Tag Archives: credit card rewards

Is there a best credit card?

Black is the new gold – at least that’s what Woolworths want us to believe…

Been thinking about credit cards quite a bit recently and wondering if there is a “best” option. So I have been looking at some of the offerings and the first one I am writing about is the “new” Woolworths Black credit card.

On the face of it, it seems quite appealing. Assuming you earn enough to qualify for the card (I think it is >R500k pa) then they are offering a whole host of very attractive things to go with the card. These include:

  • 3% back (in vouchers) on everything you spend at Woolworths.
  • 1% on everything you spend anywhere else
  • A “free” coffee at a Woolworth café twice a month (not sure if this is coffee or a cappuccino)
  • “Free” deliveries if you shop online
  • And a “free” copy of Taste magazine (Woolworths’ food magazine) and finally,
  • Automatic VIP membership to Woolworths rewards (for 1 year).

Sounds great, where do I sign and what’s the card fee?

The annual card fee is R595…ouch!

So I did a bit of investigating and thinking…what is the value of the “free” benefits and what would I need to spend to cover the card fee?

  • I would need to spend R20000 at Woolworths to get R600 back in vouchers.
  • I would need to spend R60000 outside of Woolworths to get R600 back in vouchers.
  • The value of the “free” coffees -±R30pm – that’s R360 per year
  • The value of “Taste” Magazine -±R30pm – that’s another R360 per year
  • So I guess the value of the “free” stuff “covers” the cost of the card but let’s look a bit more closely at what you actually get back.

If we assume we spend R5000 per month on the credit card and that we spend 20% (R1000) of this at Woolworths (and pay it off in full each time) I would get an annual benefit of R965 after the cost of the card. In other words if I spent R60000 on the card with 20% of this at Woolworths, I would get a benefit of about R965 (or 1.6% of the spend). Forgive me for being sceptical, but that’s not a great benefit. And if my maths is correct, it appears to decrease if you spend more. How does that work?

A closer look at the table sets out the actual annual fees and “savings”.

W/W Spend (20%) Voucher Rewards Other Spend Voucher Rewards Other rewards Total rewards Annual rewards After fee Annual spend % back (net fee)
R 5k R 1 000 R 30 R 4k R 40 R 60 R 130 R 1 560 R 965 R 60k 1.61%
R 10k R 2 000 R 60 R 8k R 80 R 60 R 200 R 2 400 R 1 805 R 120k 1.50%
R 15k R 3 000 R 90 R 12k R 120 R 60 R 270 R 3 240 R 2 645 R 180k 1.47%

Notes:

1.       Voucher rewards on spend at W/W = 3%.

2.       Rewards on “other” spend = 1%

3.       “Other” rewards = 2*monthly coffee + Taste Magazine

So while Woolworths might want you to believe that “Black” is the new gold it certainly looks like that it is almost as expensive as gold and certainly not nearly as attractive as it first appears. On the plus side, additional cards for family members are “free” but I am sure there are far “better” options than this one.

Credit card rewards…

Got an email from friend this week which went something like this…”Just got a mail from Nedbank to say I have 300 000 odd ‘Greenbacks’, their loyalty programme. I can exchange them for until trust investments. Wanted to know your opinion?  I’ll have to put R5000 cash to open an account but can get around R11 000 or so more through the Greenbacks I got sitting in an account.”

What a great idea…I knew you could get shopping vouchers but had no idea you could get unit trusts as well, so I did a bit of research.

It turns out that through the “Greenbacks” scheme you can in fact exchange the rewards for unit trusts. The question is, would I rather have unit trusts or vouchers for Cavendish Square? And this is where Nedbank have been “clever”.

If you convert the Greenbacks to shopping vouchers you will get R100 for each 3500 Greenbacks – so for my friend, this would mean about R8500 worth of vouchers (a lot of retail therapy indeed). If, however, you invest in their unit trusts they will give you R100 for each 2800 Greenbacks – so he would get about R10700 which could be invested. He would be better off by R2200 by investing in the unit trusts – and it will be done at no initial fees – so it becomes very attractive indeed.

So would I do it? Absolutely! If I had Greenbacks “lying around” that I had accumulated through using my credit card with no “need” for vouchers then I think that this is a very attractive option indeed.

Taken from their website… Invest in unit trusts.

2 800 Greenbacks = R100 contribution

Invest in a Nedbank unit trust of your choice and pay 0% initial fee on your invested amount (save up to 5%)

  • Minimum contribution of R5 000 to open a new unit trust account.
  • Contribute in multiples of R100 (2 800 Greenbacks).
  • A minimum of 140,000 Greenbacks points is required to invest in unit trusts.

And I guess if he really needed the cash, he could put the money into the Money market fund and redeem it shortly thereafter (but I am sure that is against the spirit of this and that there could well be some fine print somewhere to limit this).