What you need to know about reward credit cards
With so many providers claiming they have the best reward 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 reward credit card.
Unfortunately, due to the outbreak of coronavirus (COVID-19), some providers have decided to temporarily stop offering credit cards through Compare the Market. As a result, we'll only be able to show you credit cards from providers still available, meaning you may see a reduced number of cards on our panel.
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.
What is a reward credit card?
A reward 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, in that 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’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 the specified 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 reward 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 participating 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 earned 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.
Which reward credit card is best 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.
What can a reward card 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. 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 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.
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. Also, the APRs can be much higher, 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 depends on your personal circumstances, and your shopping and spending habits. If you shop regularly in a particular store, you could accumulate points every time you make card purchases there. Once you collect enough points, you can redeem them for cash.
As mentioned above, there are many reward credit card schemes out there, from cashback and air miles, to holiday discount incentive schemes. Remember, incentives and bonuses vary depending on the credit card provider.
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 specific period. That can help you reduce your debt instead of having to make high interest payments.
- 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. On ones that do, fees tend to be very low. 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, accruing late payment fees and having to make interest payments.
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, accruing late payment fees and having to make interest payments.
Do rewards points expire?
No, reward points don’t typically expire with most reward credit cards. 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 opt for a cashback credit card. With these cards, you can earn money every time you make a purchase.
Can I get bonus points from a new card?
Yes, some cashback cards have introductory offers that include a sign-up bonus.
Where can I compare reward credit cards?
Compare credit cards quickly and easily.