What are the benefits of a rewards card?

If you’re tossing up between a rewards card and a regular piece of plastic, then you might be wondering just what the benefits of having points earning power in your corner are.

So to help you make the right call for your wallet, we’ve listed some of the major benefits that come with these premium cards - and we’ve also covered some of the drawbacks to look out for.

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There are plenty of pros to having a rewards credit card, that all basically boil down to earning more bang for every buck that you spend. And you can do that in a range of different ways, including:

• Earning points on your spend. The first thing that comes to mind when you think “rewards cards” is probably “rewards points,” right? And for good reason. One of the most popular benefits of having one of these cards is earning points, which can then be redeemed for retail products, gift vouchers, event tickets or even cool experiences like jetboating.
• Snagging cashback offers. Another great perk of having a rewards card is being able to get cashback when you spend on your credit card. Some cards offer cashback as an introductory offer, others offer it as one of the options you can redeem points for. Remember that you won’t actually receive physical cash - usually, you’ll get this perk as either a credit on your card account, or in the form of a gift card.
• Travelling for free. Did you know that Mozo has found one of the best value ways to redeem your points is by cashing them in for a free flight or flight upgrade? Yep, a big benefit of rewards cards is that they can help you snag discounted or free travel. And it’s not just flights - you can also cash in for hire cars, airport lounge passes, accommodation and on some premium options, free travel insurance.
• Protecting your spend. Rewards cards also come with a range of insurance covers to protect your spend, including extended warranty, price protection and purchase security. That means that while you’re spending up a storm, your purchases are even more secure, thanks to the perks of your rewards plastic.
• Enjoying exclusive perks. But that’s not all. There are also a bunch of other awesome freebies and perks that come with using a rewards card, like a concierge service that can help you book restaurants or event tickets, exclusive shopping opportunities or a free bottle of wine when you dine out.

But on the other hand, there are also some drawbacks to having a rewards card that need to be considered. In a nutshell, most of these come down to the fact that it’s a more expensive option than a low rate credit card.

By choosing a piece of plastic with a rewards program attached, you’re in for:

• High annual fees. One of the biggest drawbacks is that a rewards card more often than not comes with a hefty annual fee attached, ranging from around $50 up to more than $400. So when choosing one, it’s important to consider whether or not the benefits of earning points and perks outweigh this cost.
• High interest rates. Another potential major cost when spending on a rewards credit card is having to pay the steep interest rate if you let your balance linger. These cards often come with rates around the 20% mark, which can really put a dent in your budget if you aren’t paying off your bill in full each month.
• An incentive to overspend. Whether or not this will be a big problem depends on you - but the bottom line is that when you’re earning points on every dollar you spend, there’s an added incentive to spend more. It’s fine if you’re just spending the same amount you usually would and putting it all on your credit card - but if you’re spending extra just for the points, you’ll wind up hurting your savings big time. Remember to think of the rewards program as a nice bonus and not the main reason for spending.

If you decide the benefits outweigh the costs and a rewards card is the perfect option for you, then it’s important you put the effort in to get as many perks out of it as you can, in order to justify the higher price tag. To help you do that, here are some tips on how to use your plastic to its full potential.

• Look for sign-up bonuses. Start off on the right foot by snagging a stack of points just for signing up. Some bonus rewards card offers come with up to 100,000 points right off the bat - not too shabby at all.
• Maximise your points by shopping at the right places and always using your card for big spends. You can earn up to 3 points for every dollar you spend with some rewards cards, as long as you shop in partner stores.
• Know the fine print, like point expiry dates and caps so you don’t miss out on using your hard earned points. If there’s a monthly or annual points cap, make sure you plan your spending to be spread out enough that you’ll earn points on every shop. And be aware of any expiry dates, not only so you can make sure you use the points, but so you can plan to build up enough points for a good reward before they start expiring.
• Pay your bill in full each month. This is a good habit to have no matter what credit card you use, but it’s especially important to clear your balance before your interest free days run out each month when you’re dealing with sky high rewards card interest.

Have all these benefits and perks convinced you that it’s time to add a rewards credit card to your wallet? If so, your first port of call should be our rewards card comparison tool, where you can compare 114 cards from across the market.