Getting something for nothing is a nice idea but unfortunately rewards cards aren’t always rewarding. Mozo recently compared the rewards on offer from nearly 100 credit cards and found that almost half return less than $20 net rewards value after annual fees. And at the average credit card spend of $17,000 per year, and a third of cards actually lose you money!

Whether or not a rewards card is right for you depends on the type of card you choose and your usual spending behaviour. Here’s how to choose it and use it – like a pro.

Find out if a rewards card would work for you 

Rewards cards are a great idea in theory – as you spend, card providers reward your loyalty with points that can then be ‘cashed in’ for an assortment of goodies such as flights, cash, store vouchers and gifts.

Generally, rewards cards suit big spenders, who pay off their cards in full every month without fail. If this isn’t you – stay away, you’ll more than pay for any “rewards” you might earn through annual fees and interest charges. As a rule of thumb if you spend less than $10,000 a year on your credit card it probably isn’t worth the hassle.

Choosing the right card

 The best rewards credit card for you isn’t only the one that gives you the best apparent cash return for spend (although it’s certainly an important factor). When choosing the type of rewards card to pursue, ask yourself:

• Which rewards you will actually use – a supermarket or department store rewards card might fit your lifestyle better than a frequent flyer points card
• Whether gift vouchers would save you money on existing purchases or simply invite temptation to splurge
• If prizes like bottles of wine and designer pepper grinders are something you value
• Whether you’d regularly check and use the points (especially if they expire)
• If you might get more use out of an instant rewards program instead of points

Once you’ve decided what sort of rewards program best suits your lifestyle and spending habits, be sure to compare all available rewards cards in that category to make sure you maximise the good stuff like points earning rates and minimise the bad stuff like annual fees. Use a comparison site like Mozo to find the best rewards cards.

Using rewards cards – like a pro

Once your card arrives, make sure you know how to use it like a pro:

1. Avoid interest charges: Reward credit cards have higher interest rates than low rate credit cards. Failing to pay your balance down to zero before the end of each month will swiftly undo any benefit you might gain from the card. 

2. Don’t spend for points: It can be tempting to buy more or reach for more expensive items when you feel that you’re earning points on your spend. Don’t do it! Rewards cards are only really rewarding if you can earn ‘something for nothing’ on your usual spend. 

3. Earn on business expenses: Rewards cards can be a real boon for small business owners, especially those who frequently travel interstate. Put business expenses, stationary and overheads on the card, and save money on business travel.

4. Watch your shopper psychology: Beware of using rewards that will effectively be costing you more – 30% off is not a free lunch and a flight to Melbourne is not a fully paid vacation. 

5. Use what you’ve got: Get into the habit of regularly monitoring your points balance. There’s no point earning them and letting them expire. 

Don’t get complacent – regularly review your rewards card to make sure you’ve still got a competitive deal. Also keep an eye on your annual fee, if it goes up dramatically, you could be paying more for those rewards than you’re earning. And if your lifestyle changes and your monthly spend goes down you may need to change cards too.