Rewards credit cards

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What you need to know about reward credit cards

With so many providers claiming to offer the best rewards credit card, it’s hard to know who to believe. Here are some pointers if you’re looking for a rewards credit card.

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What is a reward credit card?

A reward credit card, as the name suggests, is a type of credit card that offers incentives for using it. These rewards often come in the form of cashback, points or air miles, which you earn as you spend on your credit card. Otherwise, this type of credit card works much like any other. You can spend up to a set limit and, when you receive your bill, either:

  • Pay off the balance in full, in which case you shouldn’t pay interest (depending on your card’s terms and conditions).
  • Make a smaller payment, down to the set minimum – 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, you could incur charges and it might even affect your credit rating. It’s also worth noting that using a high percentage of your credit limit may also lower 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 receive in rewards (although some cards – especially cashback cards – have caps on how much you can earn).

Credit cards connected with high-street stores or supermarkets usually offer more points for shopping in those stores. 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 to your card account or current account. Learn more about cashback reward cards.

Alternatively, some cashback cards convert points into redeemable vouchers. If the credit card is associated with a specific store, you’ll usually be encouraged to spend there and be offered extra cashback for doing so.

How do I find the best rewards credit card for me?

The best rewards card for you will depend on your individual situation, including your shopping habits. If you travel a lot, for example, you’ll get more from a credit card that rewards you with air miles than one that gives you vouchers for a store you never use.

Similarly, if you’re a loyal shopper and have a favourite high street haunt, or always get your groceries from the same supermarket, it could pay to choose a credit card associated with those stores.

But rewards aren’t the only thing to look for. Also look at any card fees and compare the total cost of borrowing on the card by looking at the APR – which includes the interest rate as well as standard charges.

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, look for a card with 0% interest on new purchases. That way you can spread the cost of essential buys while reaping a reward.

Many credit card issuers offer attractive bonus rewards during an introductory period. But when it comes to choosing a credit card, you need to look at the whole offer, not just the incentives. Here’s what to look for when comparing the best rewards card for you:

  • Choose what type of rewards you’d like to get.
  • Use our comparison tool to filter the results and show the cards that interest you.
  • 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 first check your eligibility without it affecting your credit score. We’ll then show you the cards that you’re most likely to be accepted for.

What can rewards cards get you?

You could get cashback, air miles or points by spending on your reward card. You can sometimes swap points for shopping vouchers, hotel discounts, travel rewards and more. But deals and incentives vary between cards.

With a cashback reward card, you earn money every time you buy something.

Airline credit cards let you build up frequent flyer points or get upgrades. Often, there are big bonuses for joining. You can add the points you earn to any frequent flyer points you accumulate.

What are the different types of rewards credit cards?

There’s a wide range of rewards credit cards available, each offering different benefits. Popular rewards credit cards offer:

  • Air miles – if you travel regularly, frequent flyer points with cards like British Airways and Avios could earn you access to an exclusive airport lounge, an upgrade or even bag you a free flight.
  • 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, those points could quickly add up.
  • Cashback – this gives you back a percentage 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 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.

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

Be aware of the APR (annual percentage rate). This is how much your borrowing will cost each year, including fees or other charges. Reward cards typically have a higher APR than other cards.

Since the APRs are high, reward cards work best if you pay your monthly balance on time and in full. Only paying off the minimum means you’ll be charged interest, which could far outweigh any rewards you get.

Some credit cards also charge an annual fee, but this may be offset by a long interest-free period or a high level of rewards. Other card providers may limit how much cashback you can get, so always read the small print. Remember that the credit card deal you end up with will depend on your credit history.

Are reward credit cards worth it?

It depends on your personal circumstances and spending habits. If you regularly shop in a particular store, you could get points every time you make card purchases there and get vouchers for more spending.

If you pay off your balance each month, you could be earning every time you use your card. But if you don’t pay off your balance in full, the interest 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 lower your credit rating. You also risk going over your credit limit, and if that happens you’re likely to be charged. This 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.

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 want 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 could help you reduce your debt. There may be a charge for transferring your balance and if you don’t make at least the minimum payment you could lose the interest-free benefit.
  • 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 incur charges for using your rewards credit card outside the UK.

  • Use-abroad cards typically won’t charge fees if you use them abroad. Those 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 late payments and having to pay interest.

How to compare rewards credit cards

Ready to compare rewards credit cards? It’s important to consider a few things before deciding which one’s best for you.

Think about:

  •  how many points you receive with each purchase
  • the value of the points you earn – for example, 100 points = £1
  • when and how you can access your points
  • any fees
  • the APR

Remember to look beyond the introductory offer. Credit card offers can be very tempting, letting you build up lots of points in the early months. But you need to view the bigger picture. What rewards can you earn once the introductory period is over?

How many rewards credit cards can I have?

There’s no limit to the number of rewards credit cards you can have. But each application you make leaves a footprint on your credit record. And if you make too many applications at the same time, or even over a longer period, this could have a negative impact on your score as it may signal to lenders that you’re desperate for money. Having access to higher levels of credit could also impact your score.

When you compare with Compare the Market, we show you the rewards cards you’re likely to be accepted for – so you can see what’s available without damaging your credit record.

What’s the best rewards credit card for points?

Offers change regularly, so this is where it pays to do your research.

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

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Compare the Marked Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and availability.

Frequently asked questions

Can I get cash rewards?

Yes, if you get a cashback credit card. These cards let you 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 welcome bonus.

If I use a reward card, are my purchases protected by Section 75?

Some purchases made using a credit card are protected under Section 75 of the Consumer Credit Act. That means if something goes wrong, then you could be refunded. But this isn’t guaranteed. It depends on the situation, along with the supplier’s terms and conditions, the Mastercard or Visa scheme rules and the card issuer.

Can I transfer a balance to a rewards credit card?

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

If you want to transfer a balance from one card to another, you’d be better off moving it to a 0% balance transfer credit card instead.

How can I see the balance on my rewards card?

Almost all card providers have phone apps, as well as online banking. You can use these to check your card statements, the balance and how many rewards points you’ve accumulated.

Most credit cards will let you manage your account online. This makes it easier to oversee your finances as everything is in one place.

How do rewards cards make money?

As well as earning money from fees and interest, credit card providers get a commission from retailers. When you use your rewards credit card, your provider earns 0.1% to 0.3% from the purchase.

Where can I use my rewards credit card?

You can use rewards credit cards at most retail outlets, both in store and online.

What additional charges come with my rewards card?

Some credit cards – particularly those with better rewards – charge hefty annual fees. Other fees you might encounter include:

  • A cash advance fee for withdrawing cash from an ATM using your credit card.
  • A returned payment fee if a monthly payment bounces.

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

Mastercard and Visa are payment processors. They don’t issue cards, but their networks handle the payments made with them. American Express issues cards as well as processing the payments. Here in the UK, more people tend to use Mastercard and Visa than Amex, which tends to be accepted in fewer places.

What are premium rewards cards?

Often considered something of a status symbol, premium credit cards – sometimes known as black or gold cards – are usually offered to higher spenders. These tend to incur higher annual fees, but dish out bigger rewards too.

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