Are you attached to your frequent flyer points? Could you survive without them? Does the thought of paying a three-figure annual fee for access to a rewards programme make you cringe? Which type of card is actually a better deal — no-frills credit cards that can save you money or rewards cards that essentially pay you for using your card? Let’s explore the benefits of both, so you know what to look for when comparing credit cards on your own.

How You Might Get More From Rewards Cards

The appeal of rewards cards is an obvious one — you earn “extras” just for using your card, by spending money you would have spent anyway. It sounds like a great deal, right? If you spend a lot of money using credit cards each year, it might very well be a great deal. For example, if you have a frequent flyer card like the ANZ Frequent Flyer Gold credit card you can earn frequent flyer points that you can use on your next holiday or business trip, which might save you hundreds or dollars or more.

Not only do rewards credit cards let you earn points that you can redeem for things like frequent flyer points, cash back and merchandise, but most also come with various perks. For example, many rewards cards feature free international travel insurance and / or purchase cover. Again, the perks save you money — if you didn’t have the rewards card but you wanted the coverage, you would have to pay for it out-of-pocket.

How You Might Get More From No-Frills Credit Cards

Sure, rewards credit cards have some benefits, but that’s not the entire story. You also have the option of using a no-frills credit card like the Aussie MasterCard. These credit cards don’t offer rewards (although some do still offer perks like free travel or purchase cover insurance, so maybe we should call them low-frills instead). The main benefit of a no-frills / low-frills credit card is that you save money up front. They come with low annual fees and sometimes also low interest.

In other words, you don’t have to spend a certain dollar amount just to save money like you do with rewards cards (which means you won’t have that same drive to spend more than you otherwise might, just to meet rewards point goals). You save money right now instead by never paying it out to the credit card company through higher fees in the first place.

We also have hybrid cards — rewards cards that let you save immediately rather than waiting until you accrue rewards points. The Citibank BP credit card is a good example, as it lets you save money every time you buy petrol and other products from BP.

Which is Better?

In the end, your spending habits and the individual card terms you’re comparing will determine what the better deal is. Just remember to ask yourself “could I earn more in rewards than I would save with a no-frills card?”

If the answer is “yes,” then the rewards card is a better option. If “no,” then the no-frills card is the better deal for you. For example, it doesn’t matter how many frequent flyer points you could earn if the cost of the card (through annual fees and interest) is more than the dollar value you can redeem your points for. If it would be cheaper to save the money up front and simply purchase your tickets and other travel items outright with cash, then the rewards card isn’t a good deal, no matter how good it might feel not to lay out money directly for the purchase later.

When comparing rewards cards to no-frills options look at the interest, annual fees, introductory offers, and the value of the potential rewards and perks (based on how much you usually spend). Some rewards cards offer great deals that really will save you more money, and others will cost you more than you realise. The best way to find the best credit card deal is always to spend some time crunching the numbers.