Are rewards credit cards still worth it?

There's something quite satisfying about the idea of reclining in a business class seat or freshening up at an airport lounge, knowing that it's come courtesy of your credit card.

These are experiences that Sarah Megginson, a personal finance expert at comparison website Finder, has taken herself over the past decade, thanks to a variety of rewards credit cards.

"Personally, I love rewards cards. I've used them for over 10 years and I've had huge perks and benefits.

"I haven't paid for travel insurance for 10 years. I've flown first class to New York and business class to Los Angeles, and I've had lots of trips to Fiji and New Zealand - all covered on points.

"So I've had heaps of value from them, but at the same time, I've worked hard to make sure I'm taking advantage of bonus points offers. I shift credit cards every 18 months and I pay off my balance in full each month. It doesn't come for free and it doesn't come without work."

Who pays for rewards points?

As Megginson implies, there are trade-offs. Rewards card perks such as frequent flyer points and insurances aren't a product of the generosity of credit card companies.

Rewards credit cards generally come with an annual cost. Cards featuring decent bonus point offers and ongoing points earning rates, plus some additional perks, are likely to have an annual fee of at least $150, but more commonly it's going to be in the $250 to $400 range or even higher.

Then there are other potential costs such as surcharges, international transaction fees and interest payments that card users can end up paying along the way.

When it comes down to it, there's a lot to weigh up when assessing the potential value of a card. This has arguably been made harder in recent years as a result of tweaks to the points and perks being offered by rewards credit card providers, as well as changes to adjacent frequent flyer schemes.

How are rewards points earned?

Whether it's through a supermarket loyalty scheme or a frequent flyer program, it's fair to say that many Australians love accumulating reward points.

According to research conducted by Finder in 2022, earning rewards points was the second major motivator for Australians to take out a credit card behind having one for emergencies.

There are two main ways that rewards cardholders can earn points.

The first is by making day-to-day purchases on which they receive a set points-earning rate.

The second is through one-off bonus points offers that are activated once a spending target has been hit in a set timeframe. These can be as high as 100,000 or more Qantas Points, Velocity Points or bank-specific reward scheme points.

Why are points getting harder to accumulate?

Earning rates and bonus point offers haven't changed dramatically in size in recent years but, according to Megginson, in many cases, bonus point offers have become harder to get.

"In the past 12 to 18 months, we've seen a shift with the way the points are offered. In the past, you might have been able to get 100,000 bonus points, if you spent $3000 in the first 60 days.

"Now that offer will have shifted to be 70,000 bonus points up front, then another 30,000 points in 12 months once you have clicked over into your second year and paid your second annual fee."

Megginson believes that the move is a matter of banks trying to retain their customers for longer, but she also has a hunch that they're also targeting so-called churners.

"Credit card providers have recognised that there is a subset of people who churn through cards and aren't going to be loyal for five, six or seven years.

"Some people will just hold a card for 12 or 18 months to get the bonus points before moving on. Some will even get the points after three months then cancel it, which can be a bit riskier for your credit profile."

Going forward, Megginson says there's every chance that card providers will move to stagger bonus point offers even further by reducing the upfront bonus and spreading further bonus points out over multiple years.

What other credit card perks are disappearing?

Points are clearly a major drawcard for cardholders, but there's another side to rewards and premium credit cards: additional benefits.

These, of course, differ from card to card. But it's not uncommon for cards to come with various types of insurance (travel, purchase protection, extended warranty and so on) as well as cashback offers, travel 
or flight credits and airport lounge passes.

Unfortunately for cardholders, a number of banks have started paring back these additional perks and benefits.

"We're starting to see some cards remove benefits," says Megginson.

"And this isn't just one or two providers making small changes - we're seeing a number of providers tweaking their offerings."

"One of the recent examples is NAB. They're actually removing international and domestic travel insurance and rental car excess insurance from six of their credit cards in May next year.  NAB is not alone. BOQ, Citi and Suncorp Bank are among the other card providers phasing out travel insurance and rental car excess insurance on certain rewards cards from May 2026.

And beyond insurance perks, American Express recently removed the two annual passes to its Centurion Lounges at Sydney and Melbourne airports for holders of its Velocity Platinum Card, while also increasing the annual fee from $375 to $440.

"I think what these changes demonstrate is that now, if you want to take out a rewards card, you've really got to look at the fine print, because they all have different policies," says Megginson.

How are frequent flyer programs changing?

Credit card providers aren't the only ones who have been tweaking their offers. Both Virgin and Qantas have rolled out extensive changes to their frequent flyer programs in recent months - changes that are relevant to many rewards cardholders who earn Qantas Points and Velocity Points.

"Virgin made two broad changes back in January," says Steve Hui, chief executive of loyalty program concierge service iFLYflat.

"The first was the number of points needed to be redeemed in order to fly and the second related to how people can earn status credits.

"Points wise, Virgin increased the number of points needed to fly internationally and domestically on some routes. It [the increase] was around the 10%-15% mark, so it wasn't too drastic and they hadn't made any changes for quite a long time."

As Hui explains, Qantas has also increased the number of Qantas Points needed for many rewards seat flights.

"At the beginning of August, Qantas also made changes to their points program. I tend to focus on business class for our clients, so the change there was a 5% to 20% increase in the points redemption required for a business class seat - mostly 20%."

For example, the number of Qantas Points required for a Classic Reward economy seat from Melbourne to Brisbane has increased from 12,000 to 13,800, while a Classic Reward business seat from Sydney to Los Angeles has jumped from 108,400 to 130,100.

Could a surcharge ban change the rewards game?

In July, the Reserve Bank of Australia (RBA) released a consultation paper recommending that it would be in the public interest to ban surcharging on EFTPOS, Mastercard and Visa card payments.

At face value, removing surcharges would be a clear win for consumers given that the RBA estimates Australian debit and credit cardholders pay about $1.2 billion in surcharges each year, although there's an argument that these costs will just be passed on elsewhere.

In the same paper, the RBA also recommended that the existing cap on interchange fees - which are fees that the merchant's bank pays to the customer's bank on each card transaction - should be lowered. The RBA estimates that this would save businesses about $1.2 billion a year, though come as a $900 revenue hit to banks.

It's for this reason that some experts have argued that banks may look to offset any revenue they lose on interchange fees by reducing the value of their reward programs and additional credit card benefits or by increasing credit card fees.

How can you still earn rewards points?

Ultimately, any changes that devalue rewards points, make points harder to earn or remove additional card benefits are going to disadvantage rewards cardholders.

However, both Hui and Megginson believe that it's still possible for Australians to use rewards credit cards to their benefit. That said, it may pay to be savvy - especially when it comes to earning and redeeming points.

1. Avoid incurring unnecessary fees 

"Don't get a rewards credit card if you're not able to pay off the interest every month," says Megginson.

"That really goes for all credit cards, but if you can't afford to pay off the full balance each month to avoid paying interest, then you're going to offset the benefits you get."

2. Set a goal upfront 

"There are a few important things that most people don't look at before they start earning points. Number one is how many points they need," says Hui.

"If people know that it costs 159,000 points to fly one way to Europe in business class, then they have a target they can aim for and they can consider how to best earn those points."

3. Pay attention to earn rates

"Look really closely at the earn rate, which is how many points you get for every dollar you spend," Megginson says.

"I got my husband a card last year and I didn't pay attention to the earn rate which was 0.5 points per dollar. So, we didn't earn anywhere near as much as we could have if we were with a card that was 1 point per dollar."

4. Be mindful of where you spend   

"Make sure you get a card that aligns with your spending," says Megginson.

"For instance, if you run a business and you're making payments to the ATO, with most cards you'll earn a reduced rate or won't earn any points.

"But there are certain cards that do give you points for those kind of payments to government agencies, which can be really profitable."

5. Redeem your points strategically 

"Using points to fly business class is where you get the best sweet spot in terms of financial value and, in my view, satisfaction," says Hui.

"There's two ways to do this. In my view, booking a business class seat through Classic Rewards with Qantas or a Reward Seat with Virgin are good value.

"You can also use points to upgrade. This can also be good, but you don't determine upgrades - the airline does. It's out of your hands. So that's a big distinction."

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