A rewards credit card provides incentives to encourage its use, like points or cash-back.
Using a rewards credit card, rather than cash or a card that doesn’t earn rewards, can result in savings or valuable discounts on things you want — like flights or hotel stays.
Understanding how a rewards credit card works can help you determine whether it’s right for you, and ensure that you maximise its value.
Standard vs rewards credit cards
With a rewards credit card, you’ll typically earn a “reward” — usually points — every time you use it.
In contrast, non-rewards credit cards may offer certain perks, like low interest rates or the ability to transfer a balance, but you don’t accumulate points for spending.
Rewards credit cards may have stricter qualification requirements and higher annual fees than non-rewards credit cards.
Types of rewards credit cards
Australians have plenty of options and can choose the credit card that offers earning and redemption options that match their spending habits.
Before choosing a rewards card, shop around and talk to multiple banks about their products and current promotions. Most card issuers offer similar rewards categories — cash, travel discounts, retail shopping, and gift cards.
Trade your points for cash. For example, with the ANZ Cashback program, you get $5 for every 1,250 points. You can redeem these points to reduce an outstanding balance or deposit their cash-equivalent into an eligible ANZ bank account.
Frequent flyer and travel rewards
Airline credit cards, sometimes referred to as frequent-flyer cards, and travel rewards cards can often be a great choice for Australians who fly or stay in hotels regularly. Points earned by spending with these cards can be used on flights, hotels, and attractions.
Certain airlines also have credit cards, specifically designed for travel rewards. For example, with the Qantas Premier Platinum credit card, you’ll earn one point for every dollar you spend in Australia (plus an additional point on partner products and services), as well as 1.5 points per dollar on international purchases. These in turn can be used to book travel at a discount.
Travel rewards cards often have additional benefits such as airport lounge usage, discounted companion fares, a travel concierge service, and insurance.
Store credit cards
Occasionally, department stores or grocery stores will offer their own credit cards to encouraged and reward customer loyalty. These cards accrue points with every dollar you spend on store purchases to be redeemed on future store purchases or gift cards.
Is a rewards credit card right for you? Things to consider
Speak with multiple rewards credit card providers to see which product is the best fit for you. Learn how their rewards structures work, who they’re partnered with, and how long it’ll take you to accrue points that you’ll benefit from.
What are points actually worth? One dollar might equal one point but how many points do you need to get a gift card to fill up your tank with petrol or cover an interstate flight? If the amount you’ll need to spend to earn points exceeds your typical habits, a rewards card might not be right for you.
Don’t forget about fees and expiration dates. Weigh up the points scheme with the annual fees, check if there’s a threshold for points, and if they expire. If you’re a Westpac customer, example, your points won’t expire, but if you’re with ANZ, the rewards must be used within 36 months.
Have a strategy in place for how you’ll use the rewards points. Points are only valuable if you redeem them in a timely fashion. Will you save them up and use them for an annual overseas trip? Would you prefer to reduce your weekly expenses like food and petrol? Do you already use a credit card often, but don’t accrue rewards? All of these uses are possible if you choose the right rewards credit card and understand your redemption options.
Rewards credit cards must still be used responsibly
If you’ve got a good credit score, a plan for using the rewards points and aren’t paying off consumer debt, look into card options with benefits. This is where you make credit cards work for you, not the other way around.
Just like compound interest can work for or against you, the same goes for credit cards. You can access credit when you want it, accrue rewards points to save money on future purchases, and boost your credit score – all by paying off the balance before it’s due.
Enjoy these benefits in increments or treat yourself to a big purchase once a year. With rewards credit cards, the same advice applies. Start small, with a balance you know you can pay off every month. Build rewards credit cards into your overall financial plan and enjoy where the benefits take you.
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