How to get the best value for money with rewards points

So you've built up a nice number of reward points (let's not worry about how much you have spent on your credit card to get to that figure) and you want to treat yourself to a little something.

The question is what is the best way to redeem your points to get the most value -should you use them to pay for a flight, buy merchandise or get a shopping voucher for your favourite store?

Not all rewards are created equal.

Comparison site Mozo crunched some numbers in August last year and found that domestic flights rewards offered the highest return for your spend compared with overseas flights, gift cards and cashback.

If travel isn't your thing, research house Canstar found that for someone spending about $24,000 a year on their card, merchandise offered the best redemption value (just over $200), followed by shopping vouchers (about $180) and then cash (about $130). (Flights were not included in the comparison.)

It pays to do your own sums as each rewards program is different.

One way to do this is to work out the "point currency". This is basically how many points you need to get $1 of a reward. Canstar explains: For example, if you need 7000 points to redeem a $50 gift card, the point currency is 140 points for each $1.

You can use the points currency to compare rewards - the lower the number the better. So let's say 7000 points gets you a $50 gift card (140 points) or you could get a toaster you wanted worth $60 for 8000 points. You'd be better off getting the toaster for 133 points.

Or maybe you can get a flight from Sydney to Melbourne worth $200 for 17,000 points: the points currency is 85 so that definitely comes up trumps.

Canstar warns, though, that with travel rewards it pays to factor in the sometimes hefty taxes, fees and charges involved in flights.

These can really end up costing you more than you realise. According to Canstar's calculations, you'd need 16,700 points for a flight from Sydney to Melbourne. Once you include all the government taxes, fees, charges and carrier surcharges, though, you'd need 24,582 points to cover all the costs!

If you're thinking about using your points for merchandise, make sure you find out the best price you can get the item for at a major retailer.

That toaster you had your eye on might be on sale for $50 so you might consider redeeming your points for a gift voucher to that store to take advantage of the great price. If it is a special, though, you will need to make sure you get the voucher before it goes back to the normal price.

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