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Are reward credit cards worth it?

credit card rewards imageWhile rewards credit cards offer complimentary extras and money-saving features, Australians may be better off financially with a non-rewards credit card, according to research by, Australia’s most visited comparison website1.

The analysis of over 300 credit cards illustrates the cost difference between rewards and non-rewards cards, factoring in purchase rates and annual fees.

On average, for a rewards card, account holders pay $182 in annual fees and repay interest at 19.58%. This equates to a cost of $1,728 when repaying the average credit card balance of $6,2982 over two years.

A non-rewards card, however, has an average annual fee of just $49, and a purchase rate of 14.65%, which works out to be only $1,103 in fees and interest over the same period.

The study found credit card holders would be $625 better off when signing up for a non-rewards card, compared to a rewards credit card.

Annual cost of repaying the average credit card balance of $6,298 in two years*

  Average purchase rate Average annual fee Total cost over two years
Rewards card 19.58% $182 $1,728
Non-Rewards card 14.65% $49 $1,103

Source: *Not taking into account interest-free periods or balance transfer deals. **The average credit card balance is $3,149 and most cardholders have two or more cards.

Bessie Hassan, Money Expert at says rewards credit cards can be useful when used responsibly, but they do have drawbacks.

“Whether it’s making the most of airport lounge access or clocking up frequent flyer points, rewards credit cards offer unique benefits.

“However, rewards cards often have a higher purchase rate attached and a higher annual fee, so weigh up your options to see which card type will benefit you most.

“If you have a lot of existing plastic debt and you’re not in a position to make the most of complimentary extras, a non-rewards card may be more suitable,” she says.

Ms Hassan warns borrowers to practice due diligence when considering a rewards credit card, and to look out for traps.

“If you’re withdrawing money from an ATM, you may be charged interest at the cash advance rate, which could be around 22%, so try to avoid this if possible.

“Look at the points per dollar ratio. Most products offer at least 1 point per $1, but this may vary depending on the program type. Some providers may also implement a limit on the amount of points you can earn over a given period,” she says.

Among all credit cards available on the market, the average purchase rate is 17.28% and the average annual fee is $123.

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