Reward Programs vs Low Interest Cards

Information verified correct on September 29th, 2016

Everyone loves rewards and low rates. But we can’t have both. So how do we know what’s suitable for us as individuals?

Ideally, everybody would like a rewards credit card with a low interest. Unfortunately there are none available, and if one were to come along, it would certainly be outweighed by an excessive annual fee.

Reward program vs a low interest rate

Virgin Australia Velocity Flyer Card - Balance Transfer Offer

Rewards Program Credit Card Offer

The Virgin Australia Velocity Flyer rewards credit card features a Velocity Rewards Program which allows you to earn frequent flyer points on everyday purchases. Use Personal 24/7 Concierge Services while you are travelling abroad.

  • $64 p.a. annual fee for the first year ($129 p.a. thereafter) annual fee
  • 20.74% p.a. on purchases
  • 0% p.a. for 18 months on balance transfers
  • Cash Advance Rate of 20.99% p.a.
  • Up to 44 days interest free
  • Minimum Income Requirement of $35,000 p.a.

So when does a credit card with a reward’s program become more valuable than a low interest credit card, and vice versa? We investigate:

Plain and Simple

As a general rule of thumb, those who:

  • Occasionally or frequently accumulate interest,
  • Don’t spend excessively on their credit card ($15,000+ per annum),
  • It’s recommended they don’t apply or own a rewards credit card (unless they’re interested in an attractive balance transfer offer).

While those who:

  • Pay their balance in full each month most months,
  • Only save their card for emergencies or very rare use,
  • It’s recommended they don’t apply for or own a low interest credit card (unless they’re interested in an attractive balance transfer offer).

We will go into detail as to where these conclusions are drawn from further on.


For the sake of this example, we’ll assume that a modest rewards card annual fee is $100. Before you can start benefiting from rewards, you’ll need to accumulate enough points which equal the value of the annual fee. Otherwise, you’re paying more than you’re earning.

This graph – courtesy and credit of Cannex – demonstrates how much how much rewards you can yield (or how much money you can lose) depending on your average annual credit card spend. It is taken as an average of 80 different reward programs.

How much average earn across 80 programs.

Therefore, as an average across Australian reward programs, if you:

  • Spent $12,000 or less, you were losing $0.39 in fees or more.
  • Spent $24,000 you had an average rewards gain of $90.77
  • Spent $60,000 you had an average rewards gain of $358.78

These calculations do not even take into account the cost of interest and various other fees – it assumes that you repay your balance in full every time. If you pay other credit card fees and interest, you’ll need to spend even more to compensate for it.

If it takes 150 reward points to equal a real-life value of $1, then an ATM withdrawal fee of $2 can set you back as far $300 worth of rewards accumulation on your card.

If you believe you’re the perfect candidate for one of these cards, browse the reward program credit cards section. To compare reward programs and their point values, see our reward program guide.

Low Interest

It may seem odd to advise owning a low interest credit card if you pay your balance in full every month, seeing as the majority offer 55 days interest-free on purchases.

The point is however, if you’re going to pay your balance in full every time, the interest rate is meaningless, and you aren’t getting rewarded for it.

The rule to this exception is however, if you spend $4000-$15000 a year on your credit card, then you would be practically losing money from your rewards free anyhow, without the security of low interest if you miss a 55 day grace period.

Another acceptable factor in choosing a low interest card over a rewards card is the lack of management interest. It takes time to manage and redeem your reward points, let alone keep track of them. For those uninterested in earning rewards, they can still use a low interest card for low-cost benefit.

If you spend less than $4000 on your credit card a year, then a no annual fee credit card would be most suitable.

If you believe you’re the perfect candidate for one of these cards, browse the low interest rate credit cards section.

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Credit Cards Comparison

Rates last updated September 29th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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