How credit card reward programs work

There are three basic parts

1. Spend money, earn points
2. Sign up points bonus
3. Redeem gift cards with your points

When you spend money on a credit card with a reward program, you earn points for each dollar you spend. The rate you earn points depends on the card - it might be 1 point per dollar, 2 points or 1/2 a point.

Most credit cards with reward programs also give you a sign up bonus of some large number of points - think 100,000 points.

Each credit card provider has their own reward program, and you can use this to redeem your points for goods or gift cards. All the dollar values on this site are the values of Woolworths or Coles gift cards redeemed with points. The point requirement is different in each program. Generally, using Qantas points for gift cards is worse than using the banks own reward program.

Each credit card comes with an annual fee. Often credit cards will wave the annual fee for the first year. Some credit cards split their bonus points over two years, e.g. 80k the first year, and 20k the second year. This means you have to pay two annual fees if you want the maximum bonus for that card.

Will this affect my credit rating?

Yes, credit card enquires do affect your credit score - it's more a question of the amount. There are three different credit score providers in Australia: Illion, Equifax and Experian. Find out more from the gov. Since I started getting credit card with reward points for a few years, my credit score has dropped from "excellent" to "very good", which I am fine with. I monitor my credit score with these three services:

• Creditsimple (Illion)
• Getcreditscore (Equifax)
• Creditsavvy (Experian)