Reward credit cards
With so many reward credit cards to choose from, you might be wondering which is best for you. We’ve rounded up some pointers to help steer you in the right direction.
What is a reward credit card?
A reward credit card works pretty much the same as any other credit card. You can spend up to a set limit and, when you receive a monthly bill, you can either:
- Pay off the balance in full, in which case you shouldn’t pay any interest (subject to the terms and conditions of your card)
- Make a smaller payment, right down to a minimum set by the provider, but you will have to pay interest on the balance left on the card.
There’ll be a limit to how much you can spend on your card. If you go beyond the specified amount, you could face charges and it might even affect your credit rating.
But what is different is that you’re rewarded for using the card, usually with points, air miles, vouchers or cashback, depending on the card you’ve chosen.
How does a reward credit card work?
Regardless of how you’re rewarded, the basic principle is the same: the more you spend, the more you’ll earn in rewards (although some cards will have caps on how much you can earn, especially cashback cards.)
Cards affiliated with high-street stores or supermarkets will usually give you more points for shopping in stores connected to the card. Once you’ve earned a certain number of points, you’ll be issued with vouchers to spend in store.
Other card issuers offer air miles, which you can put towards the cost of flights, holidays, spa breaks and even concert tickets from participating partners. Two of the most well-known air miles schemes are Avios and Virgin’s Flying Club.
Cashback reward cards work on the same principle, but you get money back instead – this could be cash credited back onto your card account or into your current account.
Alternatively, some cashback cards convert earned points into redeemable vouchers. If the card is associated with specific stores, you’ll usually be incentivised to spend in those outlets and offered more cashback if you shop there.
Which reward credit card is right for me?
It depends on your shopping habits. If you travel a lot, then you’ll get more out of a credit card that rewards you with air miles rather than one that gives you vouchers for a store you never shop in. Similarly, if you’re a loyal shopper and you have a favourite high-street haunt or always get your groceries from the same place, then it pays to choose a card associated with those stores.
As with regular credit cards, there are always offers available. So, for example, if you know you have some expensive purchases coming up, like a new boiler, then look for a card with 0% interest on new purchases. This will allow you to spread the cost of essential buys while reaping some rewards.
In order to entice you, many card issuers will offer bonus rewards during an introductory period. But when it comes to choosing any credit card, you need to look at the whole offer, not just the initial incentives.
What should I look out for when choosing a reward credit card?
Be aware of the APR on a credit card – this is how much your borrowing will cost you each year, including any fees and admin charges. Typically, reward cards have a higher APR than usual, with some as high as 76% APR (variable). By comparison, you could opt for a low APR card at 5.7% (variable).
With APR in mind, reward cards work best if you pay your monthly balance on time and in full. Only paying off the minimum means you’ll end up being charged interest, which could far outweigh any rewards you get.
Some cards will also charge an annual fee for the privilege of having them, but this might be offset by a particularly long interest-free period or the level of rewards offered. Other card providers may set a limit as to how much cashback you can get, so it’s wise to read the small print so you know exactly what you’re getting.
Always remember that the credit card deal you end up with will depend on your credit history. The offer advertised by the card provider will be a ‘representative rate’ and this is typically reserved for people with tip-top credit ratings. When you apply for a credit card you’ll be subject to a credit check, so don’t be disappointed if what you’re offered isn’t what you’ve seen promoted.
Comparing reward credit cards
When it comes to choosing a reward credit card, consider your spending habits, the type of reward, any introductory offers and the APR.
To make it easy to find a match, you’ll be able to see at a glance what the key features of each card are. Start comparing right now to find a reward credit card that’s right for you.