Best Rewards Credit Cards

What is a rewards credit card?

Rewards credit cards are like loyalty programs attached to credit card. When you use your credit card, you’re rewarded with a certain point value per dollar spent, for example, you can earn 1 point per dollar. You then redeem points for rewards, which can span everything from travel rewards, supermarket rewards, cash rewards, store rewards and gift cards.

Should I get a rewards card?

If you're unsure of whether you should sign up for a rewards card, consider the following questions.

Can you pay off your monthly balance on time?

Does the type of reward offered match your interests?

Make sure to check out what kind of rewards are on offer to get the best rewards credit card for you. Opt for rewards you would normally use in everyday life, so you can enjoy perks that are practical. Here are common types of rewards offered:

• Travel rewards could come in handy if you jet set a lot. You can use points to purchase flights, upgrades (for example upgrading premium economy to business class), accommodation, complimentary travel insurance and concierge services.* Check out a frequent flyer credit card like the top-rated Qantas American Express Discovery card, or one linked to the popular Velocity frequent flyer program with Virgin Australia.
• Supermarket rewards offer you a discount on your grocery bill when you spend enough, such as the $10 discount you get per 2,000 flybuys points with the Coles Rewards Mastercard.
• Cashback is an attractive option, as it supplies you with cash rewards once you’ve spent enough on your card.
• Gift cards are available for redemption from selected retail partners.
• Store rewards let you redeem a variety of items, from beauty products to personal electronics. Examples include the Qantas Store and GO Rewards online store.

*Using a frequent flyer card, you'll get the best value for your points by redeeming them for: upgrades starting from Premium Economy, followed by airfares. Store purchases offer the least value. As an example, the iPhone 11 Pro 64GB, which retails for $1749, will cost you 304,180 points in the Qantas store. Compare this to a one-way business class trip to LA, which can cost upwards of $3000, but only 108,400 frequent flyer points – offering much better value.

Are you going to spend enough to qualify for the rewards?

Consider everyday expenses like groceries, petrol and restaurant bills – these can be paid with your rewards card to bump up your points. If you pay rent, does your real estate agent allow you to pay with a credit card? Sometimes you can even pay mortgage repayments with a credit card, although these will likely incur a fee. You can also usually add additional cards and link them to the same rewards program, so multiple family members can contribute to the minimum spend amount with their regular spending.

However, keep in mind that not all purchases made with a rewards card will earn points. For example, water and electricity bills are usually exempt.

Do credit card fees and rates cost more than the rewards are worth?

While the idea of working towards a free flight or a fatter wallet by earning rewards is appealing, if you end up forking out more in credit card fees each year than the value of rewards you get back, you're probably better off without the card.

Here's a list of the main rates, fees and 'limited time' offers associated with a rewards card:

• Interest-free period: If offered, this is short, usually 44 days or 55 days.
• Introductory interest rate: A discounted purchase rate the bank offers for a limited period of time. Make sure to check the ongoing purchase rate for the interest charges you'll pay thereafter.
• Purchase rate: The interest rate you’re charged if you have a balance owing at the end of the month. Look for a low ongoing rate that you can afford alongside the minimum repayment amount, if you do miss a payment.
• Annual fee: Not all cards have this, and the fee will generally increase depending on: the minimum income requirement for the card, and the level of premium perks offered, like travel insurance. As an example, the ANZ Rewards credit card, requires you to earn $15,000 a year, and has a relatively low annual fee of $80. Other annual fees can range up to $700. Some cards also have a reduced annual fee for the first year.
• Cash advance fees: These are charged if you transfer funds or withdraw money at an ATM or bank teller, and attract a cash advance interest rate.
• Late payment fee: If you don’t pay your bill on time, this is charged along with the purchase rate.

Other fees include rewards program fees, international transaction fees, and penalty fees if you exceed your credit limit.

What are the points really worth?

• Are there bonus points for signing up? This offers a nice little lump sum of points to get you started, but check the terms and conditions to make sure you don't need to spend an unreasonable amount on the card in a short period of time to qualify.
• What’s the points currency? How many points do you get for every $1 that you spend? Some cards may have a lower point value, like 0.75 points per $1, but offset this in the form of lower, or zero, annual fees or other perks.
• What is the points value? Do some research to find out. For example, if you’re interested in Qantas Frequent Flyer points, consult the Qantas Classic Flight Rewards Tables online to see how many points you need for your planned trip. You might find out it will take you years to save up the number of points you need, potentially leading to points fatigue. You can then make an informed decision to choose a card with a different reward.
• Is there a points cap? This can stop you from earning any more points after you hit a certain limit (a ‘hard cap’). For example, points earned on the GO MasterCard are capped at 100, 000 a year. Sometimes points are ‘soft capped,’ meaning your points rate is reduced after you spend a certain amount.
• Do points expire? If you’re saving up for a major points redemption like a flight, make sure to triple check the expiry date – it would be tear-worthy to have points expire before you’re all set to book.
• How easy is it to redeem points? Make sure that your points balance is easily accessible for checking so you don’t stockpile points without realising. Check whether the redemption process happens online, over the phone, or automatically – for example, when you get offered a discount on your next grocery shop after spending a certain amount. You can also read reviews to find out firsthand how other credit card users found the redemption process.

As a catch-all, always remember to read the Product Disclosure Statement so you’re aware of any fine print that may preclude you from redeeming points.

The bottom line

Overall, if you're interested in getting a rewards card, you should be certain you can pay it off on time every month, to avoid getting hit with a high purchase rate. If you can do this, and you're not overspending in order to reach the minimum credit limit or to earn extra points, a rewards credit card might be something you want to put on the table.

Also make sure to pick a card type that offers the kind of rewards you want, so you can more easily book that trip or have that extra cash sitting flush in your pocket, just like you deserve.