Don’t want to use points cards for travel rewards? Consider cashback instead

Credit Cards and money on back pocket
GUIDE: Using Points
TIME TO READ: 5 minutes
POSTED: January 15, 2020
UPDATED: January 15, 2020
LOYALTY PROGRAMS: American Express Membership Rewards

We talk a lot on Point Hacks about using your reward points for travel, particularly premium travel experiences. This is, in our opinion, the best value method of using your points.

However, there are some people who aren’t chasing travel experiences, and simply want to absolutely get the most return from their spend in cash.

If that’s you, using your reward points for cash back (or cash equivalents, like vouchers) can make sense as a way to stretch the budget.

What are the considerations if using a points credit card for cashback reward goals?

One of the key issues to keep in mind when using a credit card to earn points for cashback is that most points earning cards come with an annual fee. If you’re using your points for premium travel as we recommend, you can usually make this fee worthwhile for the value of the travel you’re planning.

When using your points for cash back, you’re already behind until you earn enough points to cover the value of the annual fee, unless you have a way to offset this. For the most part, this means using a low earning annual fee free card (which I’ll cover a few of).

If you’re going to use a credit card for cash back, remember to make sure you pay the full closing balance on your statement by the due date. If you don’t you’ll get interest charges which are going to quickly outweigh any cashback benefit.

How to earn up to 1.5% cash back from the American Express Platinum Edge Card

An American Express card that is worth a look if you are interested in earning cashback on spend is the Platinum Edge.

This card also earns into the Membership Rewards programme.

It has a tiered points earn scheme as follows:

  • 3 points per dollar on supermarkets (1.5% cashback)
  • 2 points per dollar at major petrol stations (1.0% cashback)
  • 1 point per dollar everywhere else (0.5% cashback)

If your household spend on supermarkets and fuel is higher than your spending everywhere else, this would be an excellent card to have to multiply your points earning capability.

The 0.5 points category hurts your ability to earn points through your big bills though – it’s a trade-off, but not completely unreasonable, when you consider the lower annual fee and the ability to extend your supermarket earn rate through gift card purchases.

This card comes with a $149 annual fee, but this is offset by:

You turn your points into cashback by selecting a transaction to “pay for” using your points – the easiest way is using the mobile app.

Every so often there are promotions that increase the value of points for certain types of purchases – for example I’ve previously seen an offer during December that offered increased credit value for the same number of points.

This, of course, doesn’t include the cashback you get from other Amex Offers, which can be quite lucrative if you can use them for spending you’d otherwise make.

How to earn 1.00% cash back from the American Express Platinum Charge Card

The American Express Platinum Charge Card earns you two Membership Rewards points per dollar you spend on all spend.

Given the transfer rate of 1,000 points = $5 in cashback, this means a Membership Rewards point is worth 0.5c in cashback.

Putting this into real terms, it means that when converted to a statement credit, you get a rate of 1.00% cashback on this account.

The card does have a $1,250 annual fee, which is quite steep, and possibly out of reach of some. However the card also comes with:

  • A $200 travel credit to use every year
  • 80,000 Membership Rewards points for new cardholders, which is instantly worth $400 in cashback
  • A free one-night stay at an Accor property in Asia Pacific, which can be worth at least $400 depending on where you use it

All of this combined helps to offset most of the annual fee, at least in the first year.

The travel credit can be used for anything you can book on the Amex Travel website, not just the high-end travel we talk about on here. Amex Travel has the same range as most online travel agents so you could just as easily book a business class flight or a five star hotel in Hong Kong, New York or Tokyo; or a Bach for a family holiday somewhere in the Coromandel.

Given most people I know would go on a holiday somewhere at least once a year, and the wide range of redemptions options on the Amex Travel site, I would think that almost everyone would use this and in doing so offset the annual fee.

Other (non-Amex) cards

While I find that the vast majority of my spending (in a dollar figure at least) is with merchants who accept American Express cards, there are some places that don’t. This is where you need a backup Visa or Mastercard.

Here are some options in this space:

  • The Westpac hotpoints card range allow you to convert your points into ‘SpendBack’ credit on your account. The credit can be used toward qualifying purchases made in the last 3 months, where 2,200 points will equal $10 back onto your account. An earn rate of 3 hotpoints per dollar on the Westpac hotpoints World Mastercard equates to a cashback of ~1.40%.
  • The BNZ Advantage cards give you the option of earning either Fly Buys points, or ‘Cash Reward’ credits to your statement. The BNZ Advantage Platinum offers the highest cashback rate of 1.10%.
  • ANZ offer pure cashback cards, but they have caps and minimum spend thresholds. For example, the ANZ CashBack Visa Platinum only allows you to earn 1.00% cashback once you spend over $10,000.

There are obviously a wide range of other cards—including the obvious Airpoints ones—that allow you to earn ‘effective cashback’. This is where you have a points currency that is tied to the New Zealand Dollar, and can be redeemed on a wide range of products in stores, gift cards, or on flights.

However these card rewards programmes still require you to actively look for ways to ‘spend’ their points on products or services. So if you’re looking for dollars back on your card statement irrespective of where you spend, the other options presented in this guide are the way to go.

Debit and prepaid cards

These cards let you spend your own money, and earn Airpoints Dollars, which are almost as good as cash in New Zealand. There’s no line of credit (so no danger of missing a payment, and no credit check), but it means you lose any benefit from interest free days between making a purchase and paying your statement.

Which of these you choose will likely depend on whether you want a savings account that you can direct your salary to, or a card that you need to manually reload (but get a slightly better earn rate).

Summing up

American Express with the Platinum or Platinum Edge cards offer a compelling option for cash back on everyday spending, particularly when you can earn this on every purchase and on most of your household bills too. It also gives you the flexibility to use your points in other ways.

There are also good options for Visa and Mastercard cards, which is useful for picking up cash back on spend where Amex isn’t accepted.

Don’t forget though – cashback is a usually a very poor value way of using your points. We think we can do much better by planning travel redemptions using rewards points – but this does take more time, effort and headspace to accomplish, and isn’t for everyone.

Don’t want to use points cards for travel rewards? Consider cashback instead was last modified: January 15th, 2020 by Daniel Kinnoch