Making the most of your rewards card

It’s easy to see why people are enticed by a credit card with a rewards program. The idea of getting ‘free’ flights, giftcards or even new products for your home can be hard to resist.

However, RateCity research has revealed there are a number of traps consumers fall into in the search for the right card.

Firstly, not all rewards programs are equal.  If you were a young professional in the market for a new car, you wouldn’t buy the family wagon. And the same is true for credit card rewards.  There is no point signing up to a Qantas frequent flyer scheme if you never fly anywhere.

HOW TO SEARCH FOR A REWARDS CARD ON RATECITY

To compare rewards cards click here.

Use the filters to help narrow down rewards cards that may suit your preferences.  You can use some or all of the filters depending on what you are looking for.

You could start by choosing the type of rewards program, e.g. Qantas Frequent Flyer. Then consider, what sort of rewards you are likely to redeem.  For example, you can choose from domestic or international flights.

If you would like to narrow down cards from a particular credit card company you can search by company name, e.g. American Express.

Or you may want to compare cards based on the annual fees.

Getting started 

Start your research for a new card by thinking about what you are going to use it for and the type of program that would best suit your personal needs.  It’s easy to be enticed by clever, glossy marketing, but step away and consider whether the perks on offer are in line with your lifestyle.

Consider how much you spend 

Next, realistically think about how much you are going to spend on the card. Rewards programs are built on a spend more receive more basis, so if you only use your card occasionally, it is unlikely you will ever accumulate the points required to redeem you dream reward.

Also, if you don’t pay your credit card off in full each month, you may void your rewards points altogether.

Weight up the cost of the annual fee 

Now consider the annual fee on the card. If the value of the rewards you are likely to get in any given year is less than the annual fee, we have a problem. No fancy toaster is worth paying an annual fee of $400. You may be surprised to learn there are a handful of rewards cards on the market with no annual fee whatsoever, such as the American Express Essentials card and Coles No Annual Fee Mastercard.

Check earn and burn rates and points caps 

One of the ways people get caught out signing up to the wrong rewards card is by forgetting to check ‘earn’ and ‘burn’ rates and points caps. This is where it gets a bit tricky and using a comparison site can sometimes help with some of the homework.

Consider how much you are likely to spend in any given month on the card and work out the maximum number of points you can earn.  Then compare your results with the company’s product table or points required to fly to your dream destination.  If your card falls short of expectations, it’s probably not the right card for you.

Watch out for complicated fine print 

When trawling through potential rewards cards, also check the eligibility requirements required to redeem points.  There’s nothing the credit card company lawyers enjoy more than writing fine print.  And let’s be honest, we could all think of better things to do than spending an evening reading terms and conditions, but if you have the stomach for it, it’s worth seeing how your card stacks up.  

Some cards have strict requirements on where you can earn points, e.g. specific supermarkets, petrol stations and restaurants. There’s no point signing up for a Woolies card if you do the majority of your shopping at Coles.

And finally, if you have a rewards card with points, make sure you use them.  There’s no point having these perks if you never get around to redeeming them.

REWARDS CARDS

COMPANY  PRODUCT  RATE  ANNUAL FEE  INTEREST FREE DAYS
American Express Essential Credit Card 14.99% $0 55
Coles  No Annual Fee Mastercard 19.99% $0 55
Myer Myer Visa Card 20.69% $69 55
HSBC Platinum credit card 19.99% $129 55
Virgin Australia Velocity Flyer card 20.74% $129 44
Jetstar Platinum Mastercard (Jetstar Dollars Program) 19.99% $169 55

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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.

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. 

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.

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 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.

Which credit card has the highest annual percentage rate?

The credit card market changes all the time, so the credit card with the highest annual percentage rate is also liable to change.

Keep in mind that credit card interest rates are expressed as a yearly rate, or annual percentage rate (APR). A low APR is generally good but also consider:

  • There can be different APR's for each feature of the card (e.g. purchases may have an APR of 14 per cent, while cash advances on same card could have an APR of 17 per cent.
  • Credit cards with a variable rate can change throughout the year, affecting your APR, so check the full details.
  • If you pay your balance in full every month, having the lowest APR is not as important as the other fees associated with the card. However, if you carry a balance from month to month, then you want the lowest APR possible.

How many numbers are on a credit card?

The numbers on your credit card actually follow a universal standard which is used to identify specific functions. Each credit card has a different amount of numbers. Visa and Mastercard have 16, American Express has 15 and Diner’s Club has 14. 

The first number on a credit card always identifies what type of credit card it is. Visa cards start with a 4, whereas Mastercard starts with a 5 and American Express with a 3. The remainder of the digits represent the account number, including the last number which is used to verify that your credit card is actually valid. 

Credit cards also have additional verification numbers, which are mainly used when the card isn’t present for phone and online purchases. These are the three-digit numbers on the back of Visa and MasterCard or the four-digit numbers on the front of an American Express card.

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.

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.

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 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.

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.