Rewards credit cards are a type of credit card that allows cardholders to earn rewards points on eligible purchases made with the card. Points can be redeemed through the card’s rewards program, and may include vouchers, cosmetics, or even flights and accommodation.
Rewards credit cards work by awarding ‘points’ - these are usually matched to a certain spending value. A common example of this is a card which rewards 1 point for each $1 spent. You can only earn points on purchases made with your card, and you can only redeem your points through the reward program relative to your card.
Depending on the reward program you join, you may be able to choose from thousands of individual rewards. Some of the most common examples of rewards include:
You may not earn points on every purchase. However, there are some reward programs which offer additional ways to earn points:
Before you apply for a rewards credit card, you must meet the following qualifying criteria:
Some card issuers may also have specific eligibility requirements you will need to meet, such as:
Qualifying criteria will vary between lenders and cards, so it’s important to compare credit cards before applying to ensure you are eligible.
You can apply for a rewards credit card online, over the phone, or at your bank. When applying, you will need to provide supporting documentation so the card issuer can accurately assess both your application and your ability to meet repayments, which may include:
Choosing a rewards credit card can offer many benefits in the right circumstances. Rewards credit cards are often available in various tiers, based on the amount you are likely to spend on the card each year. Finding the rewards card that suits you will depend entirely on how you plan to use the card.
Things to consider when choosing a rewards credit card include:
Rewards credit cards can be beneficial for the right person, and this will largely depend on whether you are getting value from the card. If you are spending more in fees than you are earning in points, you may want to consider another card.
The easiest way to determine whether a rewards card may be suitable for you is to:
To calculate the associated value of your points, simply divide the number of points required to redeem a reward by its recommended retail price (RRP). The result will be the number of points needed to claim $1 of a specific reward amount.
Rewards credit cards have a minimum credit amount of $500, and a maximum credit limit of $100,000. The amount of credit that you can access from a lender is determined by your:
The minimum and maximum limits for a rewards card will vary between card issuers and cards. Standard cards will generally have lower limits, while premium cards - such as diamond or platinum cards - may have a much higher minimum limit and stricter qualifying criteria.
Minimum Limit | Maximum Limit |
---|---|
$500 | $100,000 |
Rewards credit cards allow cardholders to earn points on eligible purchases made with the card. These points can be redeemed for flights, upgrades, gifts, or other rewards, and each card will differ in both how points can be earned, and how they can be spent.
In summary, rewards credit cards:
You use a rewards credit card the same way you would with a normal credit card. Keep in mind to verify your eligibility for earning points on your purchases before using your card, and always repay your balance in full to avoid interest charges.
Rewards credit cards often include higher annual fees than other cards. This is relative to the number of features and benefits they offer - certain cards are designed to reward high-income, high-spending customers - and you should always compare cards to ensure you are choosing a card that will work for you.
Although it’s not common, some rewards credit cards may include a balance transfer offer. Keep in mind that a balance transfer does not wipe out your existing debt, it simply transfers it. You will still need to repay your balance transfer amount, and ensure the interest-free period is sufficient for you to make repayments without incurring interest charges.
The rewards program you join will largely depend on the card issuer you choose to apply with. Banks will often have a range of rewards from their partner companies - this may include airlines or retailers. You can also find store-branded rewards cards, though these are only specific to a certain number of stores - such as Woolworths, Myer or David Jones.
Money.com.au want to make managing money easy and fun! By giving Australians simple tools so they can make the best decisions they can about their money.
We understand that the world of finance is complex, and offer free, extensive guides on Personal Loans, Car Loans and Business Loans, along with tools like our Budget Planning Spreadsheet to help you better manage and understand personal finance.
Shaun
McGowan
Shaun McGowan
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.