What are rewards credit cards?

Rewards credit cards allow you to earn bonuses—such as cash back, points or travel miles—for every dollar you spend on your credit card. Credit card providers convert your spending into points, then into rewards when you redeem those points.

There are four main types of rewards:

• Cash back: These rewards include cashback or cash equivalents such as gift cards.
• Merchandise (general rewards): These rewards often have the most options when redeeming points,including gift cards, automotive services, entertainment, lifestyle, food and beverages, or additional rewards.
• Frequent flyer (flight rewards): These rewards often suit customers looking to accrue points on a specific frequent flyer program or other travel products.
• Instant rewards: These rewards provide instant discounts at the point of sale.

How do rewards credit cards work?

Depending on the credit card and rewards program you choose, you can earn rewards points for each dollar you spend on the card.

You are then able to redeem these points in various ways according to the rules of the rewards scheme. This could mean exchanging them for a selected range of goods and services, or claiming discounts on things like flights and accommodation.

Check whether the card limits the amount of rewards points you can earn, whether the rewards points can expire before you redeem them, and whether it is easy to redeem the points for the rewards you value.

Some providers allow you to set up auto-redemption, so that every time you reach a certain number of points, these points are automatically redeemed in the method of your choice.

How can you compare rewards credit cards?

Consider the following questions to find the best rewards credit card program for you:

• What is the rewards program? Does the program suit your credit card usage habits? Does it offer rewards that you are interested in?
• How can you earn points? How many points can you earn per dollar spent? Are there any conditions or point caps? Do the rewards points expire?
• What is the cost of having the card? Is the card’s annual fee worth the amount of rewards you can earn? Are there any costs associated with being a member of the rewards program? What is the interest rate?
• Are there any other features on offer? Some rewards credit cards also offer extra perks like complimentary travel insurance, purchase protection insurance and lounge access.

Canstar can help narrow down your options. Use the table at the top of the page to compare rewards credit cards, and change the filters to suit your requirements. Canstar researches and rates credit cards from a range of providers. When comparing rewards credit cards we consider both the price and features on offer, including the net reward return that customers can get.

What are the benefits of having a rewards credit card?

Some potential benefits of having a rewards credit card are:

• Earning points. The main benefit of a rewards credit card is that you can earn rewards points on your eligible spending. These points can be redeemed for things like cashback, frequent flyer points, merchandise and discounts on your shopping.
• Extra features. Rewards credit cards can often come with extra features like complimentary insurance cover.
• Bonus offers. Rewards credit cards may offer bonus reward points for new customers when they spend a certain amount within the first few months of having the card.

What are the drawbacks of having a rewards credit card?

Some of the drawbacks of having a rewards credit card are:

• Higher annual fees and interest rates. Rewards credit cards generally charge higher annual fees and interest rates than non-rewards cards. This means you will pay more for the card, particularly if you don’t pay off your balance in full each month.
• Rewards conditions. You will usually only earn points on eligible spending. There may also be caps on the number of points you can earn, and the value of the points you earn can vary across different cards and rewards schemes.
• Temptation to overspend. A rewards credit card may encourage you to spend more to get more points, which can lead to overspending.