The best frequent flyer rewards credit cards

The falling value of frequent flyer points

Last year, many credit card companies announced drastic cuts to their reward programs. For example, some Westpac, Jetstar and Woolworths cards have become less rewarding.

On the face of it, this may seem like bad news for consumers. But we think it's related to the introduction of new laws that ban unfair credit card surcharges – and this has been a hard-fought win for consumers. These laws stop businesses from using blanket card surcharges to offset the cost of expensive rewards programs that only benefit a small number of people, such as Amex card holders or frequent flyers.

With unfair surcharges removed for the benefit of all consumers, those people who take advantage of rewards programs are no longer subsidised. We're not surprised to see that, in these circumstances, airlines are reducing the value of frequent flyer points.

This may be disappointing to frequent flyers, but removing unfair surcharges benefits all of us. This is a great reform for all consumers who don't want to have to pay for someone else's seat upgrade through an unfair surcharge.

Do you want 100,000 points with that?

... but watch out for high fees and interest rates

While rewards credit cards have become less rewarding, a new benefit has emerged. Card issuers now dangle sign-up bonuses of up to 150,000 Qantas points to lure you in. The sign-up bonus alone would pay for an economy return flight to Europe.

But before rushing to sign at the dotted line, be aware of high annual fees on these types of credit cards – those fees can really eat up any benefits you might get, particularly if loyalty point caps and expiry dates stop you earning or using your points.

Along with high fees, frequent flyer rewards credit cards also typically have high interest rates, especially for cash advances. If you're not sure that you'll always pay your balance in full, go for a credit card with a low interest rate instead. And don't fall for a balance transfer credit card from a travel reward card provider – the rate is unlikely to stay low.

Good cards for big spenders

We reviewed 102 travel rewards cards with the help of Mozo and found there are some good loyalty schemes attached to Qantas and Velocity.

We look at two spending levels to find the credit cards that deliver the best value. 

Select the spending level that most reflects your own to jump to a comparison of the top 20 cards:

• $2000 per month/$24,000 per year
• $5000 per month/$60,000 per year

Good cards for low spenders

With most rewards credit cards, you'll need to spend at least $2000 per month to get any value, but there are a few cards that can suit low spenders, such as:

• American Express Qantas Discovery
• American Express Velocity Escape

Both of these cards have a $0 annual fee and no point caps. They earn you one point per dollar spent, which is a lower rate than some other American Express cards, but the fees are low so they're still top cards for low spenders. They even rate in the Top 10 for high flyers who spent $5000 per month.

The trouble with American Express cards is that many shops hit you with credit card surcharges, or don't accept them at all. Any surcharge is likely to eat up the rewards on offer. You can, however, use them at Coles and Woolworths – which don't generally surcharge – and use your weekly grocery spends to collect reward points.

The best Visa and MasterCards for low spenders are:

• Jetstar Platinum MasterCard, which works slightly differently from other cards.
• HSBC Premier World Qantas MasterCard. With a $99 annual fee, it's at the lower end for fees and gives you a $1 to 1 Qantas point conversion rate with a point cap of $10,000 per month.

Credit cards that leave you worse off

Some credit cards will cost more in fees than you'll be able to earn in points.

For big spenders, these two cards will deliver no points value if you spend $60,000 in a year on the credit card:

• Citibank Prestige – $700 annual fee 
• Citibank Qantas Prestige – $749 annual fee

There are many more frequent flyer rewards credit cards that leave low spenders in the lurch. All of the following cards will cost you at least $100 more in annual fees than the value of points earned, if you spend $24,000 a year on your card:

• Citibank, Qantas Signature – $444 annual fee
• Citibank, Signature – $395 annual fee
• Westpac, Altitude Black – $395 annual fee
• Commonwealth Bank, Diamond Awards – $349–$379 (Qantas option) annual fee
• David Jones, American Express Platinum (Membership Rewards) – $295 annual fee
• Commonwealth Bank, Platinum Awards (Qantas Awards) – $249–$279 (Qantas option) annual fee
• Bankwest, More World – $270 annual fee

That said, some cards with high fees offer other benefits such as a concierge or insurance, which can make them worthwhile if you use those services.

The best cards from Qantas, Virgin and Jetstar

Qantas, Virgin and Jetstar also have their own branded rewards credit cards that offer special perks, but the offers can be a bit wobbly.

Jetstar

The low-cost airline has two cards:

• Jetstar Platinum MasterCard
• Jetstar MasterCard 

With both cards you can choose either Qantas Frequent Flyer points or "Jetstar dollars". At first look the "Jetstar dollars" program gives you better value than the Qantas program, but there are some unique conditions that limit its value.

• Instead of withdrawing the points when you need them, a voucher is automatically emailed to you as soon as you accrue $100 with Jetstar MasterCard or $200 with the Jetstar Platinum MasterCard.
• You need to book your travel within six months.
• If you book flights or accommodation that costs less than the voucher, the rest of its value goes down the drain as you can only use it for a single transaction.

So, it's not possible to save your points for that special trip.

Virgin

Virgin cards don't fare as well as Jetstar in the comparison, but there's an extra benefit. While Virgin's four free flights offer no longer exists, Virgin will send you a travel voucher for $129 each year on top of any rewards you get. To use the voucher, you need:

• to make an online request
• have used your card at least once in the previous two months
• book within six months.

Qantas

Offers two cards and its platinum card has some perks attached:

• Two free lounge passes per year. 
• A discounted domestic companion fare once a year for you and up to eight of your mates on the same booking. (However, this offer is of questionable value as it's only a 10% discount on economy fares and up to a 20% discount on business class fares. Plus, discounts are only applied on the base fare, not taxes and fees. Qantas admits that its sale fares may be cheaper than the discounted companion tickets.)

Other rewards cards also come with perks such as airport lounge passes, chauffeur-driven rides to the airport, complimentary accommodation and even free flights. But conditions often apply, so it pays to read the fine print, check the annual fee and understand what's really on offer.

And before getting a frequent flyer rewards card, make sure you'll actually be able to use your points once you've collected enough.

Rewards credit card traps

• Rewards credit cards only make sense if you always pay your card off in full, as they usually have higher than average interest rates. The interest can negate any value you get from the rewards.
• Frequent flyer loyalty credit cards may leave you worse off if you want to use them for an international flight, as your points could expire before you've banked enough to book the flights. 
• If your rewards credit card also offers cashback and gift-card rewards, check before converting your points. Flight rewards are likely to be better value.
• Some credit cards reduce your points for certain types of purchases, such as for insurance and utilities payments.
• Monthly point caps can prevent you from making use of that big one-off purchase, like buying a car, to boost your points balance.

Top 20 cards for a $2000 monthly spend

Other popular rewards credit cards for low spenders

Source: mozo.com.au, April 3, 2018

Other popular rewards credit cards for big spenders

Source: mozo.com.au, April 3, 2018

How do you calculate a rewards card's value?

We reviewed 102 travel rewards cards with the help of Mozo. To calculate the scores, they:

• calculated how many points you'd receive over the course of a year based on spending $2000 per month or $5000 per month
• used the points for the purchase of "classic" or "reward" economy seats with restricted seat availability
• calculated what the points are worth to you in dollar terms based on the value of the flights, excluding taxes and charges. Values used were: Sydney–Melbourne one-way: Qantas $136; Virgin $112; Jetstar $98
• subtracted the annual fee from that dollar figure to show what the points are actually worth.

Bonus points you may earn for using your card at specific merchants or any introductory or special offers are not included in the calculation. There is also no value assigned to instant discounts, insurance, ticketing and concierge services or other such benefits.