make earning points a part of your regular shopping and bill-paying, from big ticket items such as the kids’ school fees to groceries, petrol and your morning coffee. It all adds up.
Get to know the “virtual malls” of Qantas and Virgin Australia – the former in the Qantas Mall, the latter is the Velocity eStore. These let you shop with traditional retailers like David Jones through to online giants such as eBay and Net-a-Porter, earning as many as ten points per dollar simply by entering your frequent flyer number before you buy.
If you run a business, paying all your bills and expenses with the right credit card can unleash a tsunami of points. Also look at programs such as Qantas Business Rewards that let your company earn its own serve of points (and qualify for flight discounts) whenever you or your employees fly.
Many credit cards will entice you with a substantial sign-up bonus, typically as high as 80,000 to 120,000. All you need do to qualify is to spend $3000 in 90 days, which is pretty easy these days. Don’t do this too often though as multiple applications for credit can damage your credit rating under the new credit reporting system. And don’t forget to close down old cards that are longer needed.
The golden rule is to pay off your card balance in full at the end of each billing cycle. The moment you carry any balance across to the new month you’re hit with interest fees averaging 20 per cent, which immediately makes those points far more expensive to earn.
Turning points into flights
The second part of being point-savvy is to be strategic when it comes to spending those points so that they deliver maximum value. Don’t waste them at the airline’s online store, which lets you buy household items or gift cards with your points. This delivers one of the lowest yields.
For example, Qantas will happily sell you a mid-range Nespresso coffee machine for some 70,000 points, but the same machine sells at Harvey Norman and the like for around $270. Do the maths: this pegs the value of your Qantas points at just under 0.4c per point.
Conversely, using your points to book a flight sees their purchasing power soar – especially in business class. A Qantas economy class flight from Sydney or Melbourne to Hong Kong in mid-October will set you back 28,000 points, but as the cash price of that same ticket is as little as $563 this comes out at being worth 2c per point. You’ve just made your points worth five times as much as if you’d bought that Nespresso machine!
However, it happens that the same trip in business class requires barely twice as many points as in economy – even though the retail value can be more than five times higher. That same Qantas flight from Sydney or Melbourne to Hong Kong in mid-October, but this time with you happily ensconced in business class, can be yours for just 60,000 points while the cash price starts at $3,381.This gives your points a value of 5.6c each, or almost three times their value if you’d flown economy.
While taxes and surcharges are levied on points-based bookings, they’re almost identical between economy class ($166 on the route quoted above) and business class ($189). In fact, the economy class fees and taxes are almost a third of the cash economy fare, which makes paying with points even worse value.
With the right strategy in place and right cards in your wallet, it’s entirely feasible that you’ll never have to fly economy again.
David Flynn is the editor of Australian Business Traveller , an independent website for business travellers and frequent flyers.
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