For the last four to five years, I have been proudly credit card free. Similarly, my partner has been credit card free for at least three years now. I had terrible experiences with credit cards as a young adult, starting from being approved for multiple credit cards at age 18, not really understanding how exorbitant the interest rates were and proceeding to live from pay-check to pay-check with a large credit card debt. When I began to become more financially aware, I paid off all of my credit cards at the first opportunity and avoided them like the plague. I understood that there were benefits in having a credit card, if you used them as a financial tool, and with restraint. For example:

• If you have an offset account attached to your mortgage, you could put all of your expenses on your credit card and pay it off once a month, so that your money is sitting in your offset account decreasing the interest payable on your mortgage.
• Savvy credit card users make all of their purchases through their credit card to benefit from the accumulation of points, which go to paying for flights, gift cards, accommodation, etc.
• Some limited insurance is offered through credit cards and buyer protection. For example, some credit cards offer travel insurance if the flights are purchased using the credit card. Most credit cards offer protection against fraudulent transactions.
• Some people keep a fully paid off credit card handy in case of an unexpected emergency, such as needing to buy flights home or to see family at short notice.  This means they are able to invest their money in less liquid assets rather than keep an emergency fund.
• Utilising a low interest balance transfer is a good way to consolidate all credit cards into the one place, at low interest, and begin paying them off.

However, for the past 5 years I had not been convinced that these benefits stacked up against the peace of mind I had from not having a credit card and therefore not having the temptation (and means) to spend funds that didn’t belong to me.

The opportunity too good to turn down

Until about a week ago that is. As I was browsing a finance forum I came across an offer for the AMEX Velocity Platinum Card which came with between 100,000 to 110,000 (depending on referral) velocity points. The points are payable once $1000 is spent on the card within the first 3 months. I didn’t know much about velocity points either but this seemed like an unusually high amount of points so I looked into it further.  My partner is from Ireland, which is approximately an 11,000 mile trip from Australia. The velocity points tables indicated that an economy ticket for a trip between 9,501 and 15,000 miles was 62,500 points for economy or 93,800 points for premium economy. Better still, the points can be pooled between family members. A flight from Melbourne to London is 62,500 points plus roughly $110 in taxes. A flight from Sydney to Fiji is only 17,000 points plus roughly $100 in taxes! Velocity have published some of the most popular routes flown using reward points here.

What you get

The following bonuses also come with the card. There are other benefits however these are the ones that really stood out to me, along with the 110,000 reward points.

• Two complimentary single entry passes to the Virgin Australia lounge each year
• Complimentary Virgin Australia return domestic flight every year
• Domestic and International Travel Insurance
• Travel inconvenience insurance

What you give

The annual card fee is $349.00 per year. I would consider this outrageously steep, however factoring in the free return domestic flight each year (easily valued at $300) and the 110,000 velocity points (I would value this at around $1,500), the fee easily pays for itself. I figure that I can apply for the card, use the free domestic flights, spend $1000 over 3 months to earn the velocity points (which are transferred to the velocity account on a monthly basis) and pay off the $1000 before any interest is incurred on the card.

Of course, you also have to consider that when you apply for the card:

• The application will come up on your credit report. This is not an impediment with me because I haven’t had a credit card for so long, my credit history will not as a result of this application. Or in other words, I believe the risk of slightly impacting my credit report is worth the reward. I would definitely refrain from chasing credit cards just for the bonus points and other benefits as a strategy.  This would be quite detrimental to your credit history as it would look like you have been signing up to credit cards left right and centre (rightly so) and lenders would be more reluctant to deal with you.
• Self control is also critical, or else I would be giving up a lot more than the $349 annual fee. I am confident I will be paying off the card in full each month and will not be tempted to overspend on it as I once would have. In fact, I’m worried that I won’t be able to meet the $1000 over 3 months requirement, however I have read on another forum that the card can be linked through PayPal. I buy a lot of day to day things online, so being able to have some online spending count towards the $1000 requirement will be helpful. Further, if you shop through an online store by clicking on it through the velocity website, you receive double points.
• You’ll have to go through the application process where your creditworthiness will be assessed. Be prepared to disclose your household income, expenses, address and work history. I’ve discussed my experience applying with AMEX below.

The fine print 

I read through the terms and conditions regarding the bonus points to find out if there were any catches and as far as I can see, there are no alarm bells. Any points awarded through the AMEX are transferred to your velocity account on a monthly basis. If, at the time of applying for the card you aren’t a velocity member, then AMEX will arrange to have a velocity account set up for the points to be credited into. I then went to the velocity website to read their terms and conditions. The points expire after 36 months (plenty of time) and can be transferred between family members (this includes defacto partners) which is a real plus for me. This means that if I sign up and then refer my partner, and he then signs up, we would earn between us a total of 240,000 velocity points which is enough for a return premium economy flight to Ireland or just 10,000 points shy of a return trip business class. International reward flights must be redeemed at least 24 hours prior to departure whilst domestic trips need only be booked 4 hours in advance. The points offer I’ve mentioned is only available to new AMEX customers. Card Members who currently hold or who have previously held any other card offered by AMEX Australia in the previous 12 months are ineligible. However, I have read on the forums that if you have an AMEX issued through another bank (i.e ANZ, CBA etc) you are still eligible.

In addition to the annual fee, there are other fees to consider however they don’t mean too much to me because they are avoidable. I have enough savings accumulated to feel confident that I won’t leave a balance on the card and therefore the interest rate or dishonour fee doesn’t bother me. If you are less confident about this, you should carefully review the interest rate, over-limit fee and late payment fee and opt for a card with a lower interest rate (or don’t sign up for a credit card at all). There are also foreign transaction fees calculated based on 3% of the converted amount though from what I’ve read online, a 28 degrees MasterCard is a good option for travelling.  The other fees that were listed with the card include the dishonour fee, late payment fee, record of charge fee, additional statement fee, cash advance access fee, over limit fee, over the counter fee and credit plan establishment fee (for balance transfer).

Eligibility criteria

AMEX list their eligibility criteria for the particular card I applied for as follows:

• Aged over 18
• Australian citizen or permanent resident or hold a current Business Long Stay Visa (subclass 457)
• Personal gross (pre-tax) annual income of $65,000 or more
• No history of bad debt or payment default
• If self-employed, trading for at least 18 months or 12 months if holding an existing American Express issued Card

I meet this criteria however I was surprised at how cut back their application form was. It only asked me for details of my current employment (although I have only been there for 3 months) and didn’t ask me about my savings levels at all. It did ask me how much my monthly rent/mortgage/living expenses were, in addition to any monthly repayment amounts on personal loans or car loans. Due to the very light application form, I wondered if I would be approved. Lo and behold, the next day at around 1 in the afternoon, I received a text message confirming that I had been approved.

If you are interested in this offer, you can sign up without a referral and earn 100,000 velocity points here.  Alternatively, you can sign up using my referral link and earn 110,000 (an extra 10,000) velocity points here. If you sign up using my link and are approved, I will earn 20,000 velocity points which will be credited to my account. You can then refer your friends and family in the same manner if you choose to through this page.

What kind of credit card suits you?

The first question is, why do you need or want the credit card in the first place? If the credit card is to serve as an emergency fund, I would be looking for one with as low annual fees and interest as possible. I would also be saving in the background, as although a credit card can be used in emergencies, consider the interest that will incur if you don’t pay off the balance on time. If the credit card is to use for everyday spending in order to increase the balance of your own funds in your offset account, look for a credit card that is widely accepted with retailers and doesn’t incur extra charges for use. If you are a regular travel, a credit card that comes with travel insurance, has a good arrangement for earnings points and comes with bonus domestic flights are things to look for. If you can’t help spending whatever you do have however, approach credit cards with major caution. You are much better off saving the amount, say $3,000 in a debit account and using it with the mentality of a credit card i.e. always trying to maintain that balance. Living without a credit card is completely doable now that there are debit cards. The only issues we ever ran into were around car rental places which would only authorise a credit card for security purposes whilst we rented the car. Because we didn’t have one, we were required to pay the insurance excess which was around $400.

Some useful websites are comparison website Canstar, point comparison website Pointhacks and the cards section of the Whirlpool Forum.

In conclusion, coming across this card has convinced me that credit cards are not all evil. It’s about using them wisely, rather than losing control to them. I would also advocate being sceptical, researching and also having a clear financial objective of what you are hoping to achieve by having the credit card.

In the interest of full disclosure, I was contacted last year to see if I was willing to write an article about credit cards. At the time, I was still anti-credit card and declined the offer. It wasn’t until I had applied for this credit card and written this article that I remembered the offer. I contacted the agency to see if they were still interested in working with me.  As such, although this is technically a paid post, these views are wholly my own and I stand by them. I will continue to report back regarding my experience using the card, with customer service, redeeming the points, etc.

I would love to hear your thoughts and experiences. Does your credit card work for you, or do you work for your credit card?

That Career Girl

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