Rewards credit cards in Australia are heavily marketed but rarely analysed clearly. The calculation is straightforward once you have the right numbers: what do you actually earn in points per dollar spent, what are those points worth in dollars when redeemed, and does that value exceed the annual fee and any other costs? For most Australians, the answer is nuanced — rewards cards can deliver genuine value, but only for specific spending patterns and redemption habits. For others, the annual fee is dead money spent chasing points that never materialise into meaningful rewards.
Rewards credit cards earn points on eligible purchases, typically expressed as points per dollar spent. Common earn rates in Australia range from 0.5 points per dollar on basic rewards cards to 1.5–3 points per dollar on premium cards. Most cards have tiered earning: a standard rate for everyday spending and a higher rate at specific partners (supermarkets, airlines, department stores).
Key restrictions on earning: points are usually not earned on cash advances, BPAY, and some bill payments. Government charges (ATO payments, council rates) typically earn at a reduced rate of 0 or 0.5 points per dollar on most cards, as these transactions attract a surcharge. Some insurance payments and rent payments also earn at reduced or zero rates. The headline earn rate only applies to qualifying purchases.
A point is not a fixed unit of value — it depends entirely on how you redeem it. Redemption options include flights, hotel stays, cashback, gift cards, merchandise, and frequent flyer transfers. The value per point varies dramatically by redemption type:
| Redemption type | Typical value per point |
|---|---|
| Business/first class flights (frequent flyer) | 2.0–4.0 cents per point |
| Economy flights (frequent flyer) | 0.8–1.5 cents per point |
| Hotel stays | 0.6–1.2 cents per point |
| Cashback or statement credit | 0.3–0.6 cents per point |
| Gift cards | 0.4–0.7 cents per point |
| Merchandise / catalogue | 0.2–0.4 cents per point |
The hierarchy is clear: points are worth most when transferred to a frequent flyer program and redeemed for premium flights. They are worth least when redeemed for merchandise or cashback. If you are earning points and redeeming them for cashback, you are almost certainly getting less value than the annual fee costs.
To determine whether a rewards card is worth its annual fee, calculate: (annual spend on eligible purchases) × (earn rate) × (value per point at your typical redemption type) = annual rewards value. If the rewards value exceeds the annual fee, the card is net positive.
Example: A card with a $295 annual fee earns 1.0 points per dollar on everyday spending and 2.0 points per dollar at major supermarkets. You spend $30,000 per year on the card, of which $8,000 is at supermarkets. You transfer points to a frequent flyer program and redeem for economy flights at 1.0 cent per point. Points earned: ($22,000 x 1.0) + ($8,000 x 2.0) = 38,000 points. Value: 38,000 x $0.01 = $380. Net position: $380 - $295 = $85 positive. At cashback redemption (0.4 cents): 38,000 x $0.004 = $152 — net negative by $143.
Rewards cards carry significantly higher purchase interest rates than basic cards — typically 19.99–22.00% p.a. in Australia. If you carry any balance from month to month (do not pay in full), the interest cost will exceed any rewards earned within a single billing cycle. A $5,000 balance at 20.99% costs $87.46 per month in interest — far more than any points that month's spending generates. Rewards cards are only financially positive for people who pay the full balance every month without exception. If you sometimes carry a balance, a no-annual-fee low-rate card will almost always produce a better financial outcome than a rewards card.
For frequent credit card switchers, sign-on bonuses (points earned on reaching a minimum spend threshold in the first 60–90 days) often represent more value than 12 months of ordinary earn. A sign-on bonus of 100,000 Qantas points, redeemed for business class flights at 3 cents per point, is worth $3,000 — for a card with a $295 annual fee. The strategy of cycling between cards to collect bonuses is legal and widely practised, but it creates multiple credit enquiries on your credit file and requires careful tracking to avoid missing minimum spend requirements or paying fees on cards not cancelled in time.
Rewards cards deliver poor value if: you carry a balance (interest wipes the benefit), your annual spend is under $15,000–$20,000 (insufficient points to justify the fee at standard redemption values), you redeem for cashback or merchandise rather than flights, or the card's earn rate has been recently reduced (issuers devalue rewards programs regularly with limited notice). The most common mistake is continuing to pay the annual fee on a rewards card accumulated from a past employer or sign-on offer when spending levels have dropped and the card is no longer net positive.
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