Last Updated: 9 August 2017
Summary/TL;DR
When you see Credit Cards with tens of thousands of Qantas or Velocity points (or other) offered with an annual fee waived, they are effectively free money. I have been “playing” this game for approximately 3 years and have accumulated approximately 1.5 million Frequent Flyer points across a variety of programs (Qantas, Virgin Australia, American Express) which have cost me close to nothing to acquire.
The “game” of accumulating points through bonus points promotions is roughly as follows:
- Apply for Credit Card offering bonus points
- Meet the necessary spend to trigger the bonus points to be issued to you
- Await the bonus points in your account
- Cancel the Credit Card
- Repeat (once every 2-3 months)
- Steps 1-6 can be repeated once per family member/friend/loved one to further accelerate points accumulation
Generally speaking, you should space out your applcations so as to not affect your credit rating too much. As a general rule of thumb, leave 3 month gaps between individual applications.
As always, the usual Credit Card rules apply: Don’t pay interest, late fees, foreign exchange charges, cash advance fees
To use a current active deal as an example, the St George Amplify Signature Credit Card is currently offering 60,000 Qantas points and a first year annual fee waiver. You can effectively see this as being “paid” $300 to hold the card for a year, after which you can cancel the card for no cost!
I have made a particularly lengthy post below on the topic and created a list of common concerns/questions below around playing this “game” which will hopefully help you.
Taking Advantage of Credit Card Bonus Points Promotions
Do these lines look familiar to you?
Get the first year annual fee waived and earn up to 80,000 Qantas Points
A free domestic flight, and up to 100,000 Velocity Points upon signing up
I touched on these sorts of “deals” briefly and how lucrative they can be in an older post. I talked about how these points can effectively be seen as “free money” and in fact, one of the quicker ways to earn points (or “free money”).
These promotional offers by banks should not be ignored! Yes, ultimately they are trying to lure you in and make money off you, but if you play the game right, you will be the one making money off them.
Their ultimate goal is to make money off you through interest, late fees, foreign exchange charges and exceeding credit limits.
For context..
- 4750 Qantas points buys you a $25 Woolworths eGift Card.
- 4500 Velocity points buys you a $20 Coles Gift Card
This means this deal from St George where you get 60k Qantas Points and the first year annual fee waived is netting you $300 in Woolworths Gift Cards. You’re effectively being paid to hold the Credit Card for the first year.
For a Velocity Points example, this deal offers you up to 120k Velocity points for an annual fee of $289. This can get you $520 in Coles Gift Cards. Factor in the $289 fee, and you’re still effectively getting “paid” $231 to hold this card for the first year.
It is important you understand to qualify for the bonus points you often have to meet a spend threshold within the first few months of holding the card, and these amounts can sometimes be a bit of a struggle to reach without impulsively buying things. In short, the solution around this is to try and use the card to pay for things you’d be paying anyway.
But here are some more creative ideas..
- Get the bill at a dinner out with friends and use Splitwise to keep track of how much is owed to you
- Pre-pay your Private Health Insurance
- Pre-pay your Internet/Gas/Electricity/Council/Water Bills
- Buy WISH (Woolworths) eGift Cards for 5% off in advance, knowing that you’re likely to use them anyway (within the 12 month validity period).
- Purchase a fully refundable airfare (look carefully at the Fare Rules to find out if it is fully refundable) and refund it (after the bonus points are issued and spending period is over)
- Purchase a fully refundable hotel room in advance on a accommodation booking aggregator like hotels.com and refund it (after the bonus points are issued and spending period is over)
Note that the last two methods can be considered slightly shady, but you are technically breaking no rules. You’re not breaking the rules of the airline nor hotels.com if they allow you to refund an airfare/accommodation, and you are not breaking the rules of the issuer of the Credit Card. Provided you get the refund after the bonus points have been issued and the spending period has passed, you should be able to keep the points.
Gift Cards vs Flights
I will cover this of in a more detailed post in the future, but I felt the need to mention this as there is often debate about whether points are better used on gift cards of flights. The short answer is it depends, but you should use points on something you see value in.
The long answer is very long, and the reason is because it really depends on quite a number of factors. However, I would say the following:
Points are generally best used either on Flights or versatile Gift Cards, and never physical items (like iPhones, iPads, toasters, vacuum cleaners)
The exception to the above is if there is a “points” sale on the physical items. The reason for this can be explained by understanding that the physical items you purchase using points still need to be purchased for you and are generally not stocked by them (e.g. Qantas/Virgin). However, if you redeem a Gift Card, you now have the flexibility to use that cash as you wish including when there is a sale, thus maximising the value of your Gift Card.
Generally speaking, you will want to get a Gift card which you know you will realistically use anyway, such as Coles, Woolworths or petrol gift cards. This means you’re less likely to make impulse purchases on items you do not need.
I will elaborate on this in a future post.
Common Concerns/Frequently Asked Questions
Dislcaimer: My answer to these questions are purely based on my personal knowledge and should not be taken as specific financial advice. I’m fairly confident about my answers, but feel free to leave a comment to correct me if I am wrong – I do not mind being corrected, but it would be good if you could leave a source too.
Can I just apply, get the points and cancel?
Yes.
How do I cancel the card?
You call them up on their customer service hotline and tell them you wish to cancel the card. They have no right to prevent you from cancelling it but may try to convince you not to.
Or should I just keep the card?
It really depends on how much you value the card in question, which would then be determined by which card it is. In my opinion, you should always have at least one Credit Card, with other considerations being the following:
- Does the bank have any exclusions period for bonus points if a similar offer comes up again? For example, bonus points are usually only attainable if the customer has not had the same card within the last 12 or 18 months.
- Do you often get any cashback bonuses on the card? If it is an American Express card, you probably do – how much will you be missing out if you cancel?
- Do you need to free up some Credit Limit for a future home loan? Every $1 you have in Credit Limit prevents you from borrowing $3 from a home loan.
- Does the Credit Card offer you complimentary Travel Insurance? What is your alternative?
- Do you have any Rewards Points with the respective card in a proprietary rewards program (such as ANZ Rewards) which will need to be used/transferred prior to closing the card?
There is quite a lot to consider, so you will really have to think of it relative to your own personal situation.
Is there any annual fee, whether ongoing or after a promotional first year waiver?
There may be. It depends on the card, and depending on how many points you’ll be given as part of the promotion, the annual fee should not be a deterrent to you signing up.
Are there any cancellation fees for cancelling credit cards?
I have never heard of any Credit Card that has a charge for cancelling a Credit Card – so in short, the answer should be a no.
Will they offer to waive the annual fee if I cancel?
Depends on the bank/issuer. From my own personal experience, banks are generally more stingy but may sometimes offer a discounted annual fee as opposed to a complete waiver. American Express do not offer any discount or waiver of the annual fee, but instead sometimes offer a “points retention offer” to try to keep you. Whether it’s worth it or not is dependent on how many points you are being offered, and how much you actually value the card.
Can’t I just threaten to cancel and see what they offer me?
Yes, most definitely. Consider the following options/possibilities:
- You actually wish to cancel anyway: If they offer you points, take it anyway and then cancel
- You will keep it depending on what is offered: Decide based on what they offer you, whether it be an annual fee waiver or points offer
- You actually wish to keep the card anyway: You could try threaten to cancel and see if they offer you anything. If they do, obviously you take it. If not, then you pretend nothing happened and keep the card.
On the last point, there is actually a whole forum topic dedicated to this practice over on the Australian Frequent Flyer Forum.
Can I keep doing this over and over again?
Kind of. You need to space out Credit Card applications (unlike transaction accounts) because there is an impact on your Credit Rating. If you keep applying constantly without leaving enough of a gap, you will eventually get rejected for applications.
Is there any harm in applying and getting rejected?
Sort of, yes. Credit Card applications leave a “mark” (record) in your credit file for (I believe) 7 years. These appear as a “credit enquiry” and are there regardless of whether you are approved or rejected. Therefore, you do not want to “waste” a credit enquiry with a rejection and it is for this reason that you should space out your applications.
Do I need to provide proof of income/ID?
In almost all cases yes – the cases in which it is a no is usually if you are applying for a product with a financial instituion with which you have previously held products (i.e. they will already have some of your information)
Can I lie about my salary?
Of course you can, but I would not advise you do because you may well be asked to provide payslips. Be wary of how the question of income is worded (whether it is pre-tax, post-tax, and the frequency – weekly, fortnightly, monthly?). I believe the income verification checks often have ~10% leeway. Also note some of the stated income requirements are stated as a household requirement and not an individual income (notably American Express). This means a family member/partner who is not working but fulfils all the other pre-requisites could theoretically be approved for a card.
What if I run a business/self-employed?
They still recognise this income but usually have different requirements around this. It is best that you check the requirements as stated on the website.
I need to spend $3000 on the card within 3 months, what can I do to try and reach this spend amount?
Here are some ideas:
- Get the bill at a dinner out with friends and use Splitwise to keep track of how much is owed to you
- Pre-pay your Private Health Insurance
- Pre-pay your Internet/Gas/Electricity/Council/Water Bills
- Buy WISH (Woolworths) eGift Cards for 5% off in advance, knowing that you’re likely to use them anyway (within the 12 month validity period).
- Purchase a fully refundable airfare (look carefully at the Fare Rules to find out if it is fully refundable) and refund it (after the bonus points are issued and spending period is over)
- Purchase a fully refundable hotel room in advance on a accommodation booking aggregator like hotels.com and refund it (after the bonus points are issued and spending period is over)
Will I lose my points when I cancel the Credit Card?
This depends on the program which your points have been accumulated into. If the program is a proprietary program (e.g. American Express Membership Rewards, ANZ Rewards, NAB Rewards, Westpac Altitude) then the answer is most likely yes, because it is the bank’s own program. Some of the programs give you grace period after cancelling a card to use the points up as opposed to having them forfeited immediately.
If points earned on a Credit Card are earnt directly into Qantas or Virgin Velocity, your points will definitely not be forfeited upon cancellation of a Credit Card as your membership with these programs is independent of the existence of the Credit Card.
If you are about to cancel a Credit Card that is linked to a proprietary program, make sure you either transfer these points out to a Frequent Flyer program or redeem them for Gift Cards before you lose the points! Alternatively, explore the option of transferring it to a friend/family member – I know this is an option with American Express Membership Rewards!
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