Who doesn’t like getting an extra deal on a regular purchase? Credit card rewards can be an easy way to make the most of a purchase you were already going to make. Different reward schemes offer different deals. What’s best for you may depend on your spending habits and your lifestyle. However, rewards credit cards often come with slightly higher fees.
If you’ve been wondering whether or not it’s worth signing up for a rewards credit card, we’ve got the answer. Let’s have a look at what you can do with your rewards and if it actually saves you money in the long run.
What are credit card rewards?
Many credit cards come with the option to use a rewards scheme. However, some Aussies choose their credit card providers specifically based on the rewards program offered. Every time you spend money, you earn rewards points that you can use later on. Depending on the rewards program, you can exchange points for flights, gift cards, cashback, or can use them to purchase retail products.
In some cases, you can choose your rewards method upfront and once the reward threshold is reached, you won’t have to do anything to claim it. With other credit card rewards programs, you have to actively choose your reward option to receive a benefit. Your rewards points may not be available forever, often they expire if you don’t use them in a certain time-frame.
What to look out for
When comparing the best rewards credit cards, there are a few things you should keep in mind. Not all cards will offer the same deals and depending on your spending habits, some may be more useful for you than others. If you are not a frequent flyer, you may choose a gift card reward over frequent flyers points or prefer to go for a cash back option.
- How many points do you get per dollar? Not all rewards credit cards are created equal, and while comparing deals, you want to keep an eye out for how many points you get per dollar that you’re spending. As a rule of thumb, one point per dollar is pretty good value.
- Do your points expire at some point? In some cases, you will have to spend your points by a certain date or they will expire, while others have no expiry date and will continue to accumulate points.
- Are there any additional perks and offers? Some offers are limited to a certain time frame after signing up or only available to you if you spend over a certain amount each month.
- Which retailers you can get perks and deals with? It makes sense to choose a card provider that has teamed up with your favorite stores. This will ensure that you get maximum benefit out of your rewards deals.
- What fees and costs are associated with your card? Before choosing any rewards credit card, you should check what costs they come with. As well as the annual fee, you should know the interest rate in case you carry a balance onto the next month. Additionally, you may pay extra fees for cash withdrawal and foreign transactions. These are all things to consider before you sign up.
Types of credit card rewards
There are different types of credit card rewards and depending on your shopping habits, it makes sense to choose the right one for your needs. The four most common ones are frequent flyer credit cards, bank rewards credit cards, cash back credit cards, and retail and supermarket rewards cards.
Frequent flyer points
As a member of a frequent flyer program, you can earn extra miles on your credit card and at some point, turn them into a flight. For credit cards like Qantas Frequent Flyer or Emirates Skywards, your points will automatically be added to your account. In other cases, your credit card provider may allow you to transfer your rewards points to a frequent flyer account of an airline. This is a good option if you prefer to fly with different airlines or want to be more flexible with what you are using your points for. However, the number of frequent flyer points you get is often different from the number of credit card reward points you already had. The exchange rate may vary depending on your provider.
Bank rewards points
Many banks offer their own credit cards rewards system. Often you can choose how you would like to use your points: Options may include cash-back, flights or retail products of your choice. Some credit cards even come with instant reward options in-store of partnering stores like Myer or David Jones.
Cashback credit cards
There are different ways to receive cashback on your credit card. Depending on your scheme, you can receive a certain percentage of your spendings as cash back onto your credit card or specific gift cards and vouchers will be given to you once you spend a certain amount. Either way, in the long run, you’ll end up redeeming money on each purchase you are making.
Retail and supermarket rewards cards
These rewards credit cards are linked to a certain supermarket or retail store and come with benefits if you are shopping at the store frequently. They come with perks and special discounts with that specific retailer but like any other credit card, they can be used in other stores as well.
Popular rewards credit cards
Please note, the information shown in the following table reflects the current rates offered by the below credit card providers. Products are ranked based on the Product Review ratings, with rates listed as of September 2020. Ensure you check upfront with a provider to further understand if their product meets your needs.
|Product||Annual Fee||Purchase Rate||Interest Free Period|
|Qantas American Express Discovery||$0 p.a.||20.74% p.a.||44 days|
|Latitude Infinity Rewards Visa||$69 p.a.||20.69% p.a.||55 days|
|Qantas American Express Ultimate||$450 p.a.||20.74% p.a.||44 days|
|Commonwealth Bank Awards||$59 p.a.||20.24% p.a.||55 days|
|Coles No Annual Fee Mastercard||$0 p.a.||19.99% p.a.||55 days|
|Coles Rewards Mastercard||$99 p.a.||19.99% p.a.||55 days|
|Commonwealth Bank Diamond Awards||$349 p.a.||20.24% p.a.||55 days|
|GO Mastercard||$0 p.a.||22.74% p.a.||55 days|
|Westpac Altitude Black||$199 p.a. / $250 p.a. / $300 p.a.||20.24 to 20.49% p.a.||At least 44 days|
|Westpac Altitude Platinum||$49 p.a. / $150 p.a. / $200 p.a.||20.24 to 20.49% p.a.||At least 44 days|
|American Express Explorer||$395 p.a.||20.74%||55 days|
*Rates are subject to change over time.
Pros and cons of rewards credit cards
Earning rewards points while spending money sounds like a pretty good deal. Whether or not this is a good option for you depends on a few factors. Let’s start with the pros:
- Rewards points. The best thing about credit card rewards is that you get some extra benefits without having to do much. You earn points for money that you would spend either way and rewards schemes often offer extra deals. Most cards will offer you bonus deals if you spend over a certain amount within the first few months.
- Special deals and offers. When first signing up for rewards credit cards, they come with a bunch of deals to get you started, some even come with perks at certain shops after the initial introductory period. Additionally, you may get benefits such as special lounge access when flying or additional insurance options. However, this may be reflected in the annual fees.
While there are certainly benefits, rewards credit cards also come with some warning. They may give you a great incentive to overspend or buy things you wouldn’t necessarily buy, for the sake of gaining more rewards points. Let’s look at the cons:
- High annual fees and rates. Rewards credit cards often come with higher annual fees and interest rates to make up for the benefits. Especially if you are carrying a balance on your credit card, this may end up costing you more in the long run. Ask yourself if it’s really worth it?
- Incentive to spend more money. Getting points can make you spend more money than you normally would. If you’re a few points shy of claiming a reward, you may be more inclined to make a purchase. By not falling into any of these traps and spending responsibly, you should get the most benefits out of your rewards credit card.
- Not all credit cards offer all the rewards you may want. Again, this may be an incentive for negative financial behaviour. Instead of opening multiple rewards credit cards, do your homework and look for what card works best for you. Otherwise, it may be difficult to keep track of your spendings.
Whichever card you choose, be sure to stay on top of your repayments to avoid excessive interest rates. Answer the survey below and let us know some sweet deals you have scored so we can share them.