Many Australians enjoy the benefits associated with credit card rewards programs. Simply by using your card you can generate flights, merchandise or gift cards through your rewards program.
However, with annual fees on rewards credit cards ranging from $ 30 up to over $ 200, you need to be sure that you are getting good value with your credit card rewards program.
Annual Card Fee
The annual card fee for a card linked to a credit card rewards program varies from provider to provider, from $ 30 to over $ 100. Typically, you can expect to pay an annual fee of between $ 40 and $ 75 for a standard rewards credit card.
You should compare the annual fees for reward cards with the fees for standard credit cards. Many providers that don’t offer a credit card rewards program charge lower annual fees for their credit cards, and some don’t charge any fee at all.
Reward points are generally awarded based on the amount of money you spend on your credit card. Most cards will award between one and two credit card rewards points for every dollar that you append on your card.
Even if you pay off your balance in full every month (which is the recommended course of action with any rewards credit card) you will still earn points for every dollar that you spend.
Gold and Platinum cards
Many card companies link a gold and/or platinum card to their credit card rewards program. Gold and platinum cards often offer enhanced points collection; for example you may earn twice the number of points per dollar spent on a platinum card than on a standard card.
However, gold and platinum cards typically charge higher annual fees. It is not unusual for the annual fee on a platinum card linked to a credit card rewards program to be in excess of $ 200.
Balancing fees and rewards
It is therefore vitally important to balance the annual fee you pay against the value of the rewards that you are receiving.
For example, if you were to pay a $ 50 annual fee, you would have to be spending around $ 10,000 annually just to accumulate enough rewards to get that fee back.
In a recent survey across sixty-three rewards credit cards, one website found that unless you’re spending more than $ 1,000 a month, you are probably paying more in reward scheme fees over the year than you are receiving back in rewards.
If you use your credit card regularly and are spending a considerable sum every year (whilst paying your balance off on a monthly basis) then you may find that the credit card rewards you receive vastly outweigh the costs associated with the card. This may be also true of a gold or platinum card.
However, if you are spending under $ 1,000 a month on your card, you may find that you’re not even earning enough credit card rewards to negate the annual fee that you are paying. Is a rewards card therefore really the right choice?