Reward Programs vs Low Interest Cards

Featured Rewards Program Credit Card

The Citibank Emirates Platinum rewards credit card features a Citi Miles Loyalty Program which allows you to earn frequent flyer points on everyday purchases. You can earn up to 3 Skyward Miles for every $1 you spend on your card. You can then redeem your Skyward Miles for your choice of flight rewards and upgrades with Emirates partner airlines

• $229 annual fee
• 20.74% p.a. on purchases
• 1.9% p.a. for 12 months on balance transfers
• Cash Advance Rate of 20.74%
• Use Personal 24/7 Concierge Services while you are travelling abroad.

Click here to read the Citibank Emirates Platinum Card terms and conditions

Featured Low Interest Credit Card

If you are a keen shopper or just looking for a good low interest credit card then the St.George Vertigo MasterCard is a good choice. You will save right from the very start with amazingly low rates on purchases and balance transfers for the first 6 months. Best of all this card reverts to a low ongoing purchase rate after the initial 6 month period.

• $55 annual fee
• 12.49% p.a. on purchases
• 2.99% p.a. for 6 months on balance transfers
• Cash Advance Rate of 21.24%
• Up to 55 days interest free on purchases

Click here to read the St George Vertigo terms and conditions

Everyone loves rewards and low rates. But we can’t have both. So how do we know what’s best 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.
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.

Rewards

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.

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.

Related article worth reading:

• Choosing a credit card [fido.gov.au]  – See article section on Reward Programs
• Credit Cards – what is credit? [Commerce WA] – scroll down on the article page to see section on low interest credit cards

• Comparison of Top 10 Credit Card Offers

Editor's Choice: Our Top Credit Cards

Credit Card	Card Details	Interest Rate (p.a.)	Cash Advance Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Interest free days (up to)
HSBC Credit Card	Editor's Choice: 0% for 6 months Balance Transfer & No Annual Fee Featuring a $0 annual fee for life, and 0% p.a. balance transfer for 6 months, the HSBC Credit Card was voted the Best Transactor Credit Card for 2010.	16.99%	20.75%	0% for 6 months	$0	55
Suncorp Clear Options Standard Visa Card	A great 12 month balance transfer offer, combined with a low annual fee and a good interest rate on purchases.	12.24%	17.99%	1.9% for 12 months	$39	0