How do you feel about credit card reward programs, and how do consumers maximise their reward points?

They’re awesome! Free flights, Christmas shopping paid for, wine deliveries … and it doesn’t feel like I’m paying for them.

And I’m not really. And many others who enjoy the benefits of rewards cards don’t pay either. But someone is.

Rewards program benefits are not really paid for by the bank. They are paid for by other credit card users, through exhorbitant interest rates.

There are two types of credit card users – transactors and revolvers. Transactors use the card for everything, but pay the whole lot off in full every month. They don’t pay any interest.

Revolvers turn over the debt each month. And because they’re not paying off the account in full every month, they pay interest.

And with interest rates of 10 to 20 per cent, revolvers are paying enough for their own rewards points, the rewards points for transactors, and handsome profits for the banks.

Rewards points are worth around 0.5 per cent of a transaction. That is, to get a “reward” of $100, you generally have to spend between $15,000 and $25,000.

It’s not much. If it encourages you to spend extra on your card, you’ve got rocks in your head.

For spending $1000, you get approximately $5 of rewards points. But if that $1000 stays on an 18 per cent credit card for a month, you’ve paid $15. If it stays there for a year, you’ve paid $180.

Clearly, that’s not worth it. If you aren’t paying off your credit card every month, switch to a low-rate card without the fringe benefits and stop paying for others’ holidays.

Bruce Brammall is the principal adviser with Castellan Financial Consulting (www.castellanfinancial.com.au) and author of Debt Man Walking.