New research reveals that Australians now have to spend more on their credit cards each year to get the same net rewards value they were seeing just two years ago.
The promise of a free flight, shopping or cash rewards makes choosing a rewards credit card over a traditional credit card seem like a good choice.
But, annual fees on rewards credit cards have increased sharply over the last two years, while the annual value offered by rewards programs has on average remained the same and, in some cases, declined.
Many of the rewards cards evaluated failed to offer any significant value on the $16,000 a year the average Australian spends on their card.
The findings
The research, conducted by Mozo, our financial comparisons partner, evaluated 67 standard rewards cards from banks, retailers, airlines and mutuals. They calculated the annual value of the rewards that could actually be earned, then subtracted the annual fee to determine the net value offered.
Key findings:
- Twenty per cent of standard rewards cards are so unrewarding they actually charge more in annual fees each year than they allow the average spender to earn back in rewards.
- Around one third of all standard rewards cards on the market return less than $20 in net value each year to the average spender.
- Only five out of 67 standard rewards cards (non-platinum) offer the average spender over $100 in rewards value each year, after the annual fee.
And there are some interesting trends emerging from this research.
The average standard rewards card annual fee has risen sharply from $126 in 2010 to $152 in 2012. But the average non-rewards card annual fee has actually decreased over the same period from $62 to $44.
Australians are spending more on their credit cards each year, up from $14,000 two years ago, to eek out the same net value from their rewards cards that they were receiving two years ago.
This is due to the sharp increase in annual fees on standard rewards cards and the fact that some card providers have downsized the rewards offerings on their standard and gold rewards cards, as they try to attract more customers onto their lucrative platinum card products.
Australia’s most rewarding credit cards
| Rewards card |
Annual rewards value |
Annual fee |
Net annual value |
| Qantas American Express Discovery |
$160 |
$0 |
$169 |
| Coles MasterCard |
$160 |
$49 |
$111 |
| Virgin Money Virgin Flyer Credit Card |
$208 |
$99 |
$109 |
| Westpac Altitude |
$208 |
$100 |
$108 |
| Jetstar MasterCard |
$160 |
$59 |
$101 |
*Based on $16,000 annual card spend and excludes platinum cards. Excludes introductory and bonus points offers. Where both American Express and Visa / MasterCards are issued per account, calculations assume 100% of spend is on American Express.
Australia’s least rewarding credit cards
| Rewards card |
Annual rewards value |
Annual fee |
Net annual value |
| Bankwest Qantas Gold MasterCard |
$84 |
$150 |
-$66 |
| Heritage Bank Gold Rewards |
$50 |
$90 |
-$40 |
| Qantas American Express Premium |
$211 |
$249 |
-$38 |
| Bankwest Qantas MasterCard |
$84 |
$119 |
-$35 |
| Heritage Bank Classic Rewards |
$25 |
$48 |
-$23 |
*Based on $16,000 annual card spend and excludes platinum cards. Excludes introductory and bonus points offers. Where both American Express and Visa / MasterCards are issued per account, calculations assume 100% of spend is on American Express.
Bonus and Introductory Points Offers
Cardholders can get more value out of their rewards card by making use of bonus points offers, however, calculations show that the additional rewards may not add up to as much as you might think.
For instance, the Qantas American Express Premium card lets you earn bonus points when you use the card to purchase Qantas flights.
But when Mozo ran the numbers they calculated that purchasing a Sydney to Melbourne return flight each year would earn an extra 286 bonus points annually, equivalent to only $2.86 of in flight value.
Introductory points offers can offer good value to cardholders, but only in the first year of the card.
For instance, the Bankwest Qantas Gold Mastercard has an introductory offer of 4,000 Qantas Frequent Flyer Bonus Points for new customers. Again Mozo calculated that this only delivers an extra $40 in rewards value, taking the card’s overall net value in the first year to -$26.
Conclusion
"All that glitters is not gold". It's an old saying but a good one. And to be frank a lot of the offers out there look pretty sparkly and interesting, until you read the fine print.
That being said, the right credit card can work for you, if you follow some simple guidelines.
Choose a rewards program that fits your lifestyle. For instance if you don’t fly regularly you might be better off with a shopping rewards card aligned with a favourite retailer rather than a frequent flyer rewards card.
Ensure you’re not paying an excessive annual fee, as fees will eat into the value of the rewards you can earn. The best value rewards cards for the average spender have no, or low, annual fees.
Avoid rewards cards with restrictive points caps and expiry dates, particularly if you are a big spender.
Earn extra points by shopping with bonus partners, but don’t forgo cheaper prices elsewhere in the pursuit of future rewards.
Always pay your credit card balance in full each month. Most rewards cards have high interest rates that will outweigh any value you can earn in rewards.
More:
Compare popular credit cards
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