Here's what you need to know about credit card reward points

Australia Broadcast Center

27-05-2025

Movie tickets, department store wares and flights are just some of the things people 'pay' for using credit card reward points.
Perhaps you've seen someone relishing their business class upgrade, partly 'paid' for with points, on social media.
But, Angel Zhong — a professor of finance at RMIT University in Naarm/Melbourne — says points also come with risks.
If credit card point programs are a mystery to you, here's what you need to know.
Credit card rewards schemes, including point programs, vary from lender to lender, but the basic principles of each have a lot in common.
Professor Zhong says, "it really depends on the specific terms and conditions, but usually you get points for every dollar that you spend."
Reward points can then be spent on perks and benefits which differs between credit cards and institutions, but can include gift cards, retail purchases and discounted travel offers.
These type of credit cards may "also offer exclusive perks", such as "access to airport lounges, travel insurance and concierge services".
The government's MoneySmart site says credit card reward programs "sound good" because "you could earn points you can use to buy movie tickets or flights" just by spending on the card.
Toni Eager is a senior marketing lecturer at the Australian National University in Canberra, on the land of the Ngunnawal and Ngambri people.
She says rewards schemes, including points are "a way of keeping customers".
"People might like certain reward schemes more than others, or it's something that keeps people using the card that they already have rather than going out and looking for cheaper interest rates."
Dr Eager says consumers need to be financially literate to get good value from reward points schemes, which reward spending.
"Whether it encourages people to overspend or changes their spending habits comes down to financial literacy."
Consumer group Choice says credit cards are not for everyone.
"Unless you're a big spender, credit cards with rewards schemes are mostly a gimmick, and they nearly always charge hefty annual fees and high interest rates."
These costs can "easily nullify the rewards".
Professor Zhong also says to be mindful that "you pay for what you get." Credit cards with extra perks will also have higher fees and interest rates.
"It makes them more costly if you don't pay your balances in full or on time."
She also warns that banks and lenders can change their loyalty programs including the value of points, and points can also expire.
"Read the terms and conditions carefully, especially when it comes to the changing value of your points."
Prfoessor Zhong says, "point hackers" are people who regularly open and cancel credit cards. The practice is known as "credit card churning".
"You open multiple credit cards to take advantage of the bonuses, and then you close them and repeat the process again with new cards."
She says many lenders waive the first annual fee for these types of credit cards, which can also come with bonus offers (additional points or cashback for example) and a zero per cent balance transfer fee for a set period.
The card can then be cancelled before the annual fee for the second year is charged.
Initial bonuses usually come with conditions, such as "spending a certain amount in the first three months".
Professor Zhong says credit card churning can lower your credit score, and "frequent credit card application and cancellation might be a bit of a red flag" if you're applying for a mortgage.
Doing this with different credit cards simultaneously increases the risk you miss a repayment, or you fail to make full use of the rewards, she says.
MoneySmart recommends looking for a low interest rate and features you'll use in a credit card.
If you're considering a credit card with a reward scheme, "check if the benefits you get are worth the higher cost".
Professor Zhong says to "choose a card that aligns with your spending habits so that you can maximise the points [and] maintain a healthy financial lifestyle".