Rewards Credit Cards

Reward credit cards explained

What are reward credit cards?

As the name suggests, a reward credit card will offer some form of reward on your spending, such as points, air miles, cashback or vouchers, for example.

The best credit card rewards could save you significant sums on your weekly shop, give you discounts on family days out or even allow you to go on holiday for free.

As an extra perk, some reward credit cards offer an introductory interest-free period on purchases or balance transfers, for example.

It’s important to pay off reward credit cards in full every month (or before a 0% offer expires). If you don't, you could end up paying more in interest than you're getting in rewards, defeating the purpose of having the reward credit card.

Bear in mind that some reward credit cards may charge a monthly or annual fee.

Types of reward credit cards

Points

Points reward credit cards offer a certain number of points for your spending. You can then often choose the reward you receive when you redeem your points, whether that’s discounts at certain retailers or money off a range of experiences, including hotel stays, days out and restaurants.

Supermarket loyalty points

Several supermarkets and retailers such as Tesco, Asda, Marks & Spencer and John Lewis offer reward credit cards that allow you to earn supermarket loyalty points on your spending. This can help you get a discount on your fuel or grocery spending, for example.

You may be able to earn points wherever you shop, but you can often earn more points by spending with that particular retailer.

Air miles

Air miles reward cards allow you to build up points which you can then redeem on flights and holidays abroad.

Cashback

Cashback credit cards offer a cash incentive on your spending. Providers typically pay a percentage of the amount you spend on the card back into your account. See our chart to compare cashback credit cards.

Premium reward cards

Some providers may offer premium reward cards to selected customers. These may offer more attractive reward schemes, but they may also charge a substantial fee and have stricter eligibility criteria.

How do reward credit cards work?

You can use a reward credit card in the same way as any other standard purchase credit card by using it to spend in-store or online, up to your allowed credit limit.

As you spend, you’ll accrue reward points, air miles or other benefits.

For example, you may earn one point for every £1 you spend, with 100 points equating to £1 when you redeem your rewards. Some providers may offer more points if you spend at certain retailers and give you four points for every £1 spent, for example.

Providers may also offer an introductory bonus when you open a credit card or offer a more attractive reward scheme for a limited period (such as earning five points per £1 spent instead of one point).

Some cards may require you to spend a minimum amount to earn any rewards.

Each month, you’ll need to make the minimum payment (at least) to avoid any penalty fees and to keep any rewards or special offers you may be receiving. However, because interest will be charged on any balance left outstanding on the card, ideally you should aim to pay off the debt on your credit card in full every month so you don’t need to pay any interest.

Understanding points value

Reward schemes and the value of points can vary significantly between providers, so it’s important to check the terms of a card before applying.

Don't assume that, if you earn five points per £1 spent, it's necessarily going to be better than a card offering one point per £1 spent.

Say you're comparing two cards that allow you to earn one point for every £1 you spend. With Card A you need to collect 1,000 points to earn a £5 voucher, and with Card B you just need to earn 500 points to get a £5 voucher. Although both cards appear to offer the same deal, Card B offers the more generous reward scheme.

How do I redeem my credit card rewards?

The way you can redeem your credit card rewards will depend on the provider, but you will typically need to log in to an online account or app.

You should then follow the instructions on how to convert your points into vouchers, gift cards or another option.

Depending on the provider, you may need to wait until you have a minimum number of points or wait a certain period before you can redeem them.

Make sure you check if your reward points or vouchers have an expiry date, otherwise you could lose your rewards if you don’t use them in time.

How to maximise credit card rewards

Knowing the terms of your reward card and how much the points are worth is crucial to help you maximise the benefits available.

Below are three tips to help you get the most out of your reward card:

1. Choose a card that offers the rewards you want

It’s important to choose a reward credit card that fits in with your spending habits. For example, think about where you frequently shop and see if a credit card that offers a more attractive reward scheme for shopping at a specific retailer could be more beneficial than a more generic points reward card.

Make sure you consider how much you need to spend to get reward points, as well as how much money these reward points are equivalent to when you redeem them.

Also, check the ways that you can redeem your reward points. There’s little point in having a card with a generous reward scheme if you can only redeem the points at one retailer you rarely shop at. Instead, choose a card that will allow you to get vouchers or discounts for retailers you use frequently or that you will definitely use.

2. Use the card for all normal spending

Ideally, you should use a reward card for as much of your everyday spending as possible.

Think of it as an alternative to debit cards or cash. That way, you can earn a huge number of points simply by spending as normal, especially at special times of the year like the Christmas shopping season.

3. Pay off the balance in full each month

You need to aim to pay your credit card balance off in full every single month, otherwise you'll be charged interest which could easily eat into the benefits you've earned and could even outweigh them completely.

Ideally, you'll want to set up a Direct Debit to repay the balance so there’s no danger of forgetting to make a payment.

Minimising costs to maximise rewards

As mentioned above, the key to getting the most out of your rewards credit card is to repay your balance in full every month. This means you won’t pay any interest on your spending.

To be able to do this, it’s important that you only use the reward card for purchases that you can afford to repay, and not overspend or use them as a way to borrow money.

It’s also important to check whether a reward credit card charges an annual or monthly fee. Depending on the reward scheme and your spending habits, a card with a fee may still be worth considering but, for some, the cost of the fee will outweigh the perks of any rewards.

Finally, be careful of any transactions that may incur a higher interest rate or extra fees, such as cash withdrawals or spending overseas.

Are rewards credit cards worth it?

Reward credit cards may be worth getting if you’re comfortable using a credit card for your everyday spending and you know you can pay off the balance in full each month.

When used effectively and responsibly, these cards allow you to get discounts and vouchers for free, so many people could find them beneficial. However, it’s always worth checking the terms of the reward card and where you can redeem your points to make sure you choose the one that offers you the most value.

Reward credit cards won’t be worth getting if using them costs you more than the benefits you receive. For example, if you spend more than normal to earn more rewards or, in the worst-case scenario, build up debt that you can’t afford to pay off each month, a reward card could leave you financially worse off than if you didn’t have one.

Who is eligible for a rewards credit card?

You need to be aged 18 or above to apply for a credit card, but providers may set further criteria such as a minimum income requirement.

While there isn’t a set credit score you need to have to qualify for a reward credit card, you’re more likely to be approved if you have a good credit history and a good record of making repayments and managing your credit responsibilities.

Furthermore, those with a better credit score are likely to be offered more competitive deals than those with a poorer score.

Applying for a credit card involves a hard credit check, which will be recorded on your credit report.

However, you can see which reward credit card deals you may be eligible for before applying, without affecting your credit score.

What’s the best reward credit card in the UK?

This is subjective and depends on your spending habits and individual situation.

However, as a rule, the best rewards credit cards will be those that offer a generous reward scheme and allow you to regularly get money off your spending.

For some, a more flexible reward card that allows you to choose the way you redeem your points will be the best option, while those who regularly shop at the same supermarket may get more out of a reward card that offers vouchers solely for that retailer.

Some of the best reward cards also offer introductory 0% periods on purchases or balance transfers, which may be appealing to those who want to use the card for short-term borrowing or to save money on any existing credit card debt.

Moreover, some reward cards don’t charge any fees for spending overseas, which could allow you to continue earning rewards when abroad without worrying about expensive transaction fees.

How do I choose the best reward credit card?

To help you work out which card offers the best reward scheme for you, use a reward card comparison and consider:

• where you frequently shop
• what kind of rewards you would prefer and would use (such as cashback, supermarket vouchers or air miles)
• how much a reward point is worth in cash terms
• how much you’re likely to spend with the card
• whether there are any other incentives with the card, such as an introductory 0% purchase period
• whether there’s a monthly or annual fee.

See our chart above to compare reward credit cards.