powering smart financial decisions

Credit card rewards: are they right for you?

Credit card rewards: are they right for you?

In the age of online shopping and what seems to be becoming a cashless society, it would be hard to get by without a credit card. But what about credit cards that offer a rewards program? Are they as valuable as your lender would like you to believe?

Like other loyalty programs, rewards credit cards allow you to earn points towards flights, accommodation, specific merchandise, fuel or vouchers while you use your card. The more purchases you put through your credit card, the more rewards points you can earn.

The catch, however, is that you generally have to spend a lot on your credit card before you can claim any rewards. This is fine if you use your card almost like a cash card and pay off the full balance each month, otherwise you may end up getting trapped in a growing whirlwind of debt.

Assessing the benefits

The value of points varies dramatically from one rewards credit card to the next. There are two key factors when choosing a rewards credit card: the amount of points you earn per dollar spent, and the annual fee on the credit card.

Often, credit cards that accrue a higher number of points per dollar spent come with a higher annual fee. While some credit cards have zero or low annual fees – including rewards credit cards that require a lot of spending to accrue a valuable amount of points – rewards credit cards at the premium end of the spectrum can charge fees as high as $450.

In the end, choosing the right card option comes down to how much you are likely to spend each month.

“Choosing the best credit card reward program comes down to your spending habits. You may not want to pay higher interest rates and fees for a platinum rewards credit card if you barely use your card, as the rates may outweigh the reward benefits,” Alex Parsons, CEO of RateCity.com.au, said.

“Likewise, if you are a big spender you may find you’ll benefit greatly from owning a premium rewards credit card, despite an increased interest rate.”

Added costs

A higher annual fee is not the only extra cost to consider when assessing your options. Rewards credit cards generally carry a higher interest than regular credit cards so unless you pay off the balance each month, you will find yourself incurring high interest charges. This additional cost could easily outweigh the benefit of any rewards, so think hard about how you plan to use your card before you choose the best option for your needs.

Did you find this helpful? Why not share this article?



Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the RateCity Privacy Policy, Terms of Use and Disclaimer.


Learn more about credit cards

What's the best credit card for rewards?

There is no one-size-fits-all best rewards credit card. It's best you research what type of rewards program you'd like, as well as the fees, interest rate and conditions associated with those types of cards before making a choice. 

Rewards credit cards can also come with high annual fees that may end up nullifying the rewards, so think how often you use the card to decide whether the benefits outweigh the extra cost for you. A card with a lower annual fee might require a lot of spending to get any useful rewards, while another card with a higher annual fee might need fewer purchases to get a reward. 

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch.