How do rewards credit cards work?
Rewards credit cards allow cardholders to earn points on eligible purchases made using the card. These points can be redeemed through the card’s rewards program for the likes of gift cards, cashback, merchandise, flights, accommodation, store discounts or pretty much anything you can think of.
Rewards credit card points are usually matched to a certain spending value. A common example is 1 rewards point for every $1 spent. But some premium rewards cards offer higher earn rates on certain spend types – 3 points per $1 is about as good as it gets.
Specifically, some business credit cards offer particularly high levels of rewards.
But not every transaction will yield rewards points. Some cards cap the number of points you can earn per month or year, or you might only earn points on spending at certain retailers, petrol stations or supermarkets. Some transactions, like cash advances, covering interest costs or paying government bills may not earn you any points at all.
Types of reward you can get
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:
- Gift vouchers & credit card cashback
- Cosmetics
- Homeware, kitchenware & electronics
- Outdoor & sporting equipment
- Entertainment tickets for sports, events, or movies
- Flights and accommodation
- Rental car bookings
- Charitable donations
It’s clear that consumers really value their rewards, with data from Money.com.au showing that the ability to earn rewards points is the top reason Aussies chose their credit card. The survey found that one in four people (25%) ranked points as the main selling point of their card.
Additionally, nearly half of Australians with a credit card (49%) are 'churners' and admit to signing up for new cards only to collect bonus rewards points. These 'churners' have opened more than two credit cards on average in the past three years.
10 ways to maximise your rewards credit card points
1. Look for bonus points
Take advantage of rewards credit cards with bonus sign-up offers (assuming the credit card is overall a good match for your situation). This is usually an easy way to get a bulk amount of points with minimum effort. Just check the conditions to see if there’s a certain amount of money you need to spend or time limit.
2. Check the earn rate
Consider cards with higher point earn rates (again assuming the card overall is good value). Watch out for caps on how many points you can earn overall and specifications on the types of spending that generate points, as well as purchases with a lower dollar-to-point ratio.
3. Check eligibility for rewards
Make sure you know which transactions will be eligible to earn points and which ones won’t be. Also pay attention to the earn rates on different types of purchases.
4. Match the card to your lifestyle
If you travel a lot, a frequent flyer credit card could be worthwhile, because you could earn more points from airline purchases. There are also travel credit cards with extra perks, like complimentary insurance and no international transactions fees, that are beneficial for overseas use.
5. Use your card for everyday spending
Try to use your card for your day-to-day spending. But limit this to purchases you would be making anyway and that you can comfortably afford to pay off.
6. Earn bonus points
Some rewards programs allow you to earn points by hitting non-financial targets, like walking a certain number of steps per day. It's usually a small number of points but it all adds up.
7. Add an extra cardholder
Most credit cards allow additional cardholders (e.g. Amex credit cards allow up to four at no extra cost). If more than one person is using the card, you'll likely earn more rewards points (again watch for overspending).
8. Pool points with others
Some rewards programs allow point transfers between family and friends. This can help you get the most from your points – for example, by putting points towards a group trip.
9. 'Volunteer' to pick up the bill
When splitting expenses with friends, family or roommates, offer to pay so you can earn the points and have them send you the money afterwards.
10. Redeem your points wisely
Choose a rewards program with perks that you’ll actually use, whether it's saving up points for a one-off purchase, like Christmas gifts, or using them to shave a little bit off the cost of weekly groceries.
Don't forget to think about fees and other costs when weighing the benefits of a rewards credit card. The average reward points-earning credit card comes with an annual fee of $264, according to our analysis. Non-rewards cards cost around four times less at $60 each year on average. Make sure a rewards card will be worth the potentially higher cost for you.
Compare credit card rewards programs
Picking the right card based on rewards and fees is important, but so too is choosing the right rewards program. To help you decide, here’s a comparison of some of Australia’s top credit card rewards programs. We’ve ordered the table based on the lowest number of points needed to buy a $100 supermarket gift card (or closest equivalent).
Program | American Express Membership Rewards |
|---|---|
Number of rewards cards available | 4 |
Partner airlines programs | 10+ major airlines |
Average card fee | $376 |
Average points earned per $1 | 1.28 |
Points needed for a $100 supermarket gift card | 20,000 (Coles digital gift card) |
Points expiry and cap | Never and unlimited earning potential |
Program | Flybuys Rewards |
Number of rewards cards available | 3 |
Partner airlines programs | 1 |
Average card fee | $219 |
Average points earned per $1 | 1.25 |
Points needed for a $100 supermarket gift card | 20,000 (Coles gift card) |
Points expiry and cap | Never, as long as you collect or use points at least once every 12 months and no cap to point earning |
Program | NAB Rewards |
Number of rewards cards available | 3 |
Partner airlines programs | 4 |
Average card fee | $324 |
Average points earned per $1 | 1.17 |
Points needed for a $100 supermarket gift card | 20,410 (Coles, Woolworths, Harris Farm Markets or IGA digital gift card) |
Points expiry and cap | Rewards expire in three years and there’s no cap to points earning |
Program | CommBank Awards |
Number of rewards cards available | 3 |
Partner airlines programs | 2 |
Average card fee | $278 |
Average points earned per $1 | 1.5 |
Points needed for a $100 supermarket gift card | 20,650 (Coles digital gift card) |
Points expiry and cap | Doesn’t expire but selected cards have a points earning cap |
Program | Velocity Frequent Flyer |
Number of rewards cards available | 10 |
Partner airlines programs | 14 |
Average card fee | $277 |
Average points earned per $1 | 0.91 |
Points needed for a $100 supermarket gift card | 21,100 (One4all gift card) |
Points expiry and cap | Expires in 24 months of inactivity. No cap on points |
Program | Qantas Frequent Flyer |
Number of rewards cards available | 37 |
Partner airlines programs | 30 |
Average card fee | $299 |
Average points earned per $1 | 0.83 |
Points needed for a $100 supermarket gift card | 21,810 (Woolworths Group gift card) |
Points expiry and cap | Will expire in 18 months if there’s no activity on account. No cap on points |
Program | ANZ Rewards |
Number of rewards cards available | 2 |
Partner airlines programs | 5 |
Average card fee | $274 |
Average points earned per $1 | 1.75 |
Points needed for a $100 supermarket gift card | 22,225 (Coles or Woolworths gift card) |
Points expiry and cap | Must be redeemed within 36 months from 31 December of the year points were earned. Selected cards have cap on points |
Program | Amplify Rewards (Bank of Melbourne), BankSA, St.George Bank) |
Number of rewards cards available | 6 |
Partner airlines programs | 2 |
Average card fee | $235 |
Average points earned per $1 | 1.63 |
Points needed for a $100 supermarket gift card | 30,000 (points that can be transferred to Woolworths everyday rewards program) |
Points expiry and cap | Never, if the account remains open. Selected cards have a points cap |
Program | Westpac Altitude Rewards |
Number of rewards cards available | 2 |
Partner airlines programs | 5 |
Average card fee | $235 |
Average points earned per $1 | 1.63 |
Points needed for a $100 supermarket gift card | 30,000 (points that can be transferred to Woolworths everyday rewards program) |
Points expiry and cap | Never if account remains open and no cap on points |
Program | Bendigo Bank Rewards |
Number of rewards cards available | 1 |
Partner airlines programs | 1 |
Average card fee | $199 |
Average points earned per $1 | 1.5 |
Points needed for a $100 supermarket gift card | 37,040 (Coles or Woolworths gift card) |
Points expiry and cap | 35 months (just under three years) after points were originally credited |
Program | Heritage Credits (Heritage Bank) |
Number of rewards cards available | 2 |
Partner airlines programs | 0 |
Average card fee | $90 |
Average points earned per $1 | 0.0014 |
Points needed for a $100 supermarket gift card | 64 credits (Coles or Woolworths gift card) |
Points expiry and cap | Points will expire on 31 December 3 years after the points were earned. There’s no cap on points earned. |
Program | Bankwest More Rewards |
Number of rewards cards available | 3 |
Partner airlines programs | 1 |
Average card fee | $176 |
Average points earned per $1 | 2 |
Points needed for a $100 supermarket gift card | No information provided |
Points expiry and cap | Points expire after three years and rewards caps apply |
Program | Latitude Rewards |
Number of rewards cards available | 2 |
Partner airlines programs | 0 |
Average card fee | $107 |
Average points earned per $1 | 0.34 |
Points needed for a $100 supermarket gift card | No information provided |
Points expiry and cap | Expires in 18 months with no cap on reward points |
Program | Macquarie Reward Points |
Number of rewards cards available | 2 |
Partner airlines programs | 0 |
Average card fee | $199 |
Average points earned per $1 | 1.5 |
Points needed for a $100 supermarket gift card | No information provided |
Points expiry and cap | Never if account remains open and has no cap on rewards points |
Program | MyCard Rewards |
Number of rewards cards available | 3 |
Partner airlines programs | 1 |
Average card fee | $399 |
Average points earned per $1 | 1.17 |
Points needed for a $100 supermarket gift card | No information provided |
Points expiry and cap | No expiry and there is point caps on selected cards |
| Program | Number of rewards cards available | Partner airlines programs | Average card fee | Average points earned per $1 | Points needed for a $100 supermarket gift card | Points expiry and cap |
|---|---|---|---|---|---|---|
American Express Membership Rewards | 4 | 10+ major airlines | $376 | 1.28 | 20,000 (Coles digital gift card) | Never and unlimited earning potential |
Flybuys Rewards | 3 | 1 | $219 | 1.25 | 20,000 (Coles gift card) | Never, as long as you collect or use points at least once every 12 months and no cap to point earning |
NAB Rewards | 3 | 4 | $324 | 1.17 | 20,410 (Coles, Woolworths, Harris Farm Markets or IGA digital gift card) | Rewards expire in three years and there’s no cap to points earning |
CommBank Awards | 3 | 2 | $278 | 1.5 | 20,650 (Coles digital gift card) | Doesn’t expire but selected cards have a points earning cap |
Velocity Frequent Flyer | 10 | 14 | $277 | 0.91 | 21,100 (One4all gift card) | Expires in 24 months of inactivity. No cap on points |
Qantas Frequent Flyer | 37 | 30 | $299 | 0.83 | 21,810 (Woolworths Group gift card) | Will expire in 18 months if there’s no activity on account. No cap on points |
ANZ Rewards | 2 | 5 | $274 | 1.75 | 22,225 (Coles or Woolworths gift card) | Must be redeemed within 36 months from 31 December of the year points were earned. Selected cards have cap on points |
Amplify Rewards (Bank of Melbourne), BankSA, St.George Bank) | 6 | 2 | $235 | 1.63 | 30,000 (points that can be transferred to Woolworths everyday rewards program) | Never, if the account remains open. Selected cards have a points cap |
Westpac Altitude Rewards | 2 | 5 | $235 | 1.63 | 30,000 (points that can be transferred to Woolworths everyday rewards program) | Never if account remains open and no cap on points |
Bendigo Bank Rewards | 1 | 1 | $199 | 1.5 | 37,040 (Coles or Woolworths gift card) | 35 months (just under three years) after points were originally credited |
Heritage Credits (Heritage Bank) | 2 | 0 | $90 | 0.0014 | 64 credits (Coles or Woolworths gift card) | Points will expire on 31 December 3 years after the points were earned. There’s no cap on points earned. |
Bankwest More Rewards | 3 | 1 | $176 | 2 | No information provided | Points expire after three years and rewards caps apply |
Latitude Rewards | 2 | 0 | $107 | 0.34 | No information provided | Expires in 18 months with no cap on reward points |
Macquarie Reward Points | 2 | 0 | $199 | 1.5 | No information provided | Never if account remains open and has no cap on rewards points |
MyCard Rewards | 3 | 1 | $399 | 1.17 | No information provided | No expiry and there is point caps on selected cards |
Expert tip on choosing a rewards program
Brad Kelly, Credit Card Expert
"There are plenty of options but not all of them are good. For my money, the best rewards program is American Express Membership Rewards – e.g. you can transfer points to a wide range of airline programs. But for any rewards program, unless you are a BIG spender they are often not worth it as the fees outweigh the benefits. The average Aussie spends about $3,350/month on their card. This won’t get you a toaster."
Brad Kelly, Credit Card Expert
How to choose a rewards credit card
Rewards credit cards can offer a range of benefits, but choosing the wrong card could end up costing you more than you get back. The average monthly credit card spend in Australia is around $3,350 – will you be spending enough to get sufficient rewards back?
Below are some factors to consider when choosing a rewards credit card.
Match the card to your income and spending habits
Different rewards cards have different minimum income requirements. You may need an annual income of up to $100,000 to qualify for some premium credit cards.
How much you earn each year will naturally also affect how much you are likely to spend on your card, and the value of the rewards you may receive in relation to the card’s fees.
Be wary of spending more than you can afford just to earn reward points.
Watch out for fees
Annual fees are particularly important when you're choosing a rewards card. Because, they're usually pretty high – over $1,000 in some cases.
If your rewards card's perks won't stack up when valued against the annual fee, the card will be costing you money overall. In this case, a no annual fee credit card is a possible alternative.
You may also be able to find credit cards with no international fees that still offer rewards.
Consider your points eligibility
Some cards will offer more points for purchases made for specific items, while some bills or purchases may not be eligible for points at all on certain cards. Balance transfers typically do not earn points.
It's important that the card you choose is compatible with your existing spending. In other words, will the purchases you make already actually earn you points?
Don't forget point caps too. Some cards include a cap for earning points on purchases (e.g. 100,000 per year). Or the earn rate might taper off as you spend more (e.g. 1 point for every dollar spent up to $10,000 and 0.5 points for every dollar above that).
Don’t overlook the interest rate
The reality is rewards credit cards are not ideal if you carry a revolving balance on your card from month to month. Interest rates are usually very high.
If you think you won’t always pay off your balance in full, consider a low rate credit card, as some of these still offer basic rewards.
A card with a high number of interest-free days will give you more leeway to pay off the purchases without incurring interest at those high reward card rates.
It's also possible to access rewards through some special offer interest-free credit cards, with a 0% rate for a limited time.
How could rewards card usage be impacted by the planned surcharge ban?
Research from Money.com.au reveals Australians will ditch or downgrade their credit cards in droves if rewards points are watered down as a result of a planned ban on credit card surcharges.
The survey found 18% of Australians with a credit card would cancel their card altogether, while 33% will switch to a lower-fee credit card. A further 40% said they will shift more of their spending to a debit card or BNPL services.
Only 24% said they will stick with their current credit card because they still value the rewards, even if the perks are reduced.
Is a rewards credit card worth it?
If you use the card responsibly, rewards credit cards can be a handy way to access perks (e.g. some credit cards come with travel insurance included) and earn points on eligible purchases made with the card. This has become a fundamental part of how credit cards work.
At their best, rewards cards mean earning rewards for spending you would be doing anyway, with the cardholder getting more value in perks than they pay in card fees.
But for some people, the higher annual fee typically charged on rewards credit cards cancels out the value of the benefits. In other words, some people pay more than they get back in rewards. There can also be a temptation to spend more to boost the rewards.
The key is choosing a rewards credit card based on how you spend currently, and maximising your points earning without spending more than you otherwise would.
One way to determine whether a rewards card may be suitable for you is to:
- Calculate how much you spend each year
- Calculate how many points you will earn based on that
- Calculate the associated value of these points (one method is to convert the points into a gift card at a shop you use regularly)
- Compare the value of your points with the card fees
Here's an example...
Sean Callery, Editor
Let’s say you’re considering a credit card that earns you 1 rewards point per $1 you spend. You spend around $3,000 per month on your card, meaning the potential to earn 36,000 rewards points per year on the card. That would equate to around $163 in gift cards based on our analysis of rewards programs in Australia. For the card to be worth it based on the rewards points alone, the card fee would need to be less than $163 per year. A lot of rewards credit cards cost more than that, meaning you would need other card perks to make up the difference.
Sean Callery, Editor
Pros and cons of a rewards credit card
Pros
- Earn points on your regular everyday spending
- Many offer access to extra perks like complimentary travel insurance, concierge services, or exclusive discounts
- Choose between a wide range of rewards from retail chains, supermarkets, merchandise, airline flights, and gift cards
Cons
- Can be expensive over time, with high annual fees and interest rates
- You may be tempted to overspend in order to earn points
- Limitations to rewards like points cap, expiry, and purchase eligibility can dilute the value
Who can qualify for a rewards credit card?
Before you apply for a rewards credit card, make sure you meet the qualifying criteria. This is usually:
- Be over 18 years of age
- An Australian citizen or permanent resident
- Have a good credit score
- Have an annual income above the lender's cut off
How to apply for a rewards credit card
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. This will likely include:
Personal details (name, date of birth, address etc.)
Valid identification - such as a driver licence or passport
Details of your assets – such as your home and a car if you own one
Details of your current expenses and other loans you may have
Employment details - including your employment status, salary information, and payslips to verify your income. If you're self-employed, you will need to provide alternative documents, such as previous tax assessments, instead of payslips.
