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Finding the best deals, episode 3: credit cards and freebies

With so many brands vying for our attention these days, it can be hard to decide on a purchase unless it comes with an offer.



But the variety of shopping privileges and promotions out there can be pretty confusing for shoppers.

So, what kind of promotional campaigns cater best to your whim?

First of all, you might want to find out what the privileges are. Some come so subtly disguised that you don't even realise they are actually privileges.

First, let's differentiate tangible privileges from the intangible ones.

Tangible promotional offers are give-away items often seen at department stores and consumer fairs. They range from inexpensive merchandise like bags or coffee mugs, to gold necklaces or smart phones.

Banks or credit card operators often lure shoppers with items whose claimed value is higher than their actual cost. But the higher the perceived value of the freebie is, the bigger the privilege seems to be. If a purchase of Bt5,000 gets you a freebie worth Bt500, a customer might think that the returned value is 10 per cent.

In fact, those give-aways and other tangible benefits usually cost less than half of their claimed value; their impact on the customer is, however, much stronger. Customers might not realise that these freebies are already covered by the merchant transaction fees that a card operator receives from every credit card purchase. Thus, card customers are paying for their own free gifts.

The other form of benefit is less tangible. Some credit card privileges are based on a cost-saving concept - stronger in value, but often taken for granted.

For instance, many card members forget to ask for a waiver of their annual fees. If customers wish to request a fee waiver, the card operator usually requires a phone call or even a minimum purchase as a trade-off. Still, for a saving of Bt5,000, a single phone call is worth it.

Another example of intangible give-aways are free reward points or air miles. Did you realise that every Bt20-25 spent on a credit card to earn you free a reward point or air mile is, in fact, at a cost to card operators?

Because air miles and standard reward points are a form of future give-away, banks or card operators need to reserve a budget for when you want to redeem those points. That means they must set aside an amount equivalent to the committed earning rate from your purchase. Often, the cost of point-earning rates of some credit cards is even higher than that of merchandise such as bags, mugs, etc. But because the points are gradually accumulated, a card customer often doesn't realise their real value.

Most keen travellers are more interested in accumulating points and air miles, despite the fact that they have no declared commercial value. And in reality, their choice is a wise one, as they wait for their points or miles to add up so that they can redeem them for a much more valuable prize.

Janejit Ladpli is vice president for Travel & Leisure Marketing at Krungthai Card (KTC).


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