Rewards Cards – What is the Best Rewards Credit Card for You?
When it comes to rewards cards, there’s a dizzying array of offers to choose from. From sign-on bonuses and cash back to frequent flyer points and other perks, even the savviest of customers may find it hard to choose between them.
To help you narrow down your options, here’s a closer look at the different types of rewards cards, as well as some tips on how to choose the right rewards card for you.
But wait, what is a Rewards Card?
A rewards credit card is a credit card linked to a rewards or loyalty program that lets you accumulate points in exchange for a range of rewards and bonuses.
The great thing about a rewards card is you don’t need to do anything special to earn points. You will automatically rack up points simply by using your card for everyday purchases – including groceries, clothing and bills. That way, you can get more from the money you’d be spending anyway.
When you’ve earned a certain number of points, you can exchange them for valuable rewards available through the rewards program linked to your credit card, such as cashback on your credit card account, or shopping vouchers at your favourite stores.
Keep in mind that you won’t earn points for taking out a cash advance, and that certain types of purchases and transactions, such as repayments, may also be excluded. Read the terms and conditions carefully for details about your card’s earn rates and when points expire, as these will vary according to the rewards program.
Types of Rewards
Here’s an overview of the main types of rewards that are commonly available. Whether a particular rewards card offers any one or more of these rewards will depend on the rewards program linked to it.
• Cashback. A very popular rewards program choice, this offer gives you cashback on your credit card account once you reach a minimum number of points or satisfy the spend criteria, helping you to pay back your balance.
• Instant rewards. Get automatic discounts for using your credit card at participating merchants – for example, $10 off at the supermarket when you reach a certain number of points. You might also receive one-off discounts and bonuses in exchange for opening the credit card.
• Shopping rewards. Depending on your tastes, your rewards card might also allow you to redeem points in exchange for vouchers, gift cards, merchandise, concert tickets and fine dining.
• Travel rewards. Redeem rewards points for airline tickets, hotel stays or exclusive member upgrades. Travel points can either be transferrable or non-transferrable.
• Travel insurance. While not exclusive to rewards cards you can also get benefits such as travel insurance. This is an extra bonus bundled into many cards. It might not be a reward per se, but with benefits such as 24-hour customer assistance, cancellation cover, theft protection and more, free travel insurance is nothing to sneeze at.
How to choose
The right rewards card can complement your spending habits while offering the type of rewards you want.
• Know what you want. Are you loyal to a certain airline, do you love to shop, or would prefer more money in your pocket? Maybe you would like to have a combination of benefits, including travel, instant discounts and cashback?
• Cheaper isn’t always better. Depending on your needs and spending habits, cards with higher fees could earn points faster. For example, a platinum card might earn twice the points a standard card does for every dollar spent. As always, make sure the benefits will outweigh the annual cost in your case.
• Be wise, categorise. If you want to accumulate points faster, think about how you will use your card and look for those that give you extra points in relevant categories. For example, instead of earning one point for every dollar spent, some cards might offer two or three points for every dollar spent on airline tickets or at specific retailers.
• An added bonus. Some cards offer big sign-on bonuses such as free travel points. Depending on the promotion, you could be looking at 25,000, 50,000 or even up to 100,000 free points. Bonuses may be subject to certain conditions and are usually only available to new customers, so read the fine print carefully to make sure you understand the requirements.
• Love the perks. Look for a rewards card that offers great perks on top of points. For instance, if the credit card is linked to a rewards program operated by an airline, you might also be eligible for airline loyalty status perks, such as free checked baggage, priority boarding, access to airport lounges, free return flights and much more.
Avoid potential pitfalls
Different rewards cards earn points at different rates. To get the most out of your card, compare the types of rewards available, as well as the ‘points currency’ across cards.
For example, let’s say two different cards, Card #1 and Card #2, each offer one point for every $1 spent. In both cases you can redeem points for cashback; however, the rewards program for each card works a little differently:
|Card offer||Points required for cashback||Cash back amount||Point currency|
|Card #1||10,000||$50||(10,000/50) = 200||BETTER VALUE|
|Card #2||25,000||$100||(25,000/100) = 250|
Assuming the annual fees are the same, Card #1 offers 200 points per dollar better value from a ‘points earned’ perspective.
Speaking of annual fees, it’s important to weigh up the ongoing costs of holding a rewards card against the long-term benefits. For example, one card may charge $99 a year, while another card with a $199 annual fee may give you more points for every dollar spent. In some cases, the card with a higher annual fee may turn out to be a better choice, as long as you’re using it regularly. There’s no point paying an annual fee if you aren’t accumulating points and earning rewards.
Finally, always make sure you pay off your balance on time. Otherwise you’ll accrue interest charges on your purchases, and this will offset the benefits.
Take time to sort through the offers and use the card wisely, and you could make your money work harder with a rewards card.
Looking for a reward card that ticks all the boxes? Compare credit cards now to find the right one for you.