Treat yourself: Choosing between rewards credit cards

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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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. 

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.

How do you cancel a credit card?

It’s important to cancel your old cards to avoid any additional fees. Unless you’re doing a balance transfer, you’ll need to pay the outstanding balance before you cancel your credit card. If you’ve opted for a card with reward points, make sure you redeem or transfer the points before you close your account. To avoid any bounced payments and save yourself an admin headache, redirect all your direct debits to a new card or account. Once you’ve done all the preparation, call your bank or credit card provider to get the cancellation underway. Once you receive a confirmation letter, destroy your card and make sure the numbers aren’t legible.

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.

Where can I get a credit card?

Looking to get your first credit card? You might be confused as to exactly where to go to apply for one. Here’s where to go when you are ready to put in that application.

The bank: Your bank is a great place to start, provided that you have a good banking history. Since you already have a financial history, you have more chance of your application being approved.

Credit card provider: Another option is to apply for a credit card directly from the issuer, such as Visa, Mastercard or Amex. This will most likely be an online application, so do your research and apply for a suitable card for your circumstances.

Major retailers: Coles, Woolworths, Myer and David Jones all have credit cards available. But watch out for the interest rate and annual fees – these cards are designed to help you spend more in store.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

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. 

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

How to make a credit card online

If you’re wondering about how to make a credit card online application, here are some steps to follow:

  • Test the market. Many credit card options are available online. Compare providers by fees, interest and perks to ensure you’re getting the best deal.
  • Complete the application. Once you’ve selected a card, head to the provider’s website and complete the online credit card application form. Forms vary by providers.
  • Provide details. Most cards require you to meet age, residency, income and credit status condition, and you need to provide details like a bank account statement to prove this.
  • Review details. Ensure the information you’ve entered is correct.