Why are Irish credit card rewards so awful?

troyzer

I'm a recent graduate currently working in Australia and was just wondering about this recently. One of my colleagues uses her credit card for everything, I didn't understand why because my generation was raised to fear the plastic devil and the ruinous effects it can have on your life.

She said she always pays her balance on time and so she uses the card exclusively to rack up massive rewards like air miles, free travel and rental car insurance, discounts etc.

I realised this was a pretty good idea so I'm looking into getting one when I return to Ireland in a few weeks but the reward schemes with Irish credit cards are universally awful. As far as I can tell, Bank of Ireland for example only offers Supervalu reward bonuses. So if you don't shop at Supervalu (why would you? It's by far the most expensive of the multiples) you get no benefits at all. AIB is even worse, the only thing I can see is a tidy cashback on their platinum card. KBC is much the same.

By comparison, my bank here in Australia offers free domestic return flights when you sign up and everytime you renew along with a bonus system that gives you points for everything you spend. Points can be spent later on loads of different rewards like spa treatments etc. They also include the free insurance I was talking plus free extended warranties on some of your purchases. Obviously this varies by card and my bank alone issues a bewildering array of different cards. You can have the AIB, no rewards style card if you want as well and they tend to be dirt cheap.

And just to rub salt in the wound, interest rates are much the same and often lower (even though the REFI is higher). 

Thoughts?

bellz_x

Well, there's one perk with BOI and Supervalu, that's Avios points. If you sign up for Avios, along with supervalu and get an BOI credit card, use it for everything, you can rack up points pretty fast. They're also running quite a few promotions, all available on the Avios website.

Avios partners with loads of different companies, so there's tonnes of ways to make up the points, but if you're using your credit card, this is definitely a bonus. Avios can be used to book flights, among other things.

I've been using it for a while but I don't bank with BOI, so no credit card perks for me.

I would love to see better credit card rewards in Ireland. It's something we seriously lack.
Rewards in general are something this country sees so little of.

When I lived in Toronto, I could rack up Airmiles like nobodies business if I just bought a few beers at the liquor store.

Ireland is quite pathetic when it comes to rewards but I wouldn't rule out the BOI credit card, Supervalu rewards card and Avios programme.
Don't forget to add your avios and Aer Lingus account together, too.

Peregrinus

Australian banks generally don't give out personal overdrafts, so for most people borrowing on the credit card is the cheapest readily available form of short-term credit. Banks like this, since credit card rates, though cheaper than Irish credit card rates, are more expensive than overdraft rates, so it's a profitable line of business for them. My Australian bank, for instance, if it were willing to give me an overdraft would charge 14.9% interest, but on my credit card (which, yes, gives generous rewards) it would cost 20.24% for purchases and 21.24% for cash advances (on top of a hefty annual fee).

If, like your friend (and like me) you always pay off your balance on time and in full, that's great, and you can do quite nicely out of the reward schemes. But the fact that the banks promote credit cards so hard tells you that a lot of people don't pay in full and on time. Basically, the reward schemes aren't there for your benefit; they're there for the bank's benefit, because if you want to borrow the banks would rather you do it on a credit card than press them for an overdraft. Your rewards are not paid for by the bank; they're paid for by the people who use their credit cards for, well, credit.

troyzer

Peregrinus wrote: »

Australian banks generally don't give out personal overdrafts, so for most people borrowing on the credit card is the cheapest readily available form of short-term credit.  Banks like this, since credit card rates, though cheaper than Irish credit card rates, are more expensive than overdraft rates, so it's a profitable line of business for them.  My Australian bank, for instance, if it were willing to give me an overdraft would charge 14.9% interest, but on my credit card (which, yes, gives generous rewards) it would cost 20.24% for purchases and 21.24% for cash advances (on top of a hefty annual fee).  

If, like your friend (and like me) you always pay off your balance on time and in full, that's great, and you can do quite nicely out of the reward schemes.  But the fact that the banks promote credit cards so hard tells you that a lot of people don't pay in full and on time.  Basically, the reward schemes aren't there for your benefit; they're there for the bank's benefit, because if you want to borrow the banks would rather you do it on a credit card than press them for an overdraft.  Your rewards are not paid for by the bank; they're paid for by the people who use their credit cards for, well, credit.

I'm not sure if this is 100% true. I was reading into it recently and most of the margin on credit cards is made on merchant fees, not interest. The reason why they offer rewards is to encourage you to spend with as many vendors as possible, thus causing cards to proliferate and basically make terminals and card handling facilities mandatory for all businesses which they make a fortune from for doing nothing. 

The interest they charge is a tidy wedge, but it's not the core business model. They would still do very well if everybody paid on time which is why they're very happy to accommodate people like my co-worker. They're making nothing off her but because the rewards entices her to use her card everywhere, they're making a fortune on merchant fees with seemingly no risk of default based on her history. It's good to be the King.
My Dad is a sole trader and has resisted installing a terminal for ages. He still won't take plastic because the charges being charged are extortionate.

Peregrinus

Well, it could be both the merchant fees and the well-padded interest rates, couldn't it? You can be confident that the banks aren't handing out reward points out of a charitable impulse; they obviously make money when credit cards are used and, the more they are used, the more they make.

For what it's worth, this site suggests that total credit card debt in Australia $51.7 billion, of which $32.5 billion is accruing interest. That's an awful lot of people who are not paying off their bill in full every month.

troyzer

Peregrinus wrote: »

Well, it could be both the merchant fees and the well-padded interest rates, couldn't it?  You can be confident that the banks aren't handing out reward points out of a charitable impulse; they obviously make money when credit cards are used and, the more they are used, the more they make.

For what it's worth, this site suggests that total credit card debt in Australia $51.7 billion, of which $32.5 billion is accruing interest.  That's an awful lot of people who are not paying off their bill in full every month.

Yes of course but I think overall banks would be happier if everyone paid their bills on time. If they did, the banks would save a fortune in chasing down debtors and having to write off defaults. An ideal credit card customer is one who always pays on time and uses their card like there's no tomorrow. 

I have no idea why somebody would actually use their credit card like a credit card unless they were in a really bad place, using it to finance a startup or are idiots.

Peregrinus

troyzer wrote: »

Yes of course but I think overall banks would be happier if everyone paid their bills on time. If they did, the banks would save a fortune in chasing down debtors and having to write off defaults. An ideal credit card customer is one who always pays on time and uses their card like there's no tomorrow. 

I have no idea why somebody would actually use their credit card like a credit card unless they were in a really bad place, using it to finance a startup or are idiots.

No, no, the bank gets the merch fees whether or not you pay on time, plus they get interest if you don't pay on time. And the interest rates are set at a level that, even after covering the overheads of the business, you paying interest is an attractive proposition for them. They're banks; lending out money and collecting interest on the loan is the main way in which they earn income, so they like to do it. The only reason they take deposits at all is so they'll have money to lend out.

As for why people would use their credit card as a source of credit, it's because it's the most convenient form of readily available unsecured credit. In Ireland we have overdrafts for this purpose, but the Australian banks steer their customers towards credit cards, or towards secured borrowing.

Del2005

troyzer wrote: »

An ideal credit card customer is one who always pays on time and uses their card like there's no tomorrow. 

The ideal credit card customer has their card at the limit and pays the minimum allowed. Why else do they keep increasing the limit so easily.

van_beano

I believe it was EU legislation that caused whatever perks were available to be withdrawn by the banks

http://www.dailymail.co.uk/news/article-3034474/End-credit-card-perks-air-miles-thanks-EU-legislation-designed-HELP-consumer.html

I used to have an Ulster Babk credit card with the "Yourpoints" program but they ended this citing the EU rules.

I have a Tesco Credit Card now, works like their club card, get points for using it, I convert these points to get double in value Bord Gáis vouchers, pays my energy bills. It looks as though they aren't offering the Credit Card to new customers in Ireland now, don't know why.

two wheels good

Can punters paying with cash have a discount at the till please?

Peregrinus

two wheels good wrote: »

Can punters paying with cash have a discount at the till please?

I believe the bank's agreement with the merchant forbids the merchant from offering this.

Peregrinus

van_beano wrote: »

I believe it was EU legislation that caused whatever perks were available to be withdrawn by the banks

http://www.dailymail.co.uk/news/article-3034474/End-credit-card-perks-air-miles-thanks-EU-legislation-designed-HELP-consumer.html

Interesting. That would suggest that the generous perks provided by the banks are financed by hefty merchant charges born intially by the merchants, but ultimately passed back to customers (paying by both cash and card). Which, for the reason just pointed out, would mean that the cash customers are subsidising the perks for the card customers.

CeilingFly

troyzer wrote: »

I'm not sure if this is 100% true. I was reading into it recently and most of the margin on credit cards is made on merchant fees, not interest.

Nope - credit card fees are now at aboit 0.6% for many retailers, BUT if its a corporate card that fee can be up to 1% higher and AMEX would be near 3%.

So at 0.6% fee there is little margin for the bank to give rewards, however it does mean that retailers welcome card payments more than cash (cash costs 0.45% to lodge + hassle of counting and security of getting it to the bank)

However on corporate cards there is up to 1% extra charged and this goes onto the corporate loyalty programmes such as airport lounge access, free AA, free travel insurance etc.

I don't know the aussie merchant rates, but you can be sure that no matere where it is in the world, no bank offers anything for "free" - its costed somewhere.