A rewards credit card is worth it in Australia only if you pay the balance in full every month and the realistic value of the points or cashback comfortably beats the annual fee. If you ever carry a balance, interest of around 20 per cent will swallow the rewards and then some. The card stops being a perk and becomes an expensive habit.
How a rewards credit card actually works
A rewards credit card earns you something back on what you spend, usually points or a small slice of cashback. Points might convert into frequent-flyer miles, gift cards, statement credit, or merchandise. Cashback is simpler: a percentage of your spend comes back as a credit, often capped at a monthly or annual limit.
The pitch is appealing. You were going to buy groceries and fuel anyway, so why not earn on it? The catch is that the rewards are funded, in part, by the fees and interest the card issuer collects. The system is designed to be profitable for the bank, which tells you most cardholders are not coming out ahead.
The single rule that decides everything is whether you clear the statement balance by the due date. Do that, and you pay no interest and keep whatever you earned. Miss it, and the maths flips fast.
If you carry a balance, you are not earning rewards. You are paying for them.
The interest will dwarf the points
Here is the part the glossy brochures gloss over. The average purchase interest rate on Australian credit cards sits near 20 per cent, and some sit higher. Compare that to a typical earn rate that might return one to two cents of value per dollar spent.
Say you carry a $3,000 balance for a year at 20 per cent. That is roughly $600 in interest. To “earn” $600 back in rewards at a generous one to two per cent return, you would need to spend somewhere between $30,000 and $60,000 in a year and redeem every point at full value. The interest you paid almost certainly outweighs the rewards you banked. This is exactly why anyone juggling a balance should look at clearing credit card debt before chasing a single extra point.
Rewards only make sense on top of disciplined, paid-in-full spending. They are the cream, not the cake.
Weigh the annual fee against realistic rewards
Most rewards cards charge an annual fee, sometimes a few hundred dollars on premium tiers. That fee is the first hurdle your rewards have to clear before you see any benefit at all.
Be honest about your real spending rather than the brochure’s example spend. Work out:
- Your likely annual spend on the card.
- The earn rate, after any bonus categories and caps.
- The actual redemption value of those points, not the headline figure.
- The annual fee, plus any extras you would not otherwise pay.
If the realistic rewards value comes in under the fee, a no-frills or low-fee card wins. There is no shame in a boring card that simply costs you nothing.
Frequent flyer points or cashback?
The right type of reward depends on how you live, not on which logo looks fanciest.
| Reward type | Best for | Watch out for |
|---|---|---|
| Frequent flyer points | Regular travellers who book flights and upgrades | Points capping, blackout dates, devaluations |
| Cashback | Everyday spenders who want simple value | Lower headline value, monthly caps |
| Flexible points | People who want gift cards or statement credit | Poor conversion rates on some redemptions |
Frequent-flyer points can deliver outsized value if you actually fly and redeem for premium seats. If your points sit unredeemed, or you only ever cash them for a department store voucher, cashback is usually the calmer, more honest choice. It is easy to value and hard to over-promise.
The traps to read before you sign
A few features quietly erode the value of a rewards credit card:
- Points capping. Many cards stop earning, or drop to a lower rate, once you hit a monthly or annual points ceiling.
- Exclusions. Government payments, BPAY, rent, and some utilities often earn nothing.
- A fee you would not otherwise pay. A high annual fee only makes sense if the rewards genuinely outrun it for your spending.
- Devaluation. Issuers can change earn and redemption rates, so today’s sweet deal can sour.
It also pays to keep an eye on the bigger picture. Applying for and closing cards can affect your file, so it is worth understanding how to improve your credit score before you chase the next sign-up bonus. If you do decide a rewards product fits, take the time to compare rewards cards across fees, earn rates, and redemption options rather than grabbing the first big-bonus offer you see.
So, are they worth it?
For a disciplined spender who pays in full, picks a card whose rewards clearly beat the fee, and matches the reward type to their life, a rewards credit card can be a tidy, low-effort bonus on spending you were doing anyway. For everyone else, the honest answer is usually no.
The smart move is to treat the card as a payment tool first and a rewards engine second. Get the fundamentals right, then let the points be a small pleasant extra. If you are still deciding which product fits, our guide to the best credit card in Australia walks through the trade-offs in more detail.
The bottom line
A rewards credit card is only worth it when you never pay interest, the rewards genuinely outrun the annual fee, and the reward type suits how you spend. Run the numbers on your own habits, watch for caps and exclusions, and never let the lure of points talk you into carrying a balance. The cheapest reward is the interest you never paid.
This is general information, not personal financial advice. Figures were last checked June 2026 and can change, so check the official details with your card issuer or at moneysmart.gov.au before deciding.