Credit cards: choose the reward that suits your spending

Merchandise, cash, frequent flyer points and “exclusive” offers: the rewards available, just for flashing the plastic, are extensive. But – are they worth it? Each year we crunch the numbers on rewards; approximately 39 rewards programs, offered across 51 credit cards. The verdict? Yes, the rewards are there – but it’s important to choose the reward that suits your spending level.

It goes without saying that the more you spend on a credit card the more valuable a rewards program is. You could be surprised, though, at just how much you do have to spend to make it stack up on some programs!

Based on our research, the average rewards on offer for consumers at three spending levels (\$12,000 per annum, \$24,000 per annum and \$60,000 per annum) are as below:

 Annual spend Flight rewards – Average number of Ack-Wel return flights per year Cash/vouchers – \$ cashback per year General rewards – average Number of \$50 shopping vouchers \$12,000 0.46 \$87.18 1.90 \$24,000 0.91 \$173.45 3.80 \$60,000 2.29 \$431.10 9.49

Source: CANSTAR, April 2013. Does not take account of the annual fee charged on each card.

It’s important to note that this table doesn’t take account of the annual fee charged on the relevant card.

How to work it out for yourself?

It can be difficult for consumers to equate the points they earn to a dollar-value return, but we have a simple way to cut through the confusion of rewards. We call it the NET REWARD RETURN and it calculates:

• the dollar value of points earned each year, less
• the cost of the card and reward program each year

As an example:

Once you know your reward return, you can subtract the cost of the reward program to determine your net benefit each year. So in the above example, a \$60 per annum card fee would leave you with a net reward benefit of \$100.

The CANSTAR rewards star ratings compare all points-based Frequent Flyer and General Rewards programs. Click here to view our latest credit card reward star ratings report.