Money

Card rewards aren't freebies

Paul Clitheroe
Paul Clitheroe

WE all like the idea of getting something for nothing but when it comes to credit card rewards, chances are any 'freebies' you earn will come at a surprisingly high price.

Almost half of all credit cards offer points-based rewards, and while they have the potential to deliver worthwhile benefits, these cards should be approached with caution. They are best suited to big spenders who pay the card off in full each month. 

That's because reward schemes are expensive to run, so it's no surprise that you'll generally pay a lot more for a reward-based card than for a standard credit card.

As a guide, comparison site RateCity found the average purchase rate for credit cards with a rewards program is 19.41%. That's almost 3% more than the average rate on non-reward cards.

The annual fees tend to be higher too. The average for a rewards card is $134 annually compared to $55 for a standard card. This fee alone can easily outweigh the cash value of any of any merchandise or flights received as rewards.

The picture is even grimmer if you carry an outstanding card balance. By way of example, RateCity compared 10 popular reward-based cards to see which offered the best value to earn a $100 spending voucher. The GE Money Myer Visa came up trumps, but you'd need to spend $10,000 on the card just to earn the $100 voucher. With an interest rate of 20.69% anyone using this card would only need to have an ongoing balance of about $485 for the reward to be wiped out by interest charges - and that doesn't take into account the $69 annual card fee.

If you must have a card offering rewards, it's important to choose a scheme that matches where you shop as well as your personal spending budget.  If you're unsure whether your card spending is sufficient to justify the card fee, check past statements for an idea of what you regularly rack up on the plastic.

Be sure to invest some time reading the product disclosure statement to work out how many points you can earn for each dollar spent on the card. This varies widely between cards and it can be confusing, though it is an essential step in maximising any value from reward schemes.

Finally, always aim to pay off the card in full each month. If you can't, chances are you'll pay more in interest than the value of any rewards.

As a word of caution, RateCity estimates less than 5% of card holders benefit from a reward program. They really work best for people who spend a lot on their cards - often around $60,000 annually, and who don't have a lingering balance that will attract interest. If that doesn't sound like you, bypass rewards and go for a low rate card.

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit www.paulsmoney.com.au for more information.

Topics:  credit cards



Six hideaway bars to escape winter chill

THE last season of GoT finally uttered the words we’ve been waiting six seasons to hear and now that the weather has cooled down in Brisbane, “winter is here.”

Our six art gallery picks for a creative day out

Queensland's Gallery of Modern Art always has a fun, exciting and interesting exhibition on show for the whole family to enjoy.

YOU'D be mistaken in thinking Brisbane wasn't an arty city.

Brisbane's arts and culture events centre stage

You loved the film, now you're about to love the musical. Don't miss The Bodyguard The Musical in Brisbane this July.

THE arts and culture events you don't want to miss.

Homewares stores to fulfil your Instagram dreams

No Caption

You too can become an Insta-star with these fab stores.

Date nights under $50

Nothing is more romantic than a picnic with a cracking view.

NOT every date has to cost you a bomb.

Top 10 Brisbane experiences to cross off your bucket list

Do yourself a favour and get amongst the food truck scene. Eat Street is a great place to start.

A GOOD bucket list doesn’t have to span continents or cost millions.

Six mega sporting events you need to be at this year

Don't miss all the action trackside this season.

IF THERE is one thing Brisbane does damn well, it’s play host.

Llew O'Brien pays tribute to former cop at parliament

Member for Wide Bay Llew O'Brien has paid tribute in parliament to former police officer who died in a Tiaro crash.

Kevin Guteridge was tragically killed in a two car crash near Tiaro.

"Please take me home": Dog nobody wanted finds loving family

Axel has found a home with Aizel Del Rosario.

"He slept on the bed with us the first night.”

Local Partners

Sam Armytage and Tom Cruise? Saaaaay what?

SAMANTHA Armytage has hit back at rumours she’s dating Tom Cruise, following reports the pair had hit it off during an interview on Sunrise.

Musical tribute to flood volunteers released

Songwriter honours flood volunteers who helped their neighbours.

Lismore songwriter Simon Thomas was moved by strangers' kindness

Karl Stefanovic's rant about Schapelle Corby 'a bit rich'

Karl Stefanovic is sick of hearing about Schapelle Corby.

Maybe he just wanted to make himself the story.

Could Schapelle be heading for Gladstone?

Australian Schapelle Corby is escorted by Bali Police at the parole office in Denpasar, Bali, Indonesia, 27 May 2017.

Schapelle's mother teases her free daughter could be Gladstone bound

Six things you never knew about Men in Black

Mushu the pug

It's been 20 years since Men in Black first hit cinemas

10 strange stories behind famous sex scenes

Khaleesi and Khal Drogo in a steamy moment.

Every set has their own way of filming sex scenes

HBO spills new details on Game of Thrones’ final season

Game of Thrones’ eighth and final season will only have six episodes.

New details about what to expect from the eighth, final instalment.

New $46.7m counter-terrorism facility to be built in Wacol

Premier Annastacia Palaszczuk, pictured with Police Commisioner Ian Stewart, has announced plans to build a new counter-terrorism facility in Wacol.

The facility will be built over three years.

Home to a sex worker: Sordid history of iconic Coast shed

Milojevic Djordjevic's daughter Linda at the derelict shed on Yandina-Coolum Road.

The shed was once a liveable 'barrack'.

This is real estate's billion-dollar man

Bob Wolff at AREC with John McGrath of McGrath Real Estate.

They don’t call him the “Billion dollar man” for nothing

Man's amazing comeback from monster crisis

Pat O'Driscoll agents Penny Keating and Doug Webber sold 56 Agnes St, The Range at auction over the weekend.

NOT long ago, he sold his possessions to pay staff. Now he's back.

Report reveals progress on $319m airport upgrade

Aerials of the Sunshine Coast.Jetstar plane in front of the Susnhine Coast terminal, Sunshine Coast Airport.

Over two dozen government approvals needed for airport expansion

Ready to SELL your property?

Post Your Ad Here!