Which is best: monthly or annual credit card points capping?

Capping or reducing the number of frequent flyer points you can earn from a credit card is nothing new, although a growing number of banks now favour monthly points caps as opposed to the traditional annual limit.

In short, you earn Qantas, Virgin Australia or other airline frequent flyer points on spends up to a certain amount each and every month, before the earning rate takes a dive or is halted altogether until your next statement arrives.

But is monthly capping or tiering the best choice for frequent flyer hopefuls? Here’s what you need to know.

Credit card frequent flyer monthly points capping

It’s no secret that we favour credit cards without a frequent flyer earning limit, but if you have to settle for a monthly cap, it has its positives.

Rather than an annual ceiling, you’ll likely be more aware of a monthly limit and how close you are to reaching or exceeding it, as your ‘balance owing’ figure displayed in the online banking window gives a good indication of how many points you’ll have already notched up that month.

Regardless of how much you spend, you’ll also earn points throughout the year – a better option for some as your frequent flyer account balance continues to grow month-on-month, rather than remaining stagnant as it would with a yearly cap.

The drawback? When you actually use your travel-themed credit card to book international flights and accommodation, you’ll likely exceed that monthly cap and earn half-to-no points on a solid chunk of your spend in that statement period.

For example, the Woolworths Money Qantas Platinum Visa card will soon award full points only on the first $2,500 spent each month, and half-points thereafter – so if you normally charge $2,000 every month but also fork out a further $3,000 on an airfare, 50% of your outlay is earning points at a reduced rate.

Credit card frequent flyer annual points capping

Unlike monthly capping or tiering, annual limits let you spend as much or as little as you like every month without worrying about an arbitrary statement cap – provided you stay within the overall yearly points cap.

You also don’t waste your potential frequent flyer haul in the ‘slow’ months and miss out in the ‘big’ months, giving you the freedom to use the card as needed rather than timing particular purchases to land on one statement or the other.

But once you’ve reached your annual cap, that’s it – any further spend on that account won’t earn a single point until you’ve brought in the New Year, or in the best case scenario will earn points at a significantly reduced rate.

We suspect that’s why banks are now gravitating towards monthly caps to encourage year-round spending, although for consumers, we’d always prefer an annual limit over a monthly one.

The bottom line: If you’re going to earn points from your credit card, you may as well earn them at the earliest opportunity, and if you do happen to exceed the limit on one piece of plastic, you can always whip out another.

Follow Australian Business Traveller on Twitter: we're @AusBT

Chris C.

Chris is a a former contributor to Executive Traveller.