How Do Credit Card Rewards Work?

According to 2009 figures from the Reserve Bank of Australia

, there are over 14 million credit cards in circulation in Australia. With dozens of card providers and a range of different types of card, choosing the right card for your needs can be tricky.

Banks who offer a credit card rewards scheme are amongst the most popular. Cardholders are able to accumulate points simply for using their card and can then exchange them for thousands of different rewards.

If you are considering a credit card rewards program, here's our simple guide to how they work.

Sign up for a card

The first step is to head online and use a comparison service to consider all the different credit card rewards schemes that are available. Each scheme is different in terms of how you go about earning points, the interest rate charged and what rewards you can benefit from.

Once you have found a scheme that is right for you, you need to apply for your chosen card. Once your application has been approved, your credit card rewards account will be opened and your card and PIN will be sent to you.

Earn points

Once you have received your card, it is time to start amassing your credit card rewards points. The vast majority of cards allow you to earn points based on the amount you spend on your card.

Typically, you will receive one reward point for every dollar that you spend on your credit card. You can use your card almost everywhere - to pay for large items such as furniture or electrical equipment, or for day to day purchases including groceries and fuel.

The points are awarded based on your spending, not on your card balance. Even if you repay your card balance in full every month you will still benefit from all the credit card rewards you have earned through your spending.

Bonus points

In addition to earning credit card rewards based on your spending, it is possible to accumulate 'bonus' reward points.

For example, if you have a gold or platinum card, you will often find that you receive an enhanced number of points based on your spending. It is not unusual for gold cards to offer 1.5 points per dollar spent on the card, and platinum cards often offer 2 points per dollar spent.

You can also earn additional credit card rewards by using your card with a list of 'bonus partners' approved by your card provider. The details of your card's 'bonus partners' are generally on the website of your bank, and you can earn additional points for paying for goods and services with your credit card at selected retailers.

Decide on rewards

Once you have accumulated credit card rewards, you can choose what you would like to exchange them for. Most card providers have a catalogue offering a wide range of choices including homewares, electrical goods, gift cards, charitable donations and experiences. You can either regularly use your credit card rewards points for smaller rewards, or save up your points over a long period to redeem them for a more valuable item.

by: AaronZaia

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