rewards credit card vs low interest credit card

Reward Programs vs Low Interest Cards

Information verified correct on December 10th, 2016

How to work out what’s better for you: credit card rewards or a low interest rate?

Rewards and low interest rates are two of the most popular features to look for in a new credit card, but they don’t often go hand-in-hand. Instead it’s more common for a card with low rates to have only basic features, while a card with rewards is more likely to have a high standard variable rate of interest. So if the choice between a low rate and rewards credit card leaves you scratching your head, read this guide to work out which type of credit card is right for you.

How to choose between a rewards credit card and a low interest credit card

Both rewards and low interest credit cards are designed to offer benefits for specific spending habits and needs. To put it simply, rewards credit cards offer the most benefits to people who use their card often and always pay back what they spend, while low rate cards offer some savings to people who frequently carry a balance. If both of these scenarios apply to you, then you can use the following questions to help weigh up rewards programs and low interest rates.

What’s your income?

Your regular salary can help narrow down your credit card comparison by looking at the minimum income requirements for different products. For example, a low rate credit card could be more accessible if you’re a low income earner, with minimum income requirements often starting at $15,000. Rewards credit cards tend to have a higher minimum income requirement than low rate credit cards as they are more premium products with higher credit limits.

How much do you want to pay?

Most credit cards come with an account fee that you have to pay on a yearly basis, which can vary significantly based on the type of card you choose. For example, most reward and frequent flyer cards have annual fees well above $100, while low rate credit cards frequently have fees of less than $100. You’ll want to make sure that the value you get from either the rewards or the savings from low interest outweigh the cost of the card, otherwise it’s not of benefit to you.

What’s your average monthly spend?

A rewards credit card is cost-effective if it gives more value than it takes. Put simply: you must spend enough on the card to recoup the cost of the annual fee in rewards value. So if your annual fee is $100, you would want to earn at least $100 worth of value through the rewards program. As most credit cards offer points per $1 spent, your average monthly spending can help you work out whether or not a card will be worth it for you.A common way to calculate this value is to look at the points required for a gift card, and then work out how much you would have to spend to redeem this reward (and offset the cost of the annual fee).

*For example, a Westpac Altitude Rewards credit card has an annual fee of $100 and requires 19,000 points to redeem a $100 Myer gift card. It offers 1 point per $1 spent on a Visa card linked to the account, and 2 points per $1 spent on an Amex card. That means you would have to spend between $9,500 on the Amex card and $19,000 on the Visa card to balance out the annual fee.

You can use this calculation for any credit card and any reward when working out whether the product is cost-effective for your annual spend.

Your monthly spend is also an important thing to consider with a low rate card. If the card has a 0% purchase rate, it’ll only be in place for a promotional period, so you’ll want to make sure you can pay off the amount you’ve charged to the card by the time the offer ends and the standard rate applies. If it’s a low (not 0%) interest rate, you’ll still need to consider your monthly spend to understand how much interest you could potentially accrue on what you charge. This will also help you determine whether the card is of value to you.

*Rates and figures used for example purposes only

Do you usually pay your balance in full?

When comparing rewards and low rate credit cards, ask yourself whether you’re able to pay off your account balance in full each month. This will help you decide whether a rewards credit card or low rate card is more affordable.

Rewards credit cards usually have high rates of interest, so you’ll accrue a higher amount of interest if you’re unable to pay your balance in full by the end of the month. As your interest charges grow, this will counteract the value you’re getting from your rewards.

If you do struggle to repay your balance each month, a low rate or 0% purchase credit card could be a more suitable option. Not only will you have lower interest costs, but you won’t have the promise of rewards tempting you to overspend.As you can see, there are many considerations to weigh up when deciding between a rewards credit card and a low rate card. Essentially, if you’re a big spender and frequent traveller who always pays their balance in full, a rewards credit card could be a great way to get extra value back from your spending. Otherwise, if you struggle to repay your balance each month and want to keep your card costs low, a low interest rate credit card could be the right option for you.

Low interest rate credit cards vs. rewards credit cards

Rates last updated December 10th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee Interest Free Period
ANZ Low Rate Platinum Credit Card
$250 Back plus 0% p.a. for the first 6 months on purchases from approval.
0% p.a. for 6 months (reverts to 13.49% p.a.) $99 p.a. Up to 55 days on purchases Go to site More info
NAB Low Fee Card
Enjoy a low introductory rate of 0% p.a. on balance transfers and purchases for 15 months.
0% p.a. for 15 months (reverts to 19.74% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $30 p.a. Up to 44 days on purchases Go to site More info
ME Bank frank Credit Card
A low interest rate on purchases and cash advances with no annual fee charge.
11.99% p.a. $0 p.a. Up to 55 days on purchases 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.
14.99% p.a. 0% p.a. for 12 months with 1% balance transfer fee $0 p.a. Up to 55 days on purchases Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Up to 55 days on purchases Go to site More info
St.George Vertigo Visa
Introductory offer of 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months on purchases, plus a low annual fee.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 p.a. Up to 55 days on purchases Go to site More info
Westpac Low Rate Card
A simple low interest rate card featuring a low ongoing rate on purchases, up to 55 days interest-free on purchases and a low annual fee.
1% p.a. for 12 months (reverts to 13.49% p.a.) 0% p.a. for 16 months $59 p.a. Up to 55 days on purchases Go to site More info
St.George Vertigo Platinum
A platinum card with a balance transfer offer of 0% p.a. for 18 months and an introductory purchase offer of 1% p.a. for 12 months with an annual fee waiver for the first year.
1% p.a. for 12 months (reverts to 12.74% p.a.) 0% p.a. for 18 months $99 p.a. Up to 55 days on purchases Go to site More info
Coles Low Rate MasterCard
A low rate MasterCard with a competitive rate on purchases and a low annual fee.
12.99% p.a. 0% p.a. for 6 months $49 p.a. Up to 62 days on purchases Go to site More info
Bank of Melbourne Vertigo Visa Credit Card
Enjoy a low annual fee combined with 0% p.a. balance transfer offer for 18 months and 1% p.a. for up to 12 months on purchases.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 p.a. Up to 55 days on purchases Go to site More info
Bank of Melbourne Vertigo Platinum
A platinum card with a low balance transfer offer of 0% p.a. interest for 18 months and 1% p.a. for 12 months on purchases combined with complimentary insurance covers.
1% p.a. for 12 months (reverts to 12.74% p.a.) 0% p.a. for 18 months $99 p.a. Up to 55 days on purchases Go to site More info
Australian Military Bank Low Rate Visa Credit Card
Enjoy a low interest rate of 10.99% p.a. on purchases, combined with a balance transfer offer of 0% p.a. for 12 months and a low annual fee.
10.99% p.a. 0% p.a. for 12 months $49 p.a. Up to 55 days on purchases Go to site More info
ANZ Low Rate
$100 Back plus 0% p.a. for the first 6 months on purchases from approval.
0% p.a. for 6 months (reverts to 13.49% p.a.) $58 p.a. Up to 55 days on purchases Go to site More info
BankSA Vertigo Visa
Enjoy a low balance transfer offer of 0% p.a. for 18 months and a low ongoing purchase rate from BankSA.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 p.a. Up to 55 days on purchases Go to site More info
Citi Clear Platinum Card
Enjoy 0% p.a. for 9 months interest-free purchasing and 0% p.a. for 9 months on balance transfers.
0% p.a. for 9 months (reverts to 14.99% p.a.) 0% p.a. for 9 months $99 p.a. Up to 55 days on purchases Go to site More info
BankSA Vertigo Platinum
Experience Platinum card benefits with complimentary insurance policies and 24/7 Visa Platinum Concierge Service. Get 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months if you apply by 4 January 2017.
1% p.a. for 12 months (reverts to 12.74% p.a.) 0% p.a. for 18 months $99 p.a. Up to 55 days on purchases Go to site More info
Rates last updated December 10th, 2016
Bonus Points Rewards Points per $ spent (VISA/MC) Rewards Points per $ spent (AMEX) Annual fee
American Express Explorer Credit Card
American Express Explorer Credit Card
100,000 bonus points 2 $395 p.a. Go to site More info
American Express Essential Credit Card
American Express Essential Credit Card
1 $0 p.a. Go to site More info
HSBC Platinum Credit Card
HSBC Platinum Credit Card
1 0 $149 p.a. Go to site More info
HSBC Platinum Qantas Credit Card
HSBC Platinum Qantas Credit Card
60,000 bonus points 1 0 $199 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
0.66 0 $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
NAB Qantas Rewards Premium Card - Exclusive Offer
75,000 bonus points 0.5 1.5 $250 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - 0% Interest Offer
Virgin Australia Velocity Flyer Card - 0% Interest Offer
0.66 0 $129 p.a. Go to site More info
ANZ Rewards Platinum
ANZ Rewards Platinum
50,000 bonus points 1 2 $95 p.a. Go to site More info
American Express Velocity Platinum Card
American Express Velocity Platinum Card
50,000 bonus points 0 1 $349 p.a. Go to site More info
American Express Platinum Edge Credit Card
American Express Platinum Edge Credit Card
10,000 bonus points 0 1 $195 p.a. Go to site More info
ANZ Rewards Travel Adventures card
ANZ Rewards Travel Adventures card
1 2 $225 p.a. Go to site More info
Virgin Australia Velocity High Flyer Card - 30k Bonus Points offer
Virgin Australia Velocity High Flyer Card - 30k Bonus Points offer
30,000 bonus points 1 0 $144 p.a. annual fee for the first year ($289 p.a. thereafter) Go to site More info
American Express Qantas Discovery Card
American Express Qantas Discovery Card
7,500 bonus points 0 1 $0 p.a. Go to site More info
American Express Velocity Escape Card
American Express Velocity Escape Card
7,500 bonus points 0 1 $0 p.a. Go to site More info
Westpac Altitude Black - Exclusive Offer
Westpac Altitude Black - Exclusive Offer
100,000 bonus points 1.25 3 $395 p.a. Go to site More info
American Express Qantas Premium Card
American Express Qantas Premium Card
30,000 bonus points 0 1 $249 p.a. Go to site More info
David Jones American Express Platinum Card
David Jones American Express Platinum Card
40,000 bonus points 1 $295 p.a. Go to site More info
Citi Qantas Signature Credit Card
Citi Qantas Signature Credit Card
50,000 bonus points 1 0 $199 p.a. annual fee for the first year ($395 p.a. thereafter) Go to site More info
American Express Platinum Business Card
American Express Platinum Business Card
100,000 bonus points 0 1 $1,500 p.a. Go to site More info
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