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Are Credit Card Rewards Really Worth It?

Are Credit Card Rewards Really Worth It?

The indulgent rewards schemes offered up with your new credit card can often seem a little too good to be true – so, are they?

Depending on how you use your credit card could make a huge difference to how worthwhile a rewards scheme is for you. We’ve rounded up a few basic considerations to make when deciding whether to factor a rewards scheme into your credit card choice.

What are Credit Cards Rewards?

Rewards credit cards allow you to rack up points as you make purchases on your credit card. How much you spend will determine the number of points you accrue, which can then be redeemed down the track for rewards.

Typically, these rewards will be in the from of cashback, frequent flyer points, merchandise and discounts. The type of card you select will determine where you can redeem your points, and what time frame you have to redeem them in.

How Much Do You Need to Spend?

To decide if a rewards credit card is worth it for you, you’ll need to calculate how much you’d spend each month, on average. Most credit card companies will have a minimum spend required to earn points.

Interest Rates

To put this in a practical sense – your credit card may offer you 40,000 points if you spend over $2,000 in one month. However, if you would only usually spend $1,000 a month in purchases, you could run into trouble when it comes making your repayments. The flow on effect could see you paying pricey interest fees on your repayments that completely counteract any rewards you’ve earned.

Annual Fees

It’s probably no surprise that with an enticing rewards scheme comes higher interest rates and annual fees. If your card charges you a $120 annual fee and you’re only earning $70 worth of points in a year, you may want to give rewards cards a pass.

Of course, this is all hypothetical, and will depend completely on your spending habits and the conditions of each rewards scheme.

The Fine Print

  • Make sure the credit card you choose rewards you where it counts. For example, if you’re a travel nut – make sure your provider offers frequent flyer points rather than discounts
  • Check whether there are any caps to the number of points you can earn, and any expiration date on redeeming your points
  • Ensure that where you currently shop is a partnered brand of your card, so you can naturally accrue points without altering your spending habits

So, Is It Worth It: A Recap

The most important thing to remember is that you should not be altering your spending habits to accommodate a rewards system. Instead, take a look at rewards schemes on the market and see if there is a credit card that could provide some worthwhile rewards for the way you already spend your money.

Essentially, rewards cards perform best for those who pay off their balance in the interest free period each month. That way you can enjoy the perks while dodging the higher interest fees.

Ready to start comparing your options? Compare & Connect have the knowledge and tools to bring you the most competitive credit cards available. Give us a call today or head online to get started.

Sally Writes 21 Jan 2021