With a rewards credit card every £1 you spend on the card earns you points that you can later redeem for a range of rewards such as free flights, airport lounge access, supermarket points, shopping vouchers and even cash paid back to you.
They can do this because of the way credit cards work.
Every time you buy something with a card, the network provider - Mastercard, Visa or American Express - gets a small fee for sorting out the payment.
With rewards cards, the provider splits that with you - using its buying power to get deals with major firms like Sainsbury’s and British Airways.
The best reward credit cards might require you to spend a minimum amount on your card each year to qualify for the perks. They might also charge an annual fee. So it’s best to work out if you’ll be spending enough to qualify for the rewards, and whether you’re gaining enough to justify the annual fee.
If you’re spending enough and are able to pay off your balance in full each month, reward credit cards can be a great way to access a range of benefits without paying any interest.
However, if you’re someone with existing credit card debt or you’re not confident you’ll be able to pay off what you’ve borrowed in full each month, these might not be the right cards for you.
One of the most common types of reward credit card is one designed for travel. These let you build up virtual air miles that you can then exchange for free flights (you usually still pay taxes and charges) or upgrades on plane tickets. Other common travel perks include free airport lounge access and discounts from travel firms.
Sainsbury's, Tesco, M&S and John Lewis all offer customers extra rewards for spending on their linked credit cards. With Tesco and Sainsbury’s, for instance, you can pick up Clubcard or Nectar points when spending outside the supermarket and even more points than usual if you shop at their stores or on their website or app.
As well as loyalty points and air miles, some credit cards also pay you a percentage of your purchases back as cash. Think of it as a permanent sale where anything you buy with the card has an extra percent or two off. The money is generally returned to you as a credit on your account once a year.
An air miles credit card is designed to reward your spending by giving you airline points. The more you spend on your air miles credit card, the more points you’ll get.
You can then exchange the points for discounts on the price of your flights or upgrades. Depending on which air miles credit card you have, you’ll be able to earn points for flights on different airlines.
Supermarkets are well established in the credit card market and Tesco and Sainsbury’s lead the field.
These cards offer the most points for spending in 'home' shops - so the supermarket itself as well as linked retailers, for example the Sainsbury's card will also boost your points for purchases at Argos.
As well as using these cards for your groceries, you can also use them to collect rewards, in the form of Nectar or Clubcard points, on other purchases you make on the card at other retailers.
They’re not the only supermarkets with credit cards, however, as M&S and John Lewis also offer rewards for spending.
The Nectar Credit Card offers a useful fusion of rewards and convenience. With generous Nectar points earning potential from spending on everyday purchases. You also get exclusive benefits like purchase protection and global assistance. However, it does come with an annual fee of £30, which might be worth it if the rewards you earn outweigh the fee you're paying. ”
Representative example: The standard interest rate on purchases is 30.7% p.a. (variable), so if you borrow £1,200 the Representative APR will be 37.5% (variable).£30 annual fee.
We are classed as a credit broker for consumer credit, not a lender.
The most straightforward type of rewards card is a cashback credit card.
Cashback cards give you back a percentage of what you spend, which might be added to your account once a year or more frequently.
American Express (Amex) usually offers the best cashback cards in the market and the best reward credit cards in general, although it’s not accepted in as many places as Visa and Mastercard.
There are things to watch out for though.
Firstly, these cards often come with an introductory bonus, where you earn more cashback in the first few months after you get them.
They also often work on a tiered basis, where how much cashback you get depends on how much you spend on the card.
Finally, watch out for annual fees. You could end up paying a hefty charge on the card which could outweigh any benefit you get from using it. Approach cards charging fees with caution.
With a strong cashback offering of 5% on purchases in the first 3 months and up to 1% after that, and no card fee, the American Express Platinum Cashback card is our top deal”
Representative example: The standard interest rate on purchases is 30.7% p.a. (variable), so if you borrow £1,200 the Representative APR will be 30.7% (variable).
We are classed as a credit broker for consumer credit, not a lender.
The secret to getting the best out of a rewards card is to make sure you know what's on offer.
For example, lots of cards come with introductory bonuses, where the points ramp up if you spend a certain amount, in a certain store, within a certain time.
Miss out on that target and you could see how much you get back seriously affected.
Bonuses aside, many cards pay far more for spending in certain shops - with supermarket cards often increasing rewards for spending in store. If you have the option to pay in more than one way, getting this right can also boost your rewards.
But, more importantly, never spend more than you can afford to repay that month in the hunt for reward points.
Doing that is a losing game, with a few more points here and there almost never making up for missed payments, interest charges and the damage to a credit score that can result from spending more than you can afford to repay.
Rewards credit cards can be worth it, but only if they are used correctly. Perks such as air miles and cashback can help save you money, but it’s crucial to check whether your credit card charges an annual fee and how much interest you could be charged. If you’re confident you’ll spend enough on your credit card to qualify for the rewards (and to make the fee worth it if there is one), and you are able to pay off your balance in full each month, a rewards card can be a great addition to your wallet.
Yes, some types of reward points need to be used within a certain period, so check how long you get and use them before they expire.
Yes, cashback credit cards offer money or credits to you statement instead of vouchers.
Yes, most providers let you login to online banking, which lets you check how many reward points you have earned, your balance and your statement.
Yes, some cards offer bonus points in the first few months if you spend more than a specified amount.
Below you can find a list of our most popular credit cards:
Got a great savings account from…
Money.co.uk has helped provide the most…
Used money.co.uk to find the latest on…