More points for Supermarkets, Petrol etc... why?

[ferni]

So there is a trend recently that some credit card companies are introducing a tier system for point earn on different types of spend... ie 3 points at supermarket, 2 at petrol station etc...

What I don't understand is why? I would have though Supermarkets and Petrol stations would have some of the lowest merchant fees as they are usually big chains... which means less $ to pay for more points?

I'm also interested in what counts as a spend at a petrol station, if i go and buy some milk at the petrol station (without fuel) does that count for the points? What about if i go to a 7/11 that doesn't even pump fuel, will a spend there count?

What about utilities, what counts as a utility? Water and power are 2 obvious ones, what about Internet? Phone? Body Corp? Council Rates? Health Insurance?

 

[NM]

I think it is because supermarket spending is "normal" household spending and therefore generally limited in volume. So they can reward people using Amex for their normal every-day personal spending. This is in contrast to people using Amex cards for business expenses (not personal expenses) such as paying suppliers/vendors, purchasing merchandise for resale, manufacturing costs, business travel etc and earning very large numbers of rewards points in a short amount of time.

Most people would spend less than say $300 per week at supermarkets and maybe $150/week at petrol stations. So their points exposure is limited and makes the card attractive to regular families rather than seen just as a business product. But business expenses can be hundreds of thousands of dollars through the card, earning huge amounts of rewards points.

 

[ferni]

Fair point. But what I don't get is that if you take that view then every dollar spent(and point earned) loses the CC companies money which I highly doubt... so why is it they can make money from people spending just a couple of thousand $ a month on CC vs people who spend hundreds of thousands of $ a month?

 

[legroom]

.......What about utilities, what counts as a utility? Water and power are 2 obvious ones, what about Internet? Phone? Body Corp? Council Rates? Health Insurance?

Definitions vary with providers.

Macquarie Bank excludes phones from the definition of "utilities".

I agree with NM's view that AMEX positions its cards for family-oriented spending, rather than for other larger expenses (new car / return F to Europe etc..).

That's why my wallet is bulging with cards - each with its own little niche.

I used to have only one card - that's why I kept heading to the back of the bus to seat 88E where I got to sit between two strangers for 12 hours.

Not anymore !

 

[ferni]

Definitions vary with providers.

Macquarie Bank excludes phones from the definition of "utilities".

I agree with NM's view that AMEX positions its cards for family-oriented spending, rather than for other larger expenses (new car / return F to Europe etc..).

That's why my wallet is bulging with cards - each with its own little niche.

I used to have only one card - that's why I kept heading to the back of the bus to seat 88E where I got to sit between two strangers for 12 hours.

Not anymore !

Where did you find Macquaries definition of utilities? As we have just got the Macquarie CC that gives 5ppd for first 5k spend at Supermarkets, petrol and utilities... keen to know what is counted towards the 5ppd.

 

[legroom]

I raised the phones issue and was told - by head office - that it is not counted for the 5:1 bonus.

Essentially, only items mentioned in their offer (water, electricity, gas) are counted, plus supermarkets / petrol of course.

Good luck!

I had collected some 24,000 out of the possible 25,000 points - after only 3 months.

 

[NM]

Fair point. But what I don't get is that if you take that view then every dollar spent(and point earned) loses the CC companies money which I highly doubt... so why is it they can make money from people spending just a couple of thousand $ a month on CC vs people who spend hundreds of thousands of $ a month?

Its not about how much each point costs them, its about strategic positioning of each of their products into a particular market demographic. Corporate cards are designed for business spending and that part of the market is almost self-driving. But they want to ensure they have a strong presence in the non-business/corporate side of the market (regular personal spending) and since their cards are competing with a large number of products from MC and Visa, and generally have higher annual fees, they need to make it attractive to their target market, and bonus points for regular personal spending that is unlikely to be high-volume "business" spending hits that target pretty well for them. without such bonus offering, I would not have a personal Amex card any more and would have moved all my spending to MC or Visa with low or no annual fee and similar points earning.

Similarly the free domestic airfare thrown in a more of an incentive to personal spenders than people using the card for business/corporate use.