The (low) price of credit card loyalty
What promotions and gifts are attached to each credit card? We look at the main incentive plans and find that the offerings can be a bit thin
Credit cards do more than offer credit. They radiate aspiration - the top ones come with names like Ultima, Platinum and Infinite - and they come with perks.
And it is for the perks that people most often think to use one card over another. When presented with a bill, Hong Kong diners will habitually ask the waiter if the restaurant is offering a credit card promotion. They will ask this while flipping open a wallet stuffed with plastic, ensuring they have a card for all plans.
Sadly, on examination, these plans are a bit thin. Discounts typically range in the realm of 10 per cent to 15 per cent - handy but not exciting. Bonus plans often have to be redeemed in the form of goods of modest choice and quality. And any incentive has to be stacked up against the volume of spending that must go with it.
So what do you get?
HSBC's bonus-point plan offered to Visa and MasterCard holders is pretty typical. The bank offers HK$1 "reward cash" for every HK$250 a person spends on the card. The money comes in the form of vouchers that can be used at certain retailers.
Cardholders can also earn an extra HK$1 reward for every HK$20 they spend at certain retailers, including City'super, Broadway and Mannings.
But while you may be getting paid to make purchases you would be making anyway, it is important to take a close look at the offers.
The HK$1 return for every HK$250 spent translates to a return of just 0.4 per cent.
This means that to accumulate HK$1,000 of reward cash a person would need to spend HK$250,000 on their card.
HSBC charges an APR - annual percentage rate (fees plus interest) - of 34.46 per cent on its cards.
If consumers fail to clear their balance in full every month and have to pay interest on the debt, the charge will quickly wipe out the benefits of their reward cash.
Also note that rewards are often paid out in the form of vouchers for specific retailers or restaurants.
China Construction Bank gives credit card users one bonus point for every HK$1 they spend.
They can then exchange these bonus points for vouchers at 21 different retailers and restaurants, including Ikea, Toys 'R' Us and Pizza Hut, or for admission to Ocean Park.
Consumers need to accumulate 25,000 points for a HK$100 voucher. The points are valid for two years.
Credit cards also link to air miles. The DBS Black Card offers one air mile for every HK$6 spent on the card in Hong Kong and every HK$4 spent overseas.
Holders can also get up to 32,000 bonus miles if they spend up to HK$20,000 on the card within the first two months.
Consumers would need 20,000 Asia Miles for an economy return ticket to Bangkok, which would require spending of at least HK$80,000.
A return economy class flight to Bangkok with Cathay Pacific starts at HK$2,000.
Another common offer to entice consumers to apply for a card is the free gift.
Bank of East Asia offers new credit cardholders a range of welcome gifts, such as an electric cooker, an Android tablet, an electric heater or a coffee maker.
To qualify for the cooker or the smart tablet consumers must spend at least HK$6,500 on their card during the first two months, or spend HK$4,500 for the heater.
The gifts have retail values ranging from HK$698 to HK$1,980, according to bank, which levies an APR of 34.49 per cent on its card.
And if customers decide to cancel their card within 12 months of taking it out, they would also have to pay an administration fee of HK$500.
Finally, many credit card providers have teamed up with shops and restaurants to offer customers discounts if they pay using their card.
Deals range from a 10 per cent discount at selected shops in Times Square, to 10 per cent off at UA Cinemas to discounts of up to 40 per cent on selected items at Broadway.
Many of the offers have a short shelf life, so it pays to keep checking your card provider's website.
It is also worth thinking about what discounts you will be most likely to take advantage of when selecting your card.
For example, the DBS Black Card has travel offers, including a 10 per cent discount on hotel reservations made through Expedia.com.hk and a number of hotel chains, while the China Construction Bank credit card offers discounts at more than 50 restaurants in Hong Kong.
Finally, make sure you understand all the terms of the discount, as in many cases it only applies to selected merchandise or requires minimum spending.
So are the rewards offered on credit cards good enough to make it worth taking them out?
The key is to remain disciplined. Make sure you repay your balance in full each month so you never have to pay interest, and ensure that you only use your card for spending you would conduct anyway.
Finally, ask yourself if the rewards on offer are something that you really want or will really use.