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A rewards credit card earns points you redeem for flights, gift cards or goods; a cashback card credits money back to your account, either on your spending or as a one-off sign-up offer. Cashback is simpler to value because a dollar is a dollar. Points can be worth more or much less than cashback depending on how you redeem them.
Either one only pays if you clear the balance in full every month and what you get back is more than the fees. This guide explains how each works, what changed for card rewards from 1 October 2026, and how to run the numbers.
By Better Rate Mate Editorial Team ยท Last reviewed
Many rewards programs let you convert points to cashback or gift cards too, usually at a lower value per point than a good travel redemption. Our Qantas Points value guide shows how to value a redemption.
| Rewards points | Cashback | |
|---|---|---|
| What you get | Points in the bank's program or an airline program | A credit to your card account |
| How to value it | Depends on the redemption; compare with the cash price of the same thing | Face value |
| Typical form | Ongoing points per $1, often tiered and capped, plus sign-up bonuses | Often a one-off sign-up credit after a minimum spend; some cards pay ongoing cashback |
| Flexibility | Flights, upgrades, gift cards, goods, or transfer to partner programs | Reduces your balance; use it however you like |
| Expiry risk | Points can expire or be devalued when a program changes | None once credited |
| Best for | Heavy spenders who will redeem for travel | Anyone who wants a simple, certain return |
Card rewards have long been funded partly by interchange: the fee a merchant's bank pays the cardholder's bank on each transaction. Following its review of merchant card payment costs, the RBA cut the cap on consumer credit card interchange from 0.8% to 0.3% of the transaction value and abolished the 0.5% weighted-average benchmark, from 1 October 2026. It also removed surcharging on eftpos, Mastercard and Visa from the same date, and American Express, UnionPay and PayPal said they would remove surcharges too.
The RBA's stated view is that interchange should not fund consumer rewards, and it noted that some issuers had said the change may prompt them to rethink how they fund rewards. One verified example: CommBank closed its Awards program and moved Awards credit cards to CommBank Yello points from 1 October 2026, converting Awards points one-for-one. Other programs may change too, so read your card's current terms rather than an older review.
Moneysmart gives a worked case worth remembering: Jen looked at a program that cost $30 a year to join and earned one point per dollar, and found she'd need to spend $5,700 to get a $25 gift card. She decided it wasn't worth it.
Do the same sum for any card: yearly points (or cashback) on your real spending, after caps and exclusions, valued the way you'd use them, minus the annual fee, any rewards fee and any points opt-in fee. If the answer is small or negative, a no annual fee card is the better deal. The frequent flyer card guide walks through the break-even step by step.
Big bonuses usually need a minimum spend within the first few months, and offer terms commonly restrict them to new customers, often excluding anyone who has held one of the issuer's cards recently. Some bonuses are paid in two parts, with the second part conditional on keeping the card into a second year, when the annual fee is charged again. Moneysmart's advice is to read the conditions and the minimum spend. Applying for cards just for bonuses adds credit enquiries to your report each time.
If you carry a balance, interest wipes out rewards: at the RBA's August 2026 average standard rate of 20.99%, a $3,000 balance costs about $630 a year in interest. That's far more than a typical card returns in points or cashback. A low rate card or a balance transfer will save more.
Cashback is simpler and certain. Points can be worth more if you redeem them well for travel, and less if you use them for gift cards or goods. If you won't put effort into redemptions, cashback usually wins.
Only if you pay in full every month and the rewards you'd actually use are worth more than the annual fee and any rewards fees. Moneysmart's example found one program needed $5,700 of spending for a $25 gift card.
From 1 October 2026 the RBA cut the cap on consumer credit card interchange from 0.8% to 0.3% and said interchange shouldn't fund rewards. Some issuers indicated they may change how they fund rewards; CommBank, for example, moved its Awards cards to CommBank Yello points from that date.
From 1 October 2026 surcharging was removed on eftpos, Mastercard and Visa, and American Express, UnionPay and PayPal said they would remove surcharges from the same date.
The one whose points you'd earn and use most after fees, which depends on your spending and where you'd redeem. We don't rank cards; the break-even method in our frequent flyer guide works for any points card.
We don't list cards or quote issuers' rates, fees or earn rates: they change often and we don't have a live product feed. Average rates are the RBA's published figures for the month shown. Before you apply, read the card's key facts sheet and Target Market Determination, which set out its actual rates, fees and interest-free days.
Card types, fees, interest-free days and credit limits, explained in one place in ourguide to comparing credit cards. When you're ready, tell us how you use a card and we'll match you on rate and fees.
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