Rewards credit cards

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What you need to know about reward credit cards

With so many providers claiming they have the best rewards credit card, it can be hard to know who to trust. Here are some pointers to steer you in the right direction when you’re looking for a rewards credit card. 

CORONAVIRUS UPDATE

We understand that the outbreak of coronavirus (COVID-19) has caused financial difficulty for some of you. If you have a credit card and you’re worried about making repayments due to coronavirus, we’re here to help you understand the options available. 

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What is a reward credit card?

A rewards credit card, as the name suggests, is a type of credit card that offers you incentives for using it. Most commonly, these rewards are cashback, points or air miles, which you earn as you spend on your credit card. Otherwise, this type of credit card works pretty much the same as others. You can spend up to a set limit and, when you get your monthly bill, you can either: 

  • Pay off the balance in full, in which case you shouldn’t pay any interest (depending on the terms and conditions of your card). 
  • Make a smaller payment, right down to a minimum set by the provider – but you’ll have to pay interest on the balance. 

There’ll be a limit to how much you can spend on your card. If you go beyond that amount, you could face charges and it might even affect your credit rating. It’s worth noting too, that using a high percentage of your credit limit can reduce your credit rating. 

How does a rewards credit card work?

Regardless of how you’re rewarded, the basic principle is the same: the more you spend on your credit card, the more you’ll earn in rewards (although some cards will have caps on how much you can earn, especially cashback cards). 

Credit cards connected with high-street stores or supermarkets will usually give you more points for shopping in stores connected to the card. Other credit card issuers offer air miles, which you can put towards the cost of flights, holidays, spa breaks and even concert tickets from partners. 

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. Learn more about cashback reward cards.

Alternatively, some cashback cards convert points into redeemable vouchers. If the credit card is associated with specific stores, you’ll usually be incentivised to spend in those outlets and offered more cashback if you shop there. 

What is the best credit card for points? 

It really depends on what sort of points you’re looking for. Reward credit cards can offer points for all sorts of things. Air miles, hotel stays, shopping vouchers, there’s quite a lot to choose from. Each type of reward card offers points in different ways, and new credit card deals are regularly available, as credit providers compete against each other. 
 
To find which cards are offering the most points, you should start comparing reward credit cards to find the one that suits you. 

How do I find the best rewards credit card 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, it could pay to choose a credit 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 reward. 

In order to entice you, many credit 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 incentives. 

Here are some things to look for when comparing the best rewards card for you: choose the type of rewards you’d like to get

  • choose the type of rewards you’d like to get
  • use our comparison tool to filter the results and only show the cards you’re interested in
  • work out how much you’re likely to spend on the card in a year
  • based on that amount, compare the rewards you’d get from each card

When you compare with us, we’ll check your eligibility first so we’ll only show you the cards you’re likely to be accepted for, without affecting your credit score. 

What can rewards cards get you?

You can earn cashback, air miles or points by spending on your reward card. Often, points can be swapped for shop vouchers, hotel discounts and more. Rewards can even include things like nectar points to help you save on your weekly shop. However, deals and incentives vary from card to card. 

With a cashback reward card, you earn money every time you buy something with it – providing you’re debt-free and pay off the card each month. 

Airline credit cards let you build up travel rewards like frequent flyer points or get upgrades. Often, there are big bonuses to be had when you join. The points you earn by spending on your card can be added to any frequent flyer points you’ve accumulated from flying. 

Some reward travel cards let you spend your points on spa weekends, event tickets and even holidays. 

What are the different types of rewards credit cards?

There’s a wide range of rewards credit cards on the market offering different types of benefits. Pick a card that offers rewards you’ll use.

Popular rewards credit cards offer: 

  • Air miles –  if you travel regularly, frequent flyer points could earn you access to an exclusive airport lounge, an upgrade, or even bag you free flights or hotel stays. Airlines you can earn air miles with include British Airways, Avios and Virgin Atlantic. 
  • Supermarket and high-street store points – leading supermarket names such as M&S, Sainsbury’s, Waitrose and Tesco offer points that get you vouchers for every £1 you spend. If you shop regularly in one of these stores, the points could quickly add up - giving you a bonus every now and then. 
  • Cashback – get a percentage back of what you spend. Let’s say your card offers 3% cashback. For every £3,000 you spend, you’ll get £90 back.
  • Flexible rewards – some credit cards, such as Sainsbury’s Bank Dual Offer Credit Card, let you convert your points into vouchers for theme parks, cinema tickets, rail tickets, restaurant meals and holidays. This type of rewards credit card could be ideal if you enjoy days out with the family. 

How to compare rewards credit cards

When you’re ready to compare rewards credit cards, it’s important to look at a few things before deciding which one is the best for you. 

Think about: 

  • the amount of points you can earn with every purchase 
  • the value of the points you earn – for example, 100 points = £1
  • when you can access your points and how
  • any fees you’ll need to pay 
  • the APR

Remember to look beyond the introductory offer. Credit card offers can be very tempting, allowing you to build up a fair few points in the first months. But you need to look at the bigger picture. What rewards can you earn once the introductory period is over? 

Use our simple comparison tool to find the right rewards card for you, quickly and easily. 

Frequently asked questions

What should I look out for when choosing a reward credit card?

Be aware of the  APR  (annual percentage rate) on a credit card. This is the amount your borrowing will cost you each year, including any fees or other charges. Typically, reward cards have a higher APR than most other cards – some as high as 76% APR (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 credit cards will also charge an annual fee, 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. 

Are reward credit cards worth it?

It really depends on your personal circumstances, and your shopping and spending habits. If you shop regularly in a particular store, you could earn points every time you make card purchases there. Once you collect enough points, you can redeem them for cash. 

If you pay off your balance each month, you could be earning something every time you use your card. But, if you don’t pay off your balance in full, the interest you’ll pay could outweigh the benefits of earning reward points. 

And while it may seem like a good idea to build up rewards points by spending on your credit card as much as possible, using a high percentage of your credit limit could reduce your credit rating. There’s also a risk of going over your credit limit, and if that happens you’ll most likely be charged. It could also result in:

  • having your credit limit reduced
  • being charged a higher APR
  • possibly losing any interest-free offers on your card
  • damage to your credit rating.

Where can I use my rewards credit card?

There are loads of places you can use your rewards credit card. You can use it wherever you could otherwise use a regular credit card. However, to get the most out of your reward card, you should check where you’re eligible to earn points. Some cards will offer you more points for spending in certain places, while others may try and tempt you into spending more by offering extra points for spending a certain amount in the first few months. 
 
When it comes to redeeming your rewards, it depends on the type of reward card you’ve taken out. Some offer air miles, others shopping vouchers, so make sure you find the right fit for you. 

What additional charges come with my rewards card?

While the interest rate is an obvious charge, some reward credit cards come with extra costs. For example, fees for signing up or an annual charge are fairly common. You should also check for charges when using your credit card abroad or for cash withdrawals. Finally, there are extra charges for breaking any of the terms and conditions. These include late repayments or exceeding your credit limit. 

When is a rewards card not right for me?

If you struggle to pay off your credit card bill each month, a reward card may not be right for you. If you need to borrow money, you could instead opt for either a 0% balance transfer or 0% purchase card.

  • 0% balance transfer cards let you switch debt from one credit card to another. You pay interest on the new card at 0% for a set period, which can help you reduce your debt. 
  • 0% purchase credit cards give you the flexibility of buying expensive items and paying for them over a set timescale. If you’ve cleared the debt by the end of the 0% period, you won’t pay interest. 

If you’re abroad, you could be hit with lots of charges if you use your rewards credit card outside the UK. 

  • Use-abroad cards typically won’t charge you any fees if you use them abroad. Any that do charge, tend to have low fees. 

Remember, there are risks with using any credit card. These include borrowing more than you can pay back, harming your credit score by failing to make payments on time, being charged for making late payments and having to make interest payments. 

Do rewards points expire?

Not usually. But you can lose them if you miss a monthly payment or if the card is no longer active. 

Points and air miles you accrue on airline travel cards do tend to expire if they’re not redeemed within an agreed period – usually a year or two. 

Can I get cash rewards?

Yes, if you get a cashback credit card. With these cards, you can earn money every time you buy something. 

Can I get bonus points from a new card?

Yes, some cashback cards have introductory offers that include a sign-up welcome bonus. 

What are premium rewards cards?

Premium rewards cards are exactly that. They tend to offer greater rewards for people who spend more on their credit card. So, you might get double points when spending, or get bonus points for spending past a certain amount. They usually offer more flexible reward redemptions, too, perhaps including more ways or places to spend your points. They can also include extras such as no fees on foreign transactions, something you’d be charged for with a standard rewards card. 
 
This obviously comes with some strings attached, otherwise everyone would get one. So, there are normally higher annual charges to sign up and keep the card going, while you’ll perhaps also need to spend a certain amount to continue to qualify. Finally, you’ll usually need a higher credit score to be eligible for a premium rewards card, as card providers will need to trust you with higher credit limits. 

Are my purchases protected by section 75 if I use a rewards card?

Some purchases bought using a credit card are protected under Section 75 of the Consumer Credit Act, meaning that if something goes wrong you can be refunded. However, this depends on all the relevant facts as well as the supplier’s terms and conditions, the Mastercard or Visa scheme rules and the approach of the card issuer.   

Can I transfer a balance to a rewards credit card?

In theory, yes, you can transfer a balance to a rewards credit card, but why would you want to? You won’t earn any points on balance transfers and you’ll need to pay a balance transfer fee, as well as paying interest on the balance. 

If you want to transfer a balance from one card to another, you could choose to move it to a 0% balance transfer credit card instead.

Can I view my balance online?

Yes, most credit card providers should let you access your account balance online. You might be able to access this via a phone app too, meaning you can manage your credit card from your pocket. 

How do rewards cards make money?

As well as any fees charged to the customer, credit card providers also get a commission from the retailers. When you use your rewards credit card, your provider will earn 0.1% to 0.3% from the purchase. 

How many credit cards can I have?

While there isn’t technically a maximum limit on the number of credit cards you can have, you might find that lenders are less likely to approve you for a credit card, if they can see that you already have lots of open lines of credit. 
 
The question should really be, how many “should” you have? Having lots of credit cards is a quick and easy way to get yourself in debt, so you should be really careful about how you manage any credit cards you take out. You should always try to avoid paying off credit cards with other credit cards, as this almost always makes the problem worse. 
 
However, if you’re in a strong financial position, and know you can handle your money, there are some advantages to having multiple credit cards. From a rewards perspective, you could earn points towards more than one thing, like air miles but also a hotel room to go with it. But you need to spend more to earn more, so it’s really a case of what you can realistically afford. 

Is there a difference between Mastercard, Visa and American Express?

Mastercard, Visa and American Express are essentially the middle people. They handle the transactions between you and a shop or website etc. For the most part, they all do the same thing, which is help you spend your money, but there are some small perks that are specific to each service provider. Visa and Mastercard are both widely accepted around the world, so you can’t go too wrong with either of them. 
 
However, American Express is different. While Visa and Mastercard are just payment networks used to handle transactions, American Express is also the card provider, which means they’re the ones providing you the credit. American Express users might find they can’t use their Amex in as many places, because American Express charge higher retail transaction fees compared to other providers like Visa and Mastercard, which means fewer retailers accept them.

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