A Rewards Credit Card is a credit card that offer some form of reward such as cashback, airpoints, reward points, airmiles and other goodies for using your credit card for purchases.

Rewards credit cards might be the best way to take advantage of a credit card, but a rewards credit card might not be suitable for you if you have a significant credit card debt or if you expect to carry a debt on your credit card because rewards credit cards often charge high interest rates and higher annual fees.

If you expect to carry a sizeable debt on your credit card without paying it off each pay cycle, then a low rate credit card might be more suitable for you and if you currently have a significant credit card debt then a balance transfer credit card might be more suitable. If you always pay your credit card debt on time you might also be interested in a no-annual fee credit card.

The value of credit card reward points vary extensively from one credit card to another. For example, one reward point might be worth $1 (in cash) for credit card A but worth just 1 cent for credit card B. When signing up for a rewards credit card it is important to understand the dollar value of the reward points you will be getting in order to compare the different reward schemes. Aside from the dollar value of the reward points, you should also take into account the other benefits you will get from the credit card such as free travel insurance, free airport lounge access, low or no-annual fee etc.

The best rewards credit card is highly subjective and depends on your personal circumstance and what you are trying to gain from the rewards credit card. What is important is to make sure that the benefit of owning the credit card outweighs the cost of having the credit card.

A rewards credit card can be beneficial if you expect to pay off your balance in full before the interest free period ends, and the benefits of owning the credit card outweighs the cost of having card including any anual or bi-annual fees for the card.

Most credit cards require a minimum repayment to be made each month and if you fail to make this payment then a penalty fee or penalty rate might be applied each month. You need to make sure you understand what penalty rate or fees would apply before purchasing a credit card. Rewards credit cards tend to have a higher annual fee and high interest rate. As with most credit cards, direct cash withdrawals are generally charged at a higher rate as indicated by the cash rate of the card.

Below are a few things to look out for with rewards credit cards:

• Not all points are equal – It is important to know that not all points are the same. A point from one reward scheme might be worth twice as much as a point from another reward scheme.
• Reward points capping – Many reward schemes have reward point caps – meaning you cannot earn more than a certain number of point per year. This is a very important factor when considering reward programs to choose from.
• Reward points expiry – Some reward programs have reward point expiry which can be frustrating since this information is usually buried in the small print.
• East of point redemption – Make sure you know how to redeem your points before you apply for a reward credit card. This is important to avoid any frustration down the line after you have gone through the hassle of collecting your points. Some programs make it very difficult to redeem points whereas others go as far as automating the process.
• Flexibility – Some reward points can only be redeemed for flights or used as store credit. Make sure you know what you can redeem your points for.
• Bonus points – Some cards offer sign up bonus or spending bonus. Store or business specific credit cards offer extra points for shopping within the store or business. This in important information if you tend to spend a lot of money with at the store or business.

In general, rewards credit cards do NOT tend to have low interest rates. You can use our credit card finder to filter through all the rewards credit cards to find find one with a relatively lower interest rate.

How you can use your credit card rewards points depends on the specific card. Some credit card reward points can only be redeemed for flights or used in store, whereas others are more flexible and can be redeemed in multiple locations, with some even allowing points to be redeemed as cash.

It helps to think about how you are going to use your reward points before you apply for a rewards credit card. For example, if you do not fly often then Airpoints might not be worth much to you.

Sign up bonus points credit cards are cards that offer bonus points when you first sign up for the credit card. It is an incentive you get you to get the credit card.

There is a range of credit card rewards programs available in New Zealand including Airpoints, Hotpoints, Flybuys, Cashback, purple points and much more. Some rewards programs only allow you to redeem your points for flights or to use in-store whereas others are more flexible and allow you to redeem your points at multiple locations or redeem them for cash.

A rewards credit card might also not be suitable for you if you plan to take on a significant credit card debt without paying it off on time. In this case a low interest credit card might be more suitable.

A rewards credit card might also not be suitable for you if you currently have significant credit card debt. Instead, you might want to consider a balance transfer credit card with an ongoing low purchase rate.