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How do rewards credit cards work?

How do rewards credit cards work?

A rewards scheme can award you for spending on your credit card – but is a rewards card right for you?

Credit card reward points can be an effective way to benefit from regularly spending on your card. Used the right way, a credit card with a rewards program can see you earn points to go towards your supermarket shop, a gift card or even your next holiday.

Because of the awards they offer, these credit cards generally carry a higher annual fee and/or purchase interest rate. So before signing up to one, it’s important to understand exactly how they work and whether you’ll earn enough in rewards points to make any extra costs worthwhile.

Points earned for every dollar spent

Before taking out a reward credit card, check how many points it offers per dollar spent. You’ll also want to know if there any conditions around what you can and can’t spend money on to earn points.

Credit cards with the same bank or financial institution can often differ in the points they offer for your spending. With CommBank’s rewards program, for example, known as CommBank Awards:

Points accumulate

As you spend on your card, your points total will grow. Being able to view your rewards points total along the way can be handy. CommBank customers with an Awards credit card can do this through NetBank and the CommBank app.

Keep in mind that while it can be great to earn more and more points, it’s also important to stay on top of your credit card balance and ensure you’re always making your repayments. Depending on your financial situation and spending habits, a low-rate or low-fee credit card may be more suitable than a rewards card.

Using points to make purchases

Ideally you’ll be able to spend your rewards points on a wide variety of things. Again, before signing up to any rewards credit card, check the program it’s aligned to and the suite of items it offers for which you can potentially redeem your points. See what you can redeem your points for with a CommBank Awards credit card.

Take note too that if you don’t happen to have enough points to purchase what you want, rewards credit cards will also typically let you use all your points and then pay the difference on top of them. 

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.