When rewards credit cards aren't actually rewarding

When it comes to credit cards, it's easy to believe a rewards card will give you something back. But over a third of rewards card holders say it is the opposite - instead of rewards, their card costs them money to maintain.

Thirty-seven per cent of rewards card holders say their card provides them negative value, according to an ME Bank survey of 1000 credit card holders on the dollar value of the benefits they get.

Of the cardholders who did get rewards, many of those surveyed (20%) only received up to $50. ME says among the other cardholders 14% received $50-$100, 11% received $100-$200, 7% received $200-$300, 5% received $300-$500 and 7% received $500 or more.

"It's staggering to see over half of rewards card holders believe the dollar benefit they get from their card is less than $50 a year," says Christopher Mak, ME's credit cards specialist.

When it comes to rewards cards, consumers need to be careful to choose the best one for their needs.

Watch out for high interest rates, high fees and a cap on the points you can earn.

Often there is a lack of transparency in rewards card offerings, which leads to a lack of understanding of the product. This is highlighted by the results of the survey showing that the card ends up costing holders money.

Typically rewards cards are best for big spenders who use their card often then pay it off in full every month. Ideally they travel frequently and have a good credit rating.

Around 36% of survey respondents said they are unclear about the dollar value, despite 37% saying they have a credit card purely to benefit from the rewards.

"It's a worrying sign when approximately one in three people don't understand what value they're actually getting from their rewards credit card," says Mak.

He says card providers have typically passed additional regulation costs onto consumers by reducing the value of the rewards or increasing the fees.

This is borne out by 50% of rewards card holders saying they think the dollar benefits have changed or diminished since they first took out the card.

"Rewards on credit cards can be appealing, but be aware that you usually pay for them in some way - either through a fee or a higher interest rate," says Mak.

"The key takeaway is to understand what you are up for, and if you are having trouble managing debt you might question whether a rewards card is the right option for you.

"Take the time to find a card that best matches your needs."

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