How to choose a credit card: Beware free flights and cashback offers

It’s hard not to envy those travel influencers, crossing the world posting “this is what it’s like to fly first class to Dubai” videos and the like in our feeds.

Plus the other assorted Instagram and LinkedIn braggers popping up pictures of their palatial sky beds with complimentary champagne before take-off, while the best the rest of us can hope for is not to be seated next to the loo while we fold our knees up to our ears back in a crowded economy section for the next eight hours or so.

It’s even worse if you scored an upgrade once either through work or just pure dumb luck and were given a fleeting taste of travel with legroom and food that doesn’t have to be scraped off a tinfoil lid. The trundle past business class down to the back of the plane feels that bit more painful.

That could be why so-called points-hacking content featuring regular people upgrading or buying premium tickets using airline points in conjunction with credit card schemes can be so alluring. YouTube and TikTok videos teaching consumers how to book first-class flights with Emirates (which usually cost at least €20,000) using “free” points they collected simply for signing up for a new credit card are so popular. The points-collecting community has grown so large that it’s even created a side industry of “points whisperers” who offer one-on-one consultations on how to gather and maximise your points as well as manage them for you entirely.

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However, often the path to the pointy end of the plane involves credit cards that offer reward programmes that either give X amount of airline points per dollar or euro spent or dangle a large 50-100,000 point signing bonus for opening the card and spending a certain amount in the first six months.

So, is it worth it? Aside from finding the lowest interest rates or best deals on balance transfers, should consumers be comparing rewards programmes when shopping around for a credit card?

Irish customers expecting the big 100,000-plus airline points windfall for signing up for a new credit card are likely to be disappointed. In terms of cards offering reward schemes, the Irish market is quite limited compared with what’s on offer to British, American and Australian customers. Irish customers who aren’t existing customers or have UK/US bank accounts and addresses won’t be eligible for an American Express card. The Aer Lingus Visa Signature card offers a potential 125,000 Avios points to customers who spend $5,000 in the first three months and $20,000 within the first year. However, the card is issued by Chase, a US-based bank and requires applicants to have a valid permanent address in the United States to be eligible.

Irish residents instead can opt for the Aer Credit Card Travel Rewards, which is the only card in Ireland that offers direct airline points per spend. Backed by Bank of Ireland, prospective customers won’t find any splashy signing Avios point bonuses on offer. Instead, the travel rewards promised are more modest, starting with two return flights on an Aer Lingus operated service within Europe but only once €5,000 is spent within the first reward year. Plus two lounge passes and two Fast Track and Priority Boarding passes subject to terms and conditions. Avios points are offered on a €1 spend-to-1 point ratio on Aer Lingus transactions and a €4 spend-to-1 point ratio on other eligible purchases.

The card, however, has one of the highest annual percentage rates (APR), including the mandatory €30 government stamp duty, on the market at 22.7 per cent. Plus there’s an annual card fee of €78 which is made through 12 monthly charges of €6.50

While credit cards rewards programmes can be used effectively and responsibly if the balance is paid off every month on time, “there’s a big cohort of people who don’t”, warns Daragh Cassidy, head of communications for comparison site Bonkers.ie.

“The devil is in the detail,” he says when it comes to weighing up whether a reward scheme is worth potentially paying more interest down the line.

“You might say the Aer Lingus card could provide hundreds of euros worth of extras but you need to see if you can avail of benefits. The big key thing is the two return flights in Europe but you‘ll have to pay taxes and other charges yourself and there might be restricted travel periods so you might find yourself trying to book at Christmas and being unable to fly.”

“Then you need to spend €5,000 within a reward year on the card so there’s a fear you’re just spending money to try to get free flights which means you may spend it just to go into debt.”

According to the card’s terms and conditions, in addition to being responsible for paying any taxes, charges and fees out of their own pocket, customers aren’t guaranteed their preference when it comes to their complimentary flight.

Free fares are subject to availability and restricted on weekend dates from the June 24th to August 31st (Fridays/Saturdays/Sundays). The Christmas and New Year period of December 20th to January 6th. Plus midterm breaks, Easter and other bank holiday weekend dates. The bad news for rugby fans is Six Nations matches are also included in the restricted period with the terms and conditions citing “flights to the destination of the matches may not be available on the day of the match and two days either side of it”.

“When you look at that card with the nitty gritty details... it’s an awful lot of work to get two return flights in Europe,” says Cassidy.

Which means individual circumstances should be weighed up when pursuing a new credit card instead of being persuaded by one part of the offer.

“Everyone has different financial needs and spending habits, so there is no one-size-fits-all approach to choosing and using a credit card,” says Emma Archer, a spokeswoman for Switcher.ie.

“A frequent flyer would get better value from a card like the Aer credit card – but they would need to weigh up whether it is worth paying the monthly fee. On the other hand, a keen shopper would get better value from a cashback rewards card, but they may end up paying a higher APR on their purchases once the zero per cent period ends.”

Aside from the traditional airline points schemes, some credit cards now offer cashback schemes where a percentage of the purchase is re-credited to the customer’s account.

These seem to be popular among the latest fintech entrants to the Irish banking scene with both Revolut and Avant Money offering cashback incentives on their credit cards.

Revolut offers a credit card with a 1 per cent cashback promise on all purchases within the first three months subject to a minimum spend of €3,000 with a competitive (in the world of credit cards) overall APR of 17.99 per cent.

However, the cashback amount is capped at a maximum of €1,000 and the rate drops from 1 per cent to an unlimited 0.1 per cent after the three-month period.

Avant Money’s Reward+ credit card offers €100 cashback “plus up to 25 per cent interest refund on purchases every month” with a 22.9 per cent APR.

But a check of the fine print reveals the €100 cashback is “subject to minimum monthly spend of €500 in the first three months with cashback payable within six months of account opening”. While the interest “refunds are payable a month in arrears to a maximum value of €24 per statement”.

The addition of Avant, Revolut and An Post’s credit card into the market has given Irish customers more choice and are well worth looking into, says Archer.

“Overall, credit cards from non-traditional finance companies compare well in terms of rates and incentives. They will likely offer unique rewards and market-leading zero per cent introductory periods.

“However, it’s best to use a comparison website to check all the deals on the market to ensure you are choosing the right card for your financial needs.”

Like Cassidy, Archer advises consumers keep a close eye on terms and conditions to make sure rewards and benefits will actually benefit account holders in practice.

“You could also find yourself in a catch-22 situation, whereby the less you spend, the smaller your benefit – but the more you spend, the greater your balance. If you don’t settle your monthly credit card bill, there is a risk that you’ll pay interest on your purchases, which could amount to more than the cashback earned.”

AIB Platinum offers a 0.5 per cent cashback award of up to €225 in each 12-month period subject to a minimum spend of €5,000 in the same period.

Overall, when hunting for a credit card it pays to be wary of the shiny extras promised in programmes without reading through the fine print with a magnifying glass first.

While many cards now offer perks such as purchase protection and free travel insurance, Cassidy says consumers may already be covered under EU legislation in certain circumstances.

“For me when a card comes with bells and whistles like protection on purchases or travel insurance, again the devil is in the detail like how easy is it to claim? What am I covered for?”

Ultimately consumers need to weigh up their spending habits, their lifestyle, financial situations and future when choosing a card. For some, a cashback deal or flying flat in business class might be tempting but a card with lower interest rates, generous interest-free balance transfer periods and an instalment plan might offer more value in the end.