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Treat yourself: Choosing between rewards credit cards


Kate Wick

By Kate Wick

4 min read

You'd be hard-pressed to find someone who doesn't enjoy something for free, particularly when they are being rewarded for loyalty.

If used wisely, a rewards credit card can offer just that – from a free flight or kitchen appliance to even getting cold hard cash back from the provider.

Used in the wrong way or choosing the wrong card, however, and a rewards program can be a costly option.

So, with the glut of various rewards credit cards out on the market, how do you decide which is the one for you, or whether this option is for you at all? There is a relatively simple method to choosing between them. 

Make sure the reward is something you want

Perhaps above all else, you need to choose a reward program that rewards you with something you actually want. There are all kinds of reward cards out there, netting you points for everything from clothing and electronics stores to restaurants and airlines. You could be one of the 12.7 million Australians that Roy Morgan reports went on holiday in the year to September 2014. If so, you're probably more interested in flights and accommodation than grocery discounts. 

When you compare reward credit cards, your first question should be whether the reward offered is actually something you want. You don't want to find yourself spending just to earn points you won't ever use — or enjoy. You might also ask yourself if you wouldn't rather have cash back as a reward, giving you the flexibility to spend your points on whatever you deem fit. 

Match the card to your spending habits

Most reward cards give out points based on spending at particular, affiliated stores and brands. The idea is that, by dangling this carrot in front of the card user, they'll have an incentive to spend, or spend more, on a company they might otherwise give short thrift to. 

A smart card-holder will pick an option that matches their existing spending behaviour. Instead of being gently pushed into spending on a brand you wouldn't normally go to, your card should slot in neatly with the stores and products you would otherwise spend on.

Look at the whole of the card

All of this is not to say that the reward on offer is the only thing that matters. Just as with any regular regular credit card comparison, you should look at all of the card's rates, fees, terms and conditions in order to decide whether it's worth signing up. For instance, one card might have slightly more appealing rewards, but it might also have a much higher interest rate that could make you think twice about choosing it.

Similarly, many reward credit cards have high annual fees that can offset the potential freebies they offer. And unless your rewards outweight the annual fee you could be better off looking at a low-rate credit card with little or no annual fee. According to a Reserve Bank of Australia bulletin from 2012, reward points on cards have become less generous since the early 2000s, while annual fees have increased. Finally, claiming rewards is not always a straightforward process — rather than taking card providers at their word, read the fine print and know exactly what you're getting into. 

Ask how far the points go

As a consumer, you want to get value for money. With reward credit cards, this means making sure that you're not having to spend more than you would with another card to get the same or similar reward. 

Most people logically assume this means looking at how many points each spent dollar earns you. The real test of a rewards credit card's value, however, is in how many points it takes to receive a reward. After all, two cards might both accrue one reward point per dollar, but if one requires 7000 points to redeem for a flight and another requires 5000, then one is a substantially better deal. Using a site like RateCity you can now compare rewards credit cards and how they stack up, point for point.

Of course, you might decide that you don't want a credit card after all and would rather put the money you're paying for it into your savings account. Perhaps you don't spend enough to justify the expense, or maybe you spend too much and need to eliminate the temptation. Whatever the case, be sure the reward credit card makes sense for you.

To find out which rewards credit cards are available and which would suit your needs, click to compare here.

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