Are rewards credit cards worth it? The short answer to this question is that it depends, everybody is different in how they use their credit cards.

Most rewards credit cards share the same qualities: high interest rates and an annual fee. There are only a few rewards credit cards that have low interest rate options or no fees. For this reason, if you carry a balance or don't charge a significant amount on your rewards credit card each month, chances are its costing you money. Remember, credit card issuers are in business to make money off of you, they don't just give away stuff for free.

Lets take a look at the popular CIBC Aerogold Visa as an example. It has an annual fee of $120 (plus $50 per extra card), an interest rate of 18.5% and uses the Aerogold rewards program.

Lets say you pay off your bill every month and are never subject to interest fees which for most people is probably an unlikely scenario. The last I checked, a return flight to Mexico was approximately 75000 points. That same return flight from Canada can probably be purchased for about $600 including taxes. If you spent $1000 a month on your credit card and earned about 1200 points a month, it would take you about 5.2 years to earn enough points to redeem your flight to Mexico.

In the above scenario, assuming you don't have any supplemental cards, don't carry a balance, earned about 1200 points a month and actually wanted the flight to begin with, you are basically breaking even on your rewards credit card. However, most people do not have the income nor the discipline to ensure that their monthly charges are paid off each and every month. Most of the time, the credit card company is making a healthy profit. This should be no surprise, you didn't think credit card issuers were in the business of losing money did you?