By Janine Cox, www.wealthwithin.com.au
Are you shopping for points or getting real value for money?
I opened my purse the other day and realised that it’s loaded with cards, credit cards, store cards, frequent flyer, fly buys – no wonder my bag feels like a dead weight! I know I am not alone in this, so how did we all end up with so many cards? Years ago retailers, airlines, credit card companies and anyone out there vying for your business decided loyalty cards would attract repeat business and provide them access to a lot of data about our shoppinghabits. Pretty simple really, we get points to redeem for flights and otherproducts, and they get our loyalty. So are we really getting a fair deal orgetting ripped off?
Try the ‘too many cards test’. Take a minute and have a look at the number of cards you are carrying around, and then think about how often you use particular cards and whether you have really cashed in on them. Chances are that more than 50% of your cards are in the, ‘I don’t use much’ category and as such are not really needed.
In my case, the card I use the most for expenses is a bank credit card. It’s a good recording tool as it helps me to keep track of spending each month and at the end of the year I use the accumulated points to buy vouchers for Christmas presents. So when I weigh up the cost versus thebenefits from this card it’s a win/win situation; the bank collect their transaction fees and financially I come out in front.
For some, a credit card is a loaded weapon not a tool, and unfortunately easy credit has seen the majority of people end up in a cycle of debt where they are stuck paying an interest bill on unpaid balances each month. This debt cycle ensures that the costs of having these cards, far outweighs any possible benefit.
Now you are probably thinking that you wouldn’t be without your cards as they offer you the chance to get free flights, buy a new microwave or get cheaper fuel. The thing you may not be aware of though is how millions of points are never redeemed because we let them expire. Here is a win for the retailer and a big loss for us.
One friend of mine chooses to shop only at the places where she gets frequent flyers points and monitors them every month when she pays her bills. This way she ensures that the family get their holidays at a significant discount each year, which is a win for her. Now before you decide whether or not this is a smart thing to do, I want to leave you something to think about.
Is there method in her madness or is this whole loyalty points marketing ploy a false economy? What if she is paying more for her everyday items each month by shopping this way rather than shopping around for the best deal? This would mean that the savings she thinks she is getting by being loyal aren’t really there, and over a year by paying more she could be losing a lot of money. So could it be that she may be better off without these cards?
The temptation for us all is there, as it is the excitement of getting something for free, or in other words, it is the perceived bargain that draws us in. We get sucked into thinking that because we have the card for a particular store we are VIP’s and that it’s in our best interests to shop there.
Now don’t get me wrong, my intention is not to spoil your shopping experience, but I do think you are wise to really check out whether you are getting value, or whether you are paying more and giving away your personal data so that these companies can send you offers on things to entice you into something else you may not need.
As a simple exercise, check out how many points you need to purchase something and then find out how much you could pay for it using cash at a store. Try this on a few items until you work out roughly how many points are needed for each dollar spent. Some items represent better value than others when redeeming points so look at that as well. I am sure you will be amazedlike I was that when paying with points it effectively meant paying top dollar for everything. So at least weigh up your options before you claim your rewards.
Remember these programs come with a loyalty card for good reason, and the reason is that the supplier wants to lock you into buying from them. They also know that if you have a loyalty card you will be less likely to check around to compare prices. Remember that no matter what you are buying, whether it is your weekly groceries, petrol for your car, or even an investment like a house or shares for your portfolio, you always make the real savings at the time you buy.