Credit card loyalty schemes not worth it for most of us

At a time when many shoppers are turning away from credit cards, banks are devising ever more ways to get us spending on plastic. But near the top of their list of tricks is an old favourite - the credit card loyalty scheme.

Often called gold or platinum schemes, these are designed to make shoppers feel special by allowing them to earn points, which can be cashed in for some sort of reward.

However, recent analysis underlines just how much you have to spend on a card these days before you get the promised perks.

According to Canstar, which analysed 128 programs, a shopper has to spend an average of $19,480 on a credit card to earn a $100 voucher. It's a far cry from a decade ago, when $12,400 was required to get a $100 voucher. All the same, they can still be worthwhile, for the right type of shopper.

So how do the returns from loyalty schemes stack up against their costs?

To find out, you have to compare the benefit of a loyalty card with what you pay in annual fees and interest.

Once these factors are taken into account, it becomes clear that they are not the right fit for everyone.

First, the fees. Australians spend an average of $18,500 a year with credit cards, which means many of us wouldn't even qualify for a $100 voucher.

Loyalty schemes come with annual average fees of $69, which suggests there's not a huge amount of reward left over for many people, once they've paid the fee.

Then there are interest rates, which range from about 10 to an eye-popping 20 per cent for some credit cards. Despite the high rates, many of us still pay credit card interest. Of the $49.2 billion Australians have on their credit cards, about $35.3 billion, or 72 per cent, is racking up interest.

"As soon as you start to pay interest, a lot of these rewards are pretty redundant," says Canstar analyst Adam Beu.

The figures show that rewards schemes only make sense if you are a disciplined spender who pays the monthly bill in full.

Even then, it's important to choose a scheme with a fee that suits your spending habits. Some of the most extravagant schemes have membership fees of more than $300 a year.

Although the exact rate at which points are earned varies between cards, to be racking up rewards worth $300 a year, you need to be doing some serious spending.

Canstar calculates that shoppers have to splash out $60,000 on a card to get a voucher worth $285.

Rewards schemes can be a nice way to earn the occasional perk if you're a disciplined spender.

However, as always, it's important to look at the cold hard numbers rather than the glossy brochures.