From point hacks to travel hacks, the trend of chasing credit card rewards for free flights and luxury stays is taking off among young Aussies. However, while the appeal of turning everyday spending into a dream holiday is undeniable, research reveals that the reality often lands travellers in financial turbulence rather than first-class upgrades.
The concept of point hacking — strategically using credit card rewards to fund travel — has gained significant traction among young adults. The appeal is understandable: who wouldn’t want to turn routine expenses into a holiday? Credit card companies amplify this allure with enticing sign-up bonuses and rewards structures. For instance, some cards offer substantial bonus points for new cardholders, making the prospect of free travel seem within easy reach.
However, the reality often doesn’t match the glossy advertisements. A survey by finder.com.au revealed that more than one-third of Australians obtained their most recent credit card primarily to earn reward or frequent flyer points. Yet, many find themselves ensnared in debt, with interest charges eclipsing the value of the rewards.
Similarly, a study by consumer research group Canstar found more than half of people aged 18 to 29 with a credit card sign up solely to earn travel rewards points.
However, this is also the group most likely to fall behind on repayments, with nearly two-thirds failing to pay off their debt each month, ABC News reported.
The trend continues with those in their 30s, where about 67 per cent of cardholders use them for travel rewards, and again, roughly 63 per cent struggle to clear their balances.
Travel rewards cards often come with high interest rates, starting at about 20 per cent and reaching as high as 27.99 per cent.
The debt spiral: When rewards backfire
The Reserve Bank of Australia reports that the total credit card debt accruing interest stands at approximately $18.62 billion. This financial strain is particularly pronounced among younger Australians. An ASIC report highlighted that many young consumers continue to grapple with credit card debt.
A common misconception is that these points are ‘free money,’ but this couldn’t be further from the truth. The conditions, fees, and interest often erode any value earned through rewards.
The mechanics of rewards programs can also be complex and opaque. Points may expire, and the value of rewards can fluctuate, making it challenging to maximize benefits. Moreover, the temptation to overspend to earn more points can lead to financial strain.
Financial experts caution that while rewards programs might seem enticing, they should never come at the cost of long-term financial health. A strong budget and realistic spending habits should always take priority over chasing points, no matter how tempting they might be.
“I think over time, these kind of rewards programs and freebies, people realise they’re not really cut out as good as they often sound on paper,” Canstar data insights director Sally Tindall told ABC News.
The agent advantage
In contrast to the often risky world of point hacking, booking through a travel agent offers a more straightforward and potentially cost-effective approach. Travel agents provide personalised service, expert advice, and access to exclusive deals that are often unavailable to the general public.
But here’s a fun bonus: travel agents can actually help travellers earn rewards points too. Many agents work with airlines, hotels, and tour operators that are part of frequent flyer or rewards programs.
However, it’s important to note that travel agents are not there to help travellers manage or book with points. Their expertise lies in crafting unforgettable trips and securing great deals, not in navigating the complexities of frequent flyer redemptions. That’s definitely a DIY job.
