Claim Your Rewards

A “free” flight sounds tempting ... but do run the numbers to ensure you’re getting a good deal

- Maria Bekiaris

People love the idea of getting something for nothing. But if you’re not careful a rewards credit card could end up costing you rather than rewarding you. And it doesn’t help that many providers have now watered down their rewards programs.

“The Reserve Bank changed credit card interchange regulations, which meant that the banks that issue your credit cards earn lower revenues for processing your transactions,” says Steve Mickenbecker, group executive, financial services, at Canstar. “To maintain profitability of the credit card, this has meant that they have had to cut back on the benefits you receive or charge a higher fee. Generally they have cut back on rewards programs.”

Most affected are the companion card deals where you received an American Express card and a Visa or Mastercard, says Mickenbecker. “The Amex card typically earned two or three points per $1 and the Visa/Mastercard one point. The banks have closed down these products, and the replacement cards can typically earn around one to two points per $1 spend but with points tiering and capping.” CommBank, for example, is the latest bank – and the last of the big four – to drop American Express companion cards thanks to the Reserve Bank reforms in July last year.

So are rewards credit cards worth it? The answer is – it depends. The first issue to consider is whether you can stay on top of your debt. “Rewards cards can be great if you repay your card in full and on time each month but that is not everybody,” says Mickenbecker. Reward cards almost always carry a higher interest rate and fee. “So if you’re leaving debt on your card it’s a good idea to be looking for a low-rate card instead.”