Are rewards credit cards worth it in 2018?

Thursday 11 January 2018

Article by Ceyda Erem

Nearly every Aussie loves two things: a cheeky reward and spending money, so it seems that a rewards credit card may be the perfect answer to these two great loves. Or is it?

Are rewards credit cards worth it in 2018?

According to Mozo’s annual 2017 Rewards Card Survey, the net average value of rewards has, in fact, dropped to just $27.

And since we’re all about helping Aussies save money by making smarter financial decisions, we thought it was a good idea for a quick recap on everything you need to know about owning a rewards credit card.

What’s hot about a rewards credit card?

  • The rewards - Because what’s a rewards program without the rewards? Depending on your choice of plastic, you can redeem your points for perks like free flights, gift cards or retail products from your provider’s online store. 
  • Bonus points - Once you sign up to a rewards credit card, your provider may offer bonus points to get your points balance off to a great start. 
  • Travel insurance - If you’re picking up a frequent flyer card, complimentary travel insurance is something you can look forward to. This insurance generally covers medical expenses, lost luggage, cancellation fees and more! 
  • Other forms of protection/insurance - Rewards cards also come with other types of protection, like purchase protection insurance, price protection and extended warranty on purchased items. 
  • Cashback incentives But if you like to see your rewards in the form of cold, hard cash, there’s also cashback incentives up for grabs.  

What’s not hot about a rewards credit card?

  • The incentive to spend more - As you’ll only receive reward points each time you spend, this may encourage cardholders to spend more than normal. And while seeing your points balance gradually climb is exciting, it can jeopardise your savings if you’re not careful. 
  • High interest rates -  If you are thinking of applying for a rewards credit card, you’ll need to factor in the high interest rates, which are usually around 20%. Before signing up, ensure that you’ll be able to pay the balance off in full each month. 
  • High fees - Rewards credit cards generally come with a hefty annual fee, which in some cases, can exceed $400! So once you start shopping around for a rewards card, carefully consider whether or not the rewards are worth the cost. 
  • Points cap - Many providers will also place a limit on the number of points you can earn. So if you’re someone who likes to spend big, you might be better off picking up a card with no points limit. Plus, points may also expire if you fail to use them within a given timeframe.

Who are rewards credit cards best for?

Rewards cards are not for everyone but they are typically great for people who:

  • Use their credit card often
  • Are big spenders
  • Pay off their bill in full each month
  • Travel frequently
  • Have a good credit rating
  • Earn around a minimum of $35,000 per annum

How to decide if a rewards credit card right for you

If you are thinking about picking up a rewards credit card, ask yourself the following questions:

What is my annual spend on a rewards credit card? 

Before you start shopping around for a rewards card, you’ll need to have calculated your annual credit card spend, which you can do by going through your last few statements. If you come to find that you’re only spending $5,000 or less a year, you won’t get much out of a rewards card as the annual fee will outweigh the value.

What are my travel habits like?

If the airport has slowly become your second home, you may benefit from a frequent flyer card. You’ll be able to score a few perks that can make your flight a little sweeter, like complimentary travel insurance and lounge service.

Can I keep up with the monthly repayments?

Rewards cards come with high interest rates and if you’re someone who struggles to pay off their bill in full and carry a balance, all your points may start to lose their appeal once you start paying interest. In this case, you may want to look into getting a low rate credit card. But if you do have your heart set on a rewards credit card, our Rewards Revealer Tool can help you compare rewards cards that are best suited to your spending habits.

Ready to pick up a rewards card? Head over to our rewards credit card comparison tool to find your next plastic match today.

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