With rewards changing, is it time to switch credit cards?

With banks cutting points and raising fees, here's how to compare rewards cards, low-rate cards, balance transfer cards and no-fee credit cards.

In a matter of weeks, the Australian credit card landscape has undergone what is arguably its biggest shake-up in years.

Card providers, including all four major banks, have made significant changes to their credit card offerings - largely in the rewards space.

The reason? Some banks have pointed to the upcoming card surcharge ban, which will see both debit card and credit card surcharging outlawed from October 1.

Why some rewards cards no longer stack up

While providers haven't taken a uniform approach with their changes, Richard Whitten, money expert at Finder, suggests that there's been a substantial downgrade across rewards cards.

"Generally speaking, you're looking at higher annual fees, higher interest rates, lower earn rates and a winding back of complimentary insurances.

"In some cases, the value of redeeming rewards points has also been lowered.

"So far, one-off bonus point offers for new customers are still relatively high, but we may start to see those change too."

Given the extent of the changes, it's only natural that many people will be left wondering if their rewards card is still going to deliver enough value to justify its cost.

Here's how to work out if your current card still makes sense or whether an alternative option is worth considering.

Option 1: Keep a rewards credit card

While the changes that have already been announced are significant, Whitten says that it doesn't necessary mean that rewards cards are no longer valuable.

"You may find that your current card is getting a downgrade, but it may still be worth holding on to."

Cardholders may want to be proactive though. To start, Whitten suggests taking the time to review your current card to assess whether the benefits outweigh the costs.

That may involve looking at the points earn rate, bonus points and any additional perks (like travel insurance) attached to the card, then weighing those up against the annual fee and other potential costs like the purchase rate.

Whitten also recommends heading to the online shop linked to the rewards or frequent flyer loyalty program you're in order to ensure that the points themselves are worth the effort.

"Obviously different things have different values, but you'll want to work out how many points a flight upgrade or a $100 gift card will cost you.

"From there you'll need to think about how many points you are going to be able to earn with the card in a year and how the real value of those points compares to the annual fee.

"If the value you can get from your points is more or similar to the annual fee, then it might be worth it - especially when you factor in other benefits like airport longue passes or travel insurance."

Ultimately, if the numbers don't stack up, then it may be time to consider another reward card, or a different type of credit card altogether.

Option 2: Switch to a no annual fee credit card

Recent research conducted by Finder on the upcoming card surcharge ban found that one in three Australians would cancel their credit card if their provider increased their annual fee.

The good news for cardholders who aren't keen on the idea of higher annual fees - or annual fees at all - is that there are a number of fee-free options on the market.

While these cards don't typically come with rewards or premium perks, they may be a good fit for those who like the convenience of a credit card without the ongoing cost.

"A no annual fee card is the cheapest possible option for someone who pays their balance off each statement period," Whitten says.

"So, if you're just using your card to cover everyday expenses and you manage it properly, there's no difference to a debit card in terms of cost, but a credit card obviously has that extra flexibility."

Option 3: Choose a low rate credit card

Another option is to prioritise finding a card with a comparatively low purchase rate.

"A low rate card may be useful for someone who doesn't always pay off their balance from statement to statement - who might carry a balance and pay some interest," Whitten explains.

"These cards tend to have interest rates around 8% p.a. to 13% p.a., but that's much better than the more expensive cards which can be as high as 24% p.a."

Whitten says that while most of these cards do tend to have annual fees under the $100 mark, there are also a handful of options that feature both a low rate and zero annual fee.

Option 4: Choose a balance transfer credit card

For cardholders wanting to banish any card debt they're carrying for good, a credit card with a balance transfer offer may be another option worth considering.

A balance transfer allows debt to be shifted from an existing card (usually one with a high interest rate) to a new card offering a low or zero-interest offer for a set period (generally six to 24 months).

In theory, these offers can be useful in helping cardholders pay off their debt sooner without accruing additional interest.

However, they aren't risk-free. Some providers charge an upfront fee to facilitate the transfer, and once the offer period ends the interest rate will typically jump much higher.

The promotional rate also usually only applies to the transferred debt, not new purchases.

That's why it's often recommended to treat a balance transfer card as a debt repayment tool rather than as a card for everyday spending.

Before switching, consider the features that will benefit you the most.

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