Credit Cards and Frequent Flyer Points… are they worth it?
Frequent Flyer points, particularly in Australia, is almost a second currency to the AUD. With so many credit cards in the market place all with the flashy programs, it is easy to quickly feel confused.
Over the years, we have found some people are really proficient with a credit card in their day-to-day handling. Each month they pay it off and pay little or no interest, yet reap the rewards which might be on offer. Others however, find it a tread mill almost impossible to get off! These people spend most of their life around the credit limit (rather than at a zero balance) and as such feel it is more a strangle hold on their cash flow rather than a positive experience.
So how do you know which approach is right for you? And what are the trends we are seeing in this area?
Fortunately, if you do have a lover affair with the Frequent Flyer programs and linked programs there now seems to be a new way forwards:
Those that can handle credit – the traditional credit card path is remains unchanged and the programs are growing in competition.
Those that have trouble with credit – The new areas which is of particular interest is the debit cards which are also linked to frequent flyer programs. The biggest benefit for these areas is that they offer points but don’t offer a credit limit, so you are just spending your own cash. This is great in that you don’t have the temptation to spend money that you don’t have available. We are seeing a lot of the local airlines and a couple of the banks are now offering these programs so it’s worth a closer look if you fit into this segment. They may not give as much “bang for your buck” in frequent flyer points, but they do come without the headache of the high interest cost bills!
The important thing when considering a program is understanding your approach to money and saving. Are you naturally a saver….. or more of a spender?
Sometimes these points of consideration can be a little confronting, but the easiest way is to look at your bank account and see each month if it is rising or at $0. Once you have a clear understanding of the nature of your spending then you can build around strategies that set yourself up for success.
For example, if you are a spender, it would be important to establish a forced saving plan that automatically occurs on a regular basis, that builds wealth over time.
Whilst we are not a credit card experts, there are some really great people out there that specialise in this niche field and we encourage you to investigate it. What we can help you with however, is looking at your spending patterns and then building a wealth creation strategy that sets you up to build wealth rather than puts you in the back seat.
Like all great ideas however, it is important to seek professional guidance and we would recommend AJ Financial Planning.