Most banks offer you some sort of rewards programme. Many people sign up for a programme and either forget about it or do not take full advantage of its benefits, because they do not fully understand how it works. How do you know what value you are actually deriving from your rewards programme?
Independent consultant Colin Habberton recently assessed the results of a survey, conducted by eBucks, of some of the more popular loyalty programmes offered by financial services companies.
The programmes that were analysed included Absa Rewards, American Express (Amex) Membership Rewards, Diners Club, eBucks from First National Bank (FNB), Investec Dividends and Nedbank's Greenbacks.
The research was conducted between March and June this year. Some of the things the survey looked at were the transparency of the programmes, their structure, their discount and rewards partners, and what they cost.
The research broke down each reward system into a rand amount (for example, one Greenback equals 2.5 cents), but with many of the programmes this was an approximate amount, as the programmes are not always transparent about what their points are worth.
The study then evaluated how much money you would have to spend to cover the membership or linkage fees, and the amount you would have to spend to earn points worth R100. (You may be charged a linkage fee to associate your credit card with a loyalty programme so that you can earn points when you pay for purchases with your credit card.)
"Loyalty programmes have the power to offer you value in tight economic times. Each loyalty scheme included in the study has such value, some more than others," Habberton says.
eBucks
emerged as the rewards programme with the lowest spending in rands - R590 - required to receive rewards currency worth R100. The next best programme was Absa Rewards, at R1 750. Nedbank's Greenbacks required the most spend at R16 500.
The eBucks programme is available to anyone, although it has maximum benefit for FNB clients. You can use eBucks to make online purchases, and you can top up your eBucks payments with rands.
eBucks members can use their eBucks to pay for fuel at participating Engen garages. As this benefit is still quite new, you should first check whether a garage accepts eBucks. If it does, you can use your eBucks card and PIN to pay for the transaction. However, you will have to carry part of the cost of the transaction fee, which will cost you R10 or 100 eBucks.
eBucks never expire, and you can transfer your eBucks to another eBucks member at no cost.
Qualifying members receive discounts from retail partners - for example, up to 50 percent off Ster-Kinekor movie tickets, up to 20 percent off kulula.com flights and up to 15 percent off Woolworths gift cards.
Absa Rewards
, which is exclusive to Absa clients, is a relaunch of an old Absa loyalty programme. "The membership fee is higher than previously and it makes this one of the more expensive rewards programmes offered by the big four banks in terms of linkage or membership fees," Habberton says.
He says the inability to earn Rewards for normal expenditure on your bank card seems inconsistent with the fact that this product is offered by a bank.
"The actual ability to earn Rewards could be considered limited, because the earn partners in the programme may not cover all retailers that the general public regularly uses," he says.
Habberton says the programme's use of the words "cash back" could be misleading, as your Rewards go into a non-interest-bearing Rewards account, and this money can be paid out only once you have accrued Rewards worth R50.
The Diners Club
programme will suit you if you want to maximise your frequent-flyer miles on South African Airways and British Airways.
However, Habberton says that both airlines' frequent-flyer programmes seem to be beset by complaints over the unavailability of seats when members want to redeem their miles. Another drawback is that not all retailers accept the Diners Club card.
To participate in the Investec Dividends
programme, you have to be an Investec Private Bank customer, which means you must be either a university graduate or a "high earner".
Unlike other rewards programmes, Investec Dividends has no membership or linkage fees.
The Amex Membership Rewards
programme has a simple structure, but you can redeem your Rewards only after you have accrued 3 000 points, which means you will have to spend R15 000. Another drawback is that Amex credit cards are not accepted at all stores.
A positive feature is that your points do not expire, so even if you are a slow earner, you can eventually accumulate sufficient points.
Habberton says Nedbank's Greenbacks
programme is very similar to the one offered by Amex but lacks variety in terms of earning options when compared with other loyalty programmes.
Consumer Protection Act will affect loyalty schemes
Loyalty programmes will have to be overhauled ahead of the Consumer Protection Act (CPA), which will come into force in August next year.
Ina Meiring, a director at Werksman Advisory Services, says key aspects of existing programmes will need to comply with the Act by August next year.
For example, she says, loyalty programmes commonly impose limitations on when, how and what goods and services you can exchange for loyalty credits. Typically, goods or services, such as flights are 'subject to availability'.
"Under the CPA, companies have a duty to ensure that the goods or services offered to you in loyalty programmes are in stock. Companies will in future be allowed to impose restrictions on availability only if they follow the correct procedure," Meiring says. This will entail giving you advance written warning that a product or service will not be available for a certain period, and that period may not be longer than 90 days.
Loyalty programmes will also be prevented from imposing any charge for administering, processing or handling a loyalty programme transaction if the consumer is required to pay a periodic fee to remain a member of the programme.
What six major loyalty programmes offer and how much you have to spend to get something back
Absa rewards
Rand value:
One Absa Reward = R1
How to earn rewards:
You earn cash back in the form of Absa Rewards when you use your Absa credit card at selected retail partners. Each partner has a different earn rate. The partners include kulula.com, Protea, Mugg & Bean, Coricraft, Run/Walk for Life, Camelot Spa, Galaxy, Video Town, Intec, Damelin and Touchline Media.
What you can use it for:
You receive discounts or special deals on selected items from partners, including Checkers, Ramsay Media, Global Wrapps, British Airways and Mangwanani Spa. You can use your Rewards for travel, shopping vouchers, airtime or charity donations, or you can receive a cash payout in your cheque or savings account.
Annual cost:
R234, excluding credit card fees.
Spend required to earn points worth R100:
R1 750
Amex membership rewards
Rand value:
One Membership Reward = 3.4 cents
How to earn rewards:
You earn Membership Rewards when you make purchases using your Amex credit card at a rate of one Membership Reward for every R5 you spend.
What you can use it for:
You can use your Membership Rewards for travel, shopping vouchers, charity donations, to pay your bank fees and to buy foreign exchange.
Annual cost:
R169, excluding card fees.
Spend required to earn points worth R100:
R14 705
Diners Club
Rand value:
One mile = 11 cents
How to earn rewards:
You earn either British Airways miles or Voyager miles when you use your Diners Club credit card.
What you can use it for:
You can accumulate miles to qualify for free flights or upgrades.
Annual cost:
R160, excluding card fees.
Spend required to earn points worth R100:
R6 818
eBucks
Rand value:
One eBuck = 10 cents
How to earn rewards:
You earn eBucks at a rate of up to eB1.25 for every R10 you spend when you use your First National Bank (FNB) cheque card or credit card. You also earn eBucks when you pay for purchases at retail partners, such as Makro or Incredible Connection. For example, if you make a purchase at Makro and swipe your eBucks card, you will earn eBucks for the transaction even if you don't pay with an FNB card. If you use your FNB cheque or credit card to pay for a purchase of, say, R500 at Incredible Connection, you will earn eB50 for using your FNB card and another eB50 because Incredible Connection is a spend partner on the eBucks programme.
What you can use it for:
You can use your eBucks at selected retail partners, to shop online or in the eBucks shop at www.ebucks.com If you shop in the eBucks shop, you will be charged an R55 for the delivery of goods under 10 kg or R95 for goods over 10 kg. Virtual vouchers have a delivery fee of R2.50, while Lotto tickets and airtime have no delivery fees. The different internet partners, such as Netflorist and Kalahari, have their own delivery fees.
Annual cost:
There is no membership fee, but you have to pay an annual linkage fee of R160 if you want to earn rewards when you use your credit card. This fee is charged by FNB credit card and is technically not an eBucks fee.
Spend required to earn points worth R100:
R590 Investec Dividends
Rand value:
One Dividend = 3.3 cents
How to earn rewards:
You earn one Dividend for every R5 you spend using your Investec credit card, and you earn one Dividend for every R5 you spend at retail partners, including Cape Union Mart and Incredible Connection. So if you use your Investec credit card to pay for a R500 transaction at Cape Union Mart, you will earn 100 Dividends for using your Investec credit card and 100 Dividends because Cape Union Mart is a retail partner on the programme. You can earn 300 Dividends a month if you have a monthly subscription of R240 with Matrix vehicle tracking.
What you can use it for:
You get discounts of up to 15 percent at Shimansky Jewellers. You can use the Dividends on travel, shopping vouchers, charity donations, foreign exchange or to invest in unit trusts. You can also convert your Dividends to Voyager or British Airways miles.
Annual cost:
No membership fee, but the annual fee for an Investec credit card is R2 100.
Spend required to earn points worth R100:
R10 851.52
Nedbank greenbacks
Rand value:
One Greenback = 3.3 cents
How to earn rewards:
You earn one Greenback for every R5 you spend using a Nedbank cheque or credit card and two Greenbacks for every R5 you spend using a Nedbank Amex card (this card is available to you only if you have a Nedbank Visa or Mastercard credit card).
What you can use it for:
You can transfer your Greenbacks to another Nedbank customer for a fee of R150. When you redeem your Greenbacks, you can make a partial cash payment for certain transactions. For example, if you use your Greenbacks to redeem a travel reward and if you have insufficient Greenbacks to complete the transaction, you can top up with a rand amount. You can use your Greenbacks for travel, shopping vouchers, charity donations, to pay your bank fees or to invest in unit trusts. Greenbacks expire if you do not use your cheque or credit card for five months, are in arrears with your credit card repayments or commit fraud.
Annual cost:
R160, excluding bank fees.
Spend required to earn points worth R100:
R16 500
Note
The required spendig assumptions for the programmes in this article are based on an average Gold Card customer's spend with each programme's financial and retail partners.