Australian rewards cards: calculate the fee break-even

Use an alternative, not a blank page

The question is not whether a card earns rewards. It is whether the extra value justifies its extra cost compared with an option you would actually use. Moneysmart recommends comparing rates, fees and benefits in light of how you repay. We use that principle to build a simple, reproducible fee test.

Choose a realistic comparison: an existing card, a no-fee alternative or paying without a rewards card. Keep the spending assumption identical across the options. A model that assumes you spend more to unlock a reward is measuring a different behaviour, and the added spending belongs in the cost column.

Source: ASIC Moneysmart — Choosing a credit card

The arithmetic of an extra percentage point

Imagine Option A has an annual fee of A$180 and returns 1.5% in usable reward value. Option B has no annual fee and returns 0.5%. Assume all spending qualifies, there are no caps or other costs, rewards have the stated cash-equivalent value, and you pay in full under the card's conditions.

The difference in reward rate is one percentage point. The extra A$180 fee therefore needs A$18,000 of eligible annual spending to break even: 180 ÷ (0.015 − 0.005). At A$12,000, A returns A$180 before its fee, leaving zero. B returns A$60. Under these assumptions B is ahead by A$60. These are invented options, not Australian product offers.

Replace the headline rate with usable value

Points are not dollars. To make the comparison meaningful, choose a redemption you would genuinely use and calculate its value after any redemption charge. Do not use a premium travel redemption if your actual plan is a lower-value voucher. If availability or redemption conditions are uncertain, show a range instead of one precise figure.

Next separate eligible spending from total spending. Check exclusions, caps, tiered rates and whether supplementary-card purchases qualify. If the higher rate applies only to a slice of spending, calculate each slice separately. An annual total multiplied by the best advertised rate can overstate the benefit.

Keep interest and one-off benefits visible

The clean comparison above assumes no interest. If you carry a balance, add the expected financing cost using your account's actual terms. Do not subtract rewards from a debt balance as though the two cancel automatically; rewards may be restricted, delayed or usable only through a redemption programme.

Show a welcome bonus on a separate first-year line. Then run a second-year comparison without it and include the normal annual fee. Value insurance, lounge access or other benefits only if they replace something you would otherwise pay for and you meet the benefit's conditions. A long benefits list is not a household budget.

A reward credit may not satisfy the payment due

CommBank's Awards guidance says that redeeming points for cash to the card account does not count towards the minimum monthly payment. It is a useful Australian example of why a reward credit and an account payment are different things.

Keep the repayment funded in your transaction account even if a redemption is on its way. In the model above, rewards are a measure of value received, not money available to satisfy this month's deadline. For another issuer, check the equivalent redemption and payment terms rather than assuming the CommBank rule applies.

Source: CommBank — Awards program

A decision you can revisit

Save the inputs, document dates and calculation beside your conclusion. Set a reminder before renewal to compare the actual rewards you redeemed with the fees you actually paid. This turns an abstract points debate into a record of value received.

If you are considering a transfer to fund a rewards strategy, run a separate debt-repayment plan first. Moneysmart notes that transfer promotions can affect purchase interest-free days; do not assume a transfer account behaves like the debt-free account in this example. The useful outcome here may simply be keeping the cheaper arrangement.

Source: ASIC Moneysmart — Credit card balance transfers

Changes to this guide

21 September 2026: Added a local primary source, clarified an exception, recorded claim-level evidence, and replaced the shared image with an exclusive illustration.