This year, Canstar has researched and rated 57 rewards credit cards from 28 financial institutions. We’ve scoured the market to find the best rates, features, and rewards programs on offer in 2016 for Rewards credit cards.
Why get a Rewards credit card?
If you are looking for a new credit card, a Rewards card might suit you if some of these apply:
- You pay your closing credit card balance in full each month (interest rates on rewards credit cards are often around 20% p.a.).
- You want to earn points that can be redeemed for cashback, gift vouchers, merchandise, or travel agents.
- You aren’t interesting in holding or redeeming points with frequent flyer programs (e.g. Qantas Frequent Flyer or Virgin Australia’s Velocity program).
A rewards credit card may not be for you if:
- You rarely pay off your balance in full or only use your credit card occasionally.
- You want the best rates when redeeming points for flights or upgrades through airlines.
- You want benefits such as travel insurance but aren’t particularly interested in earning points that you will never redeem.
What’s new with Rewards cards?
Since the last time Canstar took a close look at Rewards credit cards the Reserve Bank has announced that it is looking to make some changes to interchange fees (fees paid between banks), the could reduce issuers’ ability to offer generous rewards on credit card spending.
The RBA has signalled its intention to cap the individual interchange fee within Visa and MasterCard’s fee schedule at 0.80%. It is also proposed that “companion” American Express cards will be subject to interchange regulation for the first time. Currently some of these interchange fees are much higher (e.g. Visa Signature was 1.80% in 2013).
If this regulation goes ahead (we can expect to hear from the RBA soon), there could be significant changes to the rewards programs offered by issuers, as these interchange fees form a part of the revenue that funds credit card reward programs.
We have seen some changes already by banks that seem to be pre-empting the RBA’s decision. The changes on these products (ANZ, Citi, Virgin Money, Suncorp, Macquarie Bank and Commonwealth Bank) have in some cases resulted in products no-longer receiving a 5 star rating.
What are the average rates and fees on offer for Rewards credit cards?
Interest rates and annual fees on credit cards that are attached to rewards programs are generally higher than those without. The tables below show minimum, average, and maximum purchase rates and annual fees on credit cards on Canstar’s database – both with and without rewards programs.
Interest rates on rewards credit cards
| Purchase Rate (p.a.) | |||
|---|---|---|---|
| Rewards | Minimum | Average | Maximum |
| Without | 7.99% | 14.21% | 23.50% |
| With | 9.99% | 19.40% | 21.74% |
| All cards | 7.99% | 16.77% | 23.50% |
| Source: Canstar. Rates as at 1 March 2016. | |||
Annual fees for rewards credit cards
| Annual Fee | |||
|---|---|---|---|
| Rewards | Minimum | Average | Maximum |
| Without | Nil | $43.13 | $125.00 |
| With | Nil | $153.74 | $700.00 |
| All cards | Nil | $98.72 | $700.00 |
| Source: Canstar. Fees as at 1 March 2016. | |||
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