The trick with rewards credit cards is to understand that there’s no such thing as a free perk.
Even if you pay off your card on time, every time and pay no interest, you are probably paying a hefty annual fee, with Canstar.com.au data revealing the average annual fee on a rewards cards is $169.
But if the annual fee doesn’t hurt you, then a ridiculously high interest rate will.
According to Canstar, the average interest rate on rewards cards is 6.26 per cent more than the rate on cards without rewards.
Also read: 4 Costliest Credit Card Mistakes
With that in mind, it pays to know all the perks that may come with your credit card to ensure you’re making the most of them if you can.
Here are five perks that you may not know about:
1. Your 5-year-old throws his cricket ball and it accidentally hits your new smart TV
If you purchased that TV using your credit card you may be covered.
Here’s why: 75 per cent of rewards credit cards come with purchase protection insurance which provides cover against loss, theft or accidental damage for a certain period after you bought the item. Unless it’s jewellery, watches and fine arts where limits can apply, most cards cover the actual purchase price of the item.
Terms and conditions vary between cards and not all purchases are included. In general, you’ve got around 90 days from the date of purchase to claim and in some cases your cover extends to anyone who’s been given the goods purchased as a gift.
2. You’ve landed in Thailand but your luggage is nowhere to be seen and you’re now regretting the fact that you didn’t take out travel insurance
If you paid for your flights using your credit card then it’s worth checking the fine print, because it may offer complimentary travel insurance (well not really complimentary as you are paying for it through your annual fee).
Here’s why: Complimentary credit card travel insurance is generally considered a premium feature so you’ll more than likely find it on premium cards. Typically you’ll be covered for hospital and doctor expenses overseas, lost luggage or damaged property cover and cancellation fee cover if you have to unexpectedly cancel your trip due to events outside your control.
Make sure you read the fine print though as exclusions and an excess may apply. For example, credit card travel insurance policies often exclude activities such as skiing or water sports or other “adventure” activities from cover.
Another perk of having a credit card on holidays is that it’s also more convenient for you for the hotel to place an authorisation hold on your credit card rather than your debit card as it would reduce your actual balance – meaning you’ll have less available cash.
3. You’ve got so many bills coming out of your transaction account that you often miss payments and get charged overdrawn fees
If you have trouble remembering when your bills are due or you’re never sure if there are enough funds in your bank account then setting up automatic payments through your credit card could not only be convenient but could get you a discount with some providers.
Here’s why: Some utilities providers offer discounts if you set up an automatic payment and pay on time and the potential savings can be significant. By setting up automatic payments for all your bills on one credit card you’ll only ever have to worry about one date – the date your credit card bill is due.
It can also be an easy way to build up rewards but watch out for any fees and charges that apply for paying bills using your credit card. Also, be sure to check whether the bill is being treated as a purchase or cash advance. If it’s a cash advance typically no interest-free period will apply.
While you’ll only have one date to remember – your credit card payment due date – it’s important that you don’t miss it. If you can’t pay your credit card off in full by that date then this option is not for you as you’ll end up paying interest.
4. You just bought the wireless headphones only to find that another store down the road is selling it at a much lower price
If you bought those headphones on your credit card then you should check if you have Price Protection Insurance.
Here’s why: Also called a Guaranteed Pricing Scheme or sometimes Shoppers Cover, Price Protection Insurance is a little-known credit card feature that could help cover that annoying difference.
Now before you get excited the conditions can be strict and also vary between providers, so make sure you read the fine print. Some stipulate that you had to have bought the item from a from a bricks-and-mortar store not an online store. Or they might specify that the two stores need to be within a certain distance from one another (often 25km) and that there’s a price difference of at least $75.
5. You are good with money and you want to pay the least amount of interest on your home loan
If you have a home loan with an offset account, it may be worthwhile directing your salary to your offset account and paying everyday expenses on your credit card.
Here’s why: The idea here is that you live off your credit card during the interest-free period and put your income to work reducing your interest expense. Assuming you repay your credit card debt in full each month, by having additional funds sitting in your offset account for a longer period of time you’re going to reduce the amount of interest owing on your home loan.
You do need to have the right credit card and this strategy does require an immense amount of discipline to ensure you only put on the card what you can afford to repay each month.
Canstar.com.au’s Editor-at-Large, Effie Zahos, has more than two decades of experience helping Aussies make the most of their money. Passionate about financial literacy, her goal is to help consumers gain a better understanding of their finances. Follow Effie on Facebook, Twitter, LinkedIn and Instagram @effiezahos.
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