Credit card reward programs can be, well, rewarding as long as you do your homework.

The value of reward points has fallen over the past year, while annual fees have increased, the Reserve Bank said in a report that found that a consumer with a credit card from one of the big four banks would have to spend $15,100 to receive a $100 shopping voucher compared with $12,400 in 2003.

But if you are disciplined and know what you want from a rewards scheme you can come out in front.

What are the points worth?

A new database created by financial services research group Cannex shows the value of rewards varies substantially depending on the category of reward you are after.

Cannex financial analyst Garfield Wright said automotive was the best category overall, followed by merchandise.

To determine the value of a reward program you must first work out the number of points required to redeem $1 of reward within a particular reward category - the point currency.

Let's look at the most valuable rewards program, the American Express Rewards Maximiser. To calculate this card's point currency you divide the number of points required to redeem every single reward within, say, its automotive category (225,500 points) by the recommended retail price of all of those rewards in that category ($5393). In this example you would need to redeem 41.81 points for each $1 of automotive rewards.

Next you need to determine the dollar value of your points based on your spending patterns.

With the Rewards Maximiser each dollar you spend earns you 1.5 points. So if you spend $1000 a month you earn 1500 points, which equals 18,000 points a year. You then divide the number of points earned in a year by the point currency you calculated before (that is 18,000 divided by 48.81 points = 430.52). That means you would have $430.52 worth of automotive rewards to redeem for spending $12,000 on your credit card.

What do you want?

You need to decide exactly what rewards you are after. "It's no good getting a card that gives excellent automotive rewards when you are more interested in entertainment rewards," Wright said.

While the American Express Rewards Maximiser offers the best return for automotive, it also offers the best lifestyle rewards (such as gym memberships and day spa treatments), although at a lower reward return of $124.88.

But for those interested in entertainment rewards - movie tickets and magazine subscriptions, for example - the Suncorp Standard Rewards card with a reward return of $307.85 is the best option.

And those looking for merchandise rewards, such as toasters or other electrical goods, should look to the Citibank Standard Rewards card with a reward return of $188.41.

The American Express Rewards Maximiser was also the best option for those looking for food and beverage, cash back and shopping voucher rewards (see box above).

How much do you spend?

Rewards programs are designed to make you spend more. So it is vital that you calculate how much you are spending on the card and whether it is beneficial in the long run.

Australian Consumers Association financial services senior policy officer Nick Coates warns that you have to not only spend a certain amount each year but also repay it.

"These programs only work if you are disciplined and pay off the balance each month. If you don't, the interest repayments will quickly cancel out the rewards."

Ask some questions

Wright warns consumers to make sure they're not paying more to belong to a program than they can redeem based on their spending.

With fees of up to $60 to belong to the rewards program, "you need to ensure you are coming off better than the rewards program fee", Wright says.

Most credit cards charge a separate annual fee as well as the rewards program fee.

Some programs also cap the number of points that can be earned in a year or allow points to expire. Others have a tiered system where, after you spend a certain amount each month, say $1500, the number of points earned per dollar spent is reduced.

Coates says you should look at the card's fundamentals - interest rate, fees and interest-free days - before the rewards. "You really should not let a reward scheme be driving your spending."

Move over Qantas, there's competition in the air

Competition between rewards programs in the airline industry is hotting up.

After months of speculation, Virgin Blue recently launched its frequent flyer program - and an analysis compiled by frequentflyer.com.au shows that for the first time the Qantas Frequent Flyer program has a serious rival.

Similar to the Qantas program, Virgin Velocity points are earned by travelling with Virgin (or its partners) and can then be redeemed for free travel. But there are some major differences, such as the ability to redeem Virgin points on any Virgin flight. No more struggling to find a frequent flyer seat - if the seat is available for purchase, you can get it with Velocity points.

Velocity has no status levels, blackout periods or joining fees.

In terms of value for points both programs stack up fairly evenly. The Qantas Frequent Flyer program offers slightly better benefits for leisure and corporate platinum members, while Virgin offers a better deal for small business and the smaller corporate customers.

One area where Qantas clearly has the upper hand is its extensive partner network. Virgin's partner program is still very much embryonic, but does include other airlines (Virgin Atlantic and Emirates), credit card provider National Australia Bank and car hire company Europcar.