Are Credit Card Rewards Points Worth It?

Credit cards that rack up rewards points are tempting – who wouldn’t want free flights or cash back just for spending? But are those shiny rewards programs actually giving you value, or are you just paying for someone else’s holiday? Let’s explore how these schemes work in Australia, their perks and pitfalls, and whether they’re worth it for you.

Many rewards credit cards promise big perks (like flights and gift cards), but it’s important to weigh those rewards against the fees and interest you might pay.

What Are Credit Card Rewards Programs?

Credit card rewards programs are basically loyalty schemes offered by banks or card companies to encourage you to spend on the card. Every time you tap or swipe, you earn points (for example, 1 point per $1 spent) which can later be redeemed for various goodies. In Australia, these points are often linked to popular programs: Qantas Frequent Flyer (earning Qantas Points), Velocity Frequent Flyer (Virgin Australia’s points), supermarket rewards like Flybuys (Coles) or Everyday Rewards (Woolworths), or the bank’s own schemes (like CommBank Awards or ANZ Rewards). For instance, you’ve probably seen ads about earning Qantas Points on your grocery shop or redeeming points for gift cards. It sounds great – spend on everyday items and eventually score free flights, gift cards, cashback, or other perks.

Most major banks and card issuers in Australia have some type of rewards credit card. American Express (Amex) offers Membership Rewards or co-branded Qantas/Virgin cards with generous points earn rates. The big banks have their own programs too – Commonwealth Bank has CommBank Awards, ANZ has ANZ Rewards (and separate Qantas cards), NAB has NAB Rewards, and Westpac runs Altitude Rewards (with options to earn Qantas or Velocity points). Each program has its own catalogue of rewards: you might trade points for flights, upgrades, gift cards, gadgets, or even get cashback credited to your account. Some premium cards throw in extras like airport lounge passes, travel insurance, or concierge services as well. On paper, it’s a sweet deal – why not get something back for money you’d spend anyway?

The Perks: Free Flights, Gift Cards and More

The biggest selling point of rewards cards is the promise of freebies and VIP perks. If you accumulate enough points, you can redeem them for free or discounted flights (a big draw for frequent flyers), hotel stays, electronics, or shopping vouchers. For example, Qantas or Velocity points might take you on a holiday, and supermarket points like Flybuys can be converted into cash off your grocery bill. Some cards even let you convert bank reward points to airline miles (e.g. converting CommBank Awards points to Velocity points for flights). Others offer direct cashback – effectively a rebate on your spending.

Card issuers also dangle sign-up bonuses – e.g. “Earn 100,000 points if you spend $3,000 in 3 months.” These one-time bonuses can be very valuable (often worth a few hundred dollars in travel or gifts) and give you a quick boost of points. High-end rewards cards might come with luxury perks like airport lounge access, complimentary travel insurance, or hotel upgrades, making you feel like a VIP. All this is designed to make you think, “Hey, my credit card is paying me for a change!” If you’re a savvy points collector who travels frequently or can maximise special offers, these benefits can indeed be enticing.

The Real Costs: Fees, Interest and Fine Print

Before you get too excited planning a free trip to Bali on points, pump the brakes – rewards cards often come with higher costs that can eat away the value of those perks. Premium rewards credit cards typically charge hefty annual fees (sometimes $100–$400+ per year). For example, some top-tier frequent flyer cards in Australia have annual fees around $250–$450. That’s a big upfront cost for the privilege of earning points. You need to ensure the value of rewards you’re getting exceeds this fee; otherwise, you’re in the red. One analysis showed that if you spent $20,000 in a year (earning ~20,000 points) and redeemed that for a $100 gift card, that’s a mere 0.5% return on spending – and a $250 annual fee would wipe out the benefit. In fact, you’d need to spend around $50,000 just to earn enough points to offset a $250 fee in that scenario.

Furthermore, rewards cards often carry higher interest rates – commonly around 19–24% p.a. in Australia. If you don’t pay your balance in full each month, interest charges will quickly dwarf any points earned. As one expert bluntly noted, if you’re not clearing the balance monthly, the interest could “totally wipe out any benefit” from rewards. In other words, paying 20% interest on groceries just to earn a few Qantas points makes no sense – you’d be far better off with a low-rate card or no card at all in that case.

The fine print can trip you up too. Point values vary greatly: not all points are equal. For example, 10,000 Qantas Points might get you a $60 Woolworths voucher or just a one-way flight that could be worth more or less depending on how you use it. Airlines also impose taxes/fees on “free” flights, and reward seat availability can be limited (especially for popular routes or peak times). There are often blackout dates, seat availability limits, or tiers that mean the dream redemption (like a business class upgrade) might be out of reach unless you have elite frequent flyer status. Many cards require a minimum spend in the first few months to unlock big bonus points – this can tempt people to overspend (more on that below). And don’t forget: points can expire if not used, and banks or airlines can devalue their points programs at any time by changing the conversion rates or reward prices. The terms and conditions can shift, so that shiny rewards card you signed up for might slowly become less rewarding over time.

Common Traps: Chasing Points and Overspending

Rewards programs sound great, which is exactly why banks love them – they encourage you to keep spending (and stay loyal to that card) in pursuit of points. One of the biggest traps is letting the tail wag the dog: spending extra money or buying things you don’t need just to earn points or meet a bonus target. In fact, a recent survey found that 2 in 5 Australian credit card users struggled to meet the high spend required for bonus points, and about 2.6 million Aussies have overpaid or gone into debt chasing rewards points. That’s a sobering statistic. If you’re splurging or carrying a balance due to a rewards card, you’re likely losing money overall. Another survey revealed over half of young adults got a credit card purely to earn travel points, but 60% of them weren’t paying off their cards each month – meaning interest charges and late fees that easily outweigh any free flights earned.

Overspending is a real danger. The psychology of “earning points” can nudge us to add that extra item to the cart or choose a pricier option because “Hey, I’ll get points for it!” But if you wouldn’t have bought it otherwise, those points aren’t truly free – you effectively paid for them. Minimum spend requirements for sign-up bonuses can also lead people to rush and spend more in a short time than they normally would. Some even open multiple cards to chase bonuses (a practice known as points hacking or credit card churning). While this can yield points in the short term, it’s not for the faint-hearted – it requires excellent organisation to avoid fees and can ding your credit score if you’re not careful. Banks have also caught on, often excluding previous customers from bonuses and tightening terms.

Lastly, be wary of reward illusion: people sometimes justify using a high-interest card or delaying paying it off because “I’m getting rewards”. This is almost always a mistake. As consumer group CHOICE bluntly puts it, unless you’re a big spender able to reap large rewards, these cards are “mostly a gimmick” – their hefty fees and rates can easily nullify the rewards for the average person. In other words, don’t let flashy points promotions cloud your good financial judgment.

Tips to Get the Most Value (Who Should Use Rewards Cards)

So, how can you enjoy credit card rewards responsibly? The key is to be the ideal rewards card user – disciplined, organised, and strategic. Here are some tips to get real value without the stress:

• Pay off your balance in full every month. This is non-negotiable. If you carry a balance, interest will wipe out the point gains. Only use a rewards card if you can avoid interest entirely.

• Use the card for normal, budgeted spending. Put your everyday expenses (groceries, fuel, bills) on the card to accumulate points on things you’d buy anyway. Don’t use it as an excuse to buy extra stuff. Stick to your spending plan.

• Pick a card that fits your lifestyle. If you fly often with Qantas, a Qantas points card could make sense; if you prefer cashback or shopping vouchers, choose a card that excels in those rewards. Also consider where the card is accepted – Amex, for example, earns lots of points but isn’t taken everywhere (and usually has higher fees). A Visa/Mastercard might be more practical if you want broad acceptance, even if the earn rate is lower.

• Watch the fees (and point caps). Make sure the rewards you earn will be worth more than the annual fee. Sometimes a no-fee or low-fee card with fewer rewards actually saves you more money in the long run. Also be aware some cards cap how many points you can earn in a month or year.

• Take advantage of bonuses – wisely. Sign-up bonuses and special offers can juice your points balance quickly, but plan ahead. Only go for a bonus if you’re confident you can meet the minimum spend with your regular expenses (not by overspending). Once you’ve earned a bonus and the year is up, reassess if the card is still worth keeping or if it’s time to switch or cancel (avoiding annual fees for year two if you’re not getting value).

• Use your points effectively. Don’t hoard points forever – they can lose value over time or expire. Redeem them for things that give you good bang for buck. Oftentimes, using points for experiences like flights or hotel stays yields better value than trading them for toasters or low-value items (check the dollars-per-point value). And if you have a flexible rewards program (e.g. bank points that transfer to airlines), compare your options before cashing out.

Rewards cards are best suited for people who are financially savvy and spend enough to earn meaningful rewards without debt. If you have a good income, pay everything off on time, and charge a lot of work or personal expenses that you’d pay anyway, you could earn a nice pile of points each year essentially for free. Frequent travellers often benefit the most, since they can use points for flights or upgrades that would otherwise cost a lot out-of-pocket. On the flip side, if you’re someone who struggles to stick to a budget, tends to carry a balance, or wouldn’t spend enough to offset the fees, a rewards card likely isn’t worth it. In that case, you’re better off with a low-rate, low-fee credit card (or a debit card) and the peace of mind of no looming debt.

Wrap-Up: Are Rewards Cards Worth It?

In the end, the question “Are credit card rewards points worth it?” comes down to your habits. Used strategically, rewards cards can indeed give you free stuff – and who doesn’t love that? But if you have to bend over backwards or spend more than you normally would to get those points, the value disappears quickly.

Key takeaways:

• Rewards cards only pay off if you never pay interest. Carrying debt on a 20% interest card for points is a losing game.

• Big spenders with discipline benefit most. If you’re charging many expenses anyway and managing them well, you’ll reap the rewards. Casual spenders or anyone struggling financially should think twice.

• Annual fees and restrictions matter. Always weigh the fee versus the rewards you actually use. A $0 fee card with modest rewards can beat a $400 card if you’re not maximising perks. Read the fine print on point caps, expiries, and redemption conditions.

• Don’t chase points at the cost of overspending. Points should be a bonus, not a goal that makes you buy unnecessary stuff. If you find yourself stretching your budget to earn rewards, it’s probably not worth it.

Bottom line: Credit card rewards can be worth it for Australians, but only in the right circumstances. For many people, a straightforward low-cost card (or no card at all) might yield greater “rewards” in the form of savings and less stress. So before you jump on the points bandwagon, do the math and make sure you’re truly coming out ahead – not just giving your money away for a few frequent flyer points. Happy (responsible) swiping!

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it, you should consider its appropriateness for you, having regard to those factors. Before making any decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement.