Aussies 'need to be cautious of reward credit cards'

People should approach reward credit cards with caution.

Research carried out by CHOICE claims that such credit cards are only viable for those who are able to repay their balance in full every month, as the interest is significantly higher than normal credit cards as well as charging a typical annual fee of $500.

It was also revealed that Aussies will have to spend $1,000 on such a card every month for more than five years before they would earn enough points to receive a $500 digital camera, Perth Now reports.

Christopher Zinn, spokesperson for CHOICE said: "There's a lot of marketing hype about rewards cards but if you look at the figures they can hardly be considered all that generous in the way points are converted to flights, vouchers, goods and even cash."

He adds that although those who can place expenses on reward credit cards at no direct cost to themselves can receive "significant benefits", those Aussie credit card holders who are unable to clear monthly balances on such cards should avoid them.

Instead, Mr Zinn advises that such people opt for a low-interest credit card.

Choosing this kind of credit could be recommended as Maxine Wright, of the Forster Neighbourhood Centre in New South Wales, recently claimed that she is advising an increasing number of people on financial management since the emergence of the financial crisis.