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Is your rewards credit card rewarding you?

Information verified correct on December 9th, 2016

High annual fees and interest rates can quickly outweigh the benefits of having a rewards credit card. Here’s what you need to know to make sure you get the best value from these programs.

With the promise of points for flights, gift cards, merchandise and cash back, rewards credit cards are a popular way to get more value out of paying with plastic. However, high annual fees and interest rates mean that the cost of the card could outweigh these potential benefits.

In some cases, people actually end up spending hundreds of dollars more just having a rewards credit card than they ever get back from the points they earn using it. Here, we look at the cost of rewards cards, how many points they earn and other pitfalls, to help you get real value out of any credit card you choose.

Rewards card costs vs the benefits

In 2012, the RBA released a report that showed that the average cost of credit cards frequently outweighed the spending required for cardholders to redeem a $100 gift card. These findings informed the RBA’s approach to regulating credit card costs, particularly in regards to the interchange fees that are charged to merchants for accepting cards.

These fees have been a key source of revenue for credit card companies that offer rewards programs. However, in 2015 the RBA released draft rules that capped these fees for merchants processing Visa, MasterCard and American Express payments. This meant a significant loss in potential earnings for credit card providers.

As a result, there have been major revisions to credit card rewards programs between 2015 and 2016. For example, many cards now offer fewer points per $1 spent, while others offer a lower conversion rate if you want to transfer points to a frequent flyer program. There have also been changes to which transactions do and don’t earn points, and more updates are expected in the future.

The result of these changes is that rewards programs now offer differing rates of value to both existing and new cardholders. This means it’s now more important than ever to make sure the card you use offers you value. Put simply, the rewards should always be worth more than the fees you pay for the card.

How much do you need to spend to get rewards?

A good way to determine the value of a rewards credit card is to look at the amount of money you need to spend to make redemptions. The points required for different rewards varies, so most comparisons use a standard $100 gift card as a guide for spending requirements.

With that in mind, we’ve compared the amount of points needed to redeem a $100 gift card for the major rewards programs linked to different credit cards. We’ve also included the amount you’d be required to spend in order to earn those points based on common earn rates of 0.5 points per $1 and 1 point per $1. Finally, we’ve included the range of annual fees associated with each program.

Rewards programPoints needed for $100 gift cardRequired spend (based on common earn rates)Annual fee range
American Express Membership Rewards13,500
  • 0.5 points per $1: $27,000
  • 1 point per $1: $13,500
$0 to $1,200
ANZ Rewards Program22,225
  • 0.5 points per $1: $44,450
  • 1 point per $1: $22,225
$80 to $375
Bankwest More Rewards Program28,000
  • 0.5 points per $1: $56,000
  • 1 point per $1: $28,000
$70 to $130
Bendigo Bank Rewards36,667
  • 0.5 points per $1: $73,334
  • 1 point per $1: $36,667
$24 to $119
Citibank Rewards Program40,000
  • 0.5 points per $1: $80,000
  • 1 point per $1: $40,000
$99 to $700
CommBank Awards20,000
  • 0.5 points per $1: $40,000
  • 1 point per $1: $20,000
$59 to $349
flybuys Rewards20,000
  • 0.5 points per $1: $40,000
  • 1 point per $1: $20,000
$0 to $89
Heritage Credit Rewards64 credits*$55 to $125
HSBC Rewards Plus20,000
  • 0.5 points per $1: $40,000
  • 1 point per $1: $20,000
$0 to $149
Jetstar Dollars ProgramN/A**Spending for 100 Jetstar Dollars: 

(Note: You must earn a minimum of 200 Jetstar Dollars on the Jetstar Platinum MasterCard to redeem a gift voucher)

$59 to $149
Krisflyer Rewards ProgramN/A**N/A**Note: There are no credit cards currently offering direct earning for Krisflyer Rewards, but you may be able to exchange points from another program to your Krisflyer account.
Macquarie Credit Card Rewards Program19,250
  • 0.5 points per $1: $38,500
  • 1 point per $1: $19,250
$199 to $249
Myer One10,000
  • 0.5 points per $1: $20,000
  • 1 point per $1: $10,000
$39
Q Rewards (BOQ)28,600
  • 0.5 points per $1: $57,200
  • 1 point per $1: $28,600
$60 to $99
Qantas Frequent Flyer17,250
  • 0.5 points per $1: $34,500
  • 1 point per $1: $17,250
$0 to $700
Emirates Skywards Rewards32,000
  • 0.5 points per $1: $64,000
  • 1 point per $1: $32,000
$299
Suncorp Bank Rewards17,900
  • 0.5 points per $1: $35,800
  • 1 point per $1: $17,900
$120 to $169
Velocity Rewards18,000
  • 0.5 points per $1: $36,000
  • 1 point per $1: $18,000
$0 to $349
Westpac Altitude Rewards19,000
  • 0.5 points per $1: $38,000
  • 1 point per $1: $19,000
$100 to $395
Woolworths Rewards20,000
  • 0.5 points per $1: $40,000
  • 1 point per $1: $20,000
$49

Rates and fees correct as of August 2016.
*Credits are awarded based on every $1,000 spent per month with a Heritage credit card
**This program does not offer $100 gift cards

Based on this table, we can see that the minimum spend required for a $100 gift card across all rewards programs is $10,000 with Myer One if your credit card offers 1 point per $1 spent. In comparison, the maximum spend required for a $100 gift card would be $80,000 with a Citi Rewards credit card that earns 0.5 points per $1 spent. In the end, if you spend less than $10,000 a year on your credit card, it’s unlikely you’ll get much value from a rewards program.

Spending and rewards vs the annual fee

Once you know how much you need to spend to get a $100 gift card, you can get an idea of whether or not the cost of the card’s annual fee will outweigh the benefits. Use the following steps to work this out for any card.

  1. Calculate your average spending. Consider what you typically charge to your credit card each month, and then multiply by 12 to get your yearly spending. For example, if you usually spend $2,000 per month on your card, your annual spend would be $24,000.
  2. Calculate your rewards per year. Use your annual spend to work out how many rewards points you will earn per year. For instance, if you spend an average of $24,000 annually on a card that offers 1 point per $1, you would earn 24,000 points. Once you know the average points you’ll get per year, you can look at the reward redemptions for that program to figure out if you would have enough points for a $100 gift card (or something else).
  3. Compare your rewards to the annual fee. When you know how many points and rewards you’re likely to get each year, you can see whether or not they offset the cost of the annual fee. For instance, if you’re able to redeem a $100 gift card each year, then a card with an annual fee of $100 or less is worth it. On the other hand, a card with an annual fee of over $100 will cost you more than any reward you will receive. .

The following case studies give examples of when a card is too expensive and when it offers value to the cardholder.

  • How to know when your rewards card is offering you value

Portia using Bankwest More Platinum MasterCard

Portia
Portia has recently seen an ad for the Bankwest More Platinum MasterCard and is interested in applying for it. This card offers 2 points per $1 spent and has an annual fee of $130.

  1. Annual spending. Portia spends an average of $3,000 per month on her credit card, totalling $36,000 per year.
  2. Rewards. Based on her current spending habits, Portia would earn 72,000 points per year with this credit card.
  3. Rewards vs annual fee. It costs 28,000 points to redeem a $100 gift card through the Bankwest More Rewards Program. This means Portia could redeem two $100 gift cards per year (56,000 points) and a $50 gift card for 14,500 points. The total value of these rewards is $250, which outweighs the annual fee of $130 by $120.

This case study shows that higher average credit card spending leads to more rewards, which increases the chances of the benefits outweighing the cost of the annual fee, as is the case for Portia.

  • How to know when your rewards card isn’t offering you value

Pete using ANZ Platinum Rewards credit card

Pete
Pete wants to earn rewards for using his credit card and has heard about the ANZ Platinum Rewards credit card from a friend. This card comes with both a Visa and an American Express option, earning 1 point per $1 on the Visa card and 2 points per $1 on the Amex card. It also has an annual fee of $95. Pete decides to see if it will offer him value based on his current credit card spending habits.

  1. Average spending. Pete spends an average of $1,000 per month, or $12,000 per year on his card.
  2. Rewards. If Pete only used the Amex card, he would earn 24,000 points in a year. If he only used the Visa, he would earn 12,000 points. If he used each card 50% of the time, he would earn around 18,000 points.
  3. Rewards vs annual fee. The ANZ Rewards program offers a $100 gift card for 22,225 points. If Pete used the Amex card everywhere, he would have enough points for this reward, which would cover the $95 annual fee. But if Pete had to use the Visa card for some or all of his spending, he would not earn enough points to cover the annual fee.

In this scenario, Pete would struggle to get substantial value out of the rewards card. Considering Pete doesn’t spend much money with a credit card, he would be better off with a credit card that has no annual fee, with or without rewards.

Tips for maximising the value of your rewards credit card

  • Bonus points. Credit card companies regularly offer bonus points for new customers when they spend a certain amount of money in their first few months of having the card. Checking for these offers when you’re comparing rewards cards helps you to get more value out of the program in the first year.
  • Reward partner offers. Many credit card rewards programs have reward partners that offer more points when you make purchases with them. For example, the CommBank Awards program offers 1 bonus point per $1 when you use your card with a range of partners including Hoyts, Prouds, Crown Metropol and Thrifty. Other programs, including Velocity and Qantas Frequent Flyer, have seasonal promotions with partners to offer you bonus points. Check with your rewards program to find out what options are available to help boost your points balance and get more value from your card.
  • Tiered rewards programs. Some credit cards earn you different point rates based on your purchases. For example, the American Express Qantas Ultimate card offers 3 Qantas Points per $1 spent at participating restaurants and for certain Qantas products and services, 2 Qantas Points per $1 on overseas transactions, and 1 Qantas Point per $1 for most other transactions. It also earns 0.5 Qantas Points per $1 for utility bill and government payments. With these cards, calculate the reward benefits based on where you regularly use your credit card and aim to pay with plastic at the places that offer the highest earn rate.
  • Reward redemptions. The points required for different redemptions varies. In some cases you may be able to get more value out of your rewards points by carefully choosing how you redeem them.
  • Complimentary extras. Credit card perks such as complimentary insurance, airfares or personal concierge services also add value to rewards cards and can offset the annual fee and other charges.
  • Paying your balance in full. If you pay off your credit card balance in full each statement cycle, you will avoid interest charges that add to the cost of the card.

credit card costsOther costs to consider

  • Interest rates. Standard rates for rewards credit cards are often high, so the charges could outweigh the benefits of rewards if you carry a balance.
  • Rewards program fees. Some rewards programs require you to pay an annual fee in addition to the credit card annual fee. For example, you will pay a yearly fee if you opt in to earn Qantas Rewards with a Citi or CommBank rewards card. Make sure you factor this cost into your comparisons before choosing a credit card.
  • Credit card surcharges. Some merchants charge you a fee for paying with a credit card. Generally it’s less than 1% for a Visa or MasterCard purchase, and up to 2% for American Express. Card payments for taxis and airfares can also often result in additional fees worth 10% or more of the total purchase. These charges could offset the benefit of the points that you earn for the purchases, so always check if there is a surcharge before using your card.
  • Card acceptance. While most merchants accept Visa and MasterCard credit cards, it can be harder to find places that accept Amex. Most major retailers do, but it’s worth considering this factor before you choose a particular credit card.
  • International transaction fees. Most cards charge a fee of 2% to 3.5% on every transaction you make in a foreign currency. In some cases, this fee could outweigh any rewards you earn for the purchases you make overseas or online with international retailers.

While credit card rewards do provide benefits when you pay with plastic, in some cases the costs outweigh the value of the rewards. Being aware of the different factors that affect rewards card value, and comparing cards before you apply, will help you choose a credit card that offers the most benefits for you.

Comparison of Rewards Credit Cards

Rates last updated December 9th, 2016.

Virgin Australia Velocity High Flyer Card - 30k Bonus Points offer

Balance transfer offer changed to 1.9% p.a. for 15 months which is valid until 16 January 2017.

November 1st, 2016

American Express Platinum Edge Credit Card

Standard 10,000 bonus points offer + 0% for 12 months BT offer + $200 Travel Credit

November 1st, 2016

American Express Explorer Credit Card

100,000 bonus points and balance transfer offers have been extended until 30 January 2017.

November 29th, 2016

View latest updates

Jonathan Choi Jonathan
Rewards Points per $ spent (AMEX) Rewards Points per $ spent (VISA/MC) Bonus Points Annual fee
American Express Explorer Credit Card
Receive 100,000 Membership Rewards Bonus Points on eligible spend within the first 2 months of Card Membership. Also enjoy a $400 travel voucher and two complimentary airline passes per year.
2 100,000 bonus points $395 p.a. Go to site More info
American Express Essential Credit Card
Receive a $50 credit on eligible spend and get Smartphone screen insurance combined with a no annual fee for life card. Also enjoy a 0% p.a. balance transfer rate for 12 months.
1 $0 p.a. Go to site More info
HSBC Platinum Credit Card
Enjoy an annual fee refund every year if you meet the spend requirement with a balance transfer offer, high credit limits and prestige services including a personal concierge service and VISA Platinum rewards program.
0 1 $149 p.a. Go to site More info
HSBC Platinum Qantas Credit Card
Receive 60,000 bonus Qantas Points on eligible spend within 3 months. Enjoy access to premium benefits and complimentary insurance.
0 1 60,000 bonus points $199 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Earn bonus Velocity Points in the first 3 months plus a low balance transfer offer of 0% p.a. for 18 months
0 0.66 $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
NAB Qantas Rewards Premium Card - Exclusive Offer
Get 75,000 bonus Qantas Points plus enjoy a low promotional offer of 4.99% p.a. for 6 months on balance transfers.
1.5 0.5 75,000 bonus points $250 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - 0% Interest Offer
Earn Velocity Points plus enjoy an introductory interest-free offer of 0% p.a. on purchases for 12 months, and 0% p.a. for 6 months on balance transfers.
0 0.66 $129 p.a. Go to site More info
ANZ Rewards Platinum
Earn points for every dollar spent on purchases plus a 50,000 Reward Points after your first eligible purchase is made within 3 months of card approval.
2 1 50,000 bonus points $95 p.a. Go to site More info
American Express Velocity Platinum Card
Enjoy up to 50,000 bonus Velocity Points when you meet the minimum required spend and earn up to 3 rewards points per dollar spent. Also receive a complimentary return flight every year.
1 0 50,000 bonus points $349 p.a. Go to site More info
American Express Platinum Edge Credit Card
Receive 10,000 Membership Rewards Bonus Points when you meet the minimum spend requirement. Enjoy a $200 travel credit every year and get 0% p.a. for 12 months on balance transfers.
1 0 10,000 bonus points $195 p.a. Go to site More info
ANZ Rewards Travel Adventures card
Pay no overseas transaction fee on purchases and receive complimentary domestic return flight and lounge passes each year you hold the card when you spend $500 on eligible purchases within the first three months.
2 1 $225 p.a. Go to site More info
Virgin Australia Velocity High Flyer Card - 30k Bonus Points offer
Receive 30,000 bonus Velocity Points and earn 1 Velocity Points per $1 spent. Receive an exclusive $129 Virgin Australia Gift Voucher and two complimentary Single Entry Virgin Australia domestic Lounge passes each year.
0 1 30,000 bonus points $144 p.a. annual fee for the first year ($289 p.a. thereafter) Go to site More info
American Express Qantas Discovery Card
A no annual fee frequent flyer credit card with Earn 7,500 bonus points and enjoy 0% p.a. on balance transfers for 12 months when you apply and are approved. Earn 1 Qantas Point per $1 spend.
1 0 7,500 bonus points $0 p.a. Go to site More info
American Express Velocity Escape Card
Enjoy 7,500 bonus Velocity Points when you meet the minimum spend requirement and earn up to 2 points for every $1 you spend, together with a $0 annual fee.
1 0 7,500 bonus points $0 p.a. Go to site More info
Westpac Altitude Black - Exclusive Offer
Earn 100,000 bonus points when you spend $5,000 on eligible purchases, choose between two reward programs offering Altitude or Qantas Rewards and receive premium cardholder benefits.
3 1.25 100,000 bonus points $395 p.a. Go to site More info
American Express Qantas Premium Card
Earn as much as 30,000 bonus Qantas Points when you meet the minimum spend requirement. Enjoy frequent flyer benefits including uncapped Qantas Points per $1 spent, complimentary travel insurance and Qantas Club lounge invitations.
1 0 30,000 bonus points $249 p.a. Go to site More info
David Jones American Express Platinum Card
Receive 40,000 Membership Rewards points or 30,000 Qantas Points. Plus earn up to 4 rewards point per $1 spend.
1 40,000 bonus points $295 p.a. Go to site More info
Citi Qantas Signature Credit Card
Earn up to 50,000 bonus Qantas Points when you spend $2,000 or more on eligible purchases in the first 90 days. Plus, enjoy introductory interest rates on balance transfers and purchases with a discounted annual fee of $199 in the first year.
0 1 50,000 bonus points $199 p.a. annual fee for the first year ($395 p.a. thereafter) Go to site More info
American Express Platinum Business Card
Receive 100,000 bonus points when you meet the minimum spend requirement and earn up to 2 Membership Rewards points for every dollar spent.
1 0 100,000 bonus points $1,500 p.a. Go to site More info

Sally McMullen

Sally McMullen is a journalist at finder.com.au who is a credit cards, frequent flyer and travel money expert by day and music maven by night.

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