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.
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.
|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|