What is a rewards credit card?
Just as the name suggests, a reward credit card rewards you when you use it to make a payment or buy something. Used responsibly and carefully, reward credit cards can provide you with a range of benefits depending on the type of rewards your card offers, how often you use it and how quickly you pay it back.
Typically, reward cards work by giving you a certain number of points or a percentage of what you spend back to you each time you use it. Some cards reward you for spending in certain sectors, such as travel, and others for buying certain things, such as groceries.
What are the different types of reward credit card?
There are several types of reward credit cards available, tailored to appeal to different people. Here are the main ones:
Cashback credit cards
Cashback cards reward you by paying back a percentage of what you spend on the card, usually as credit on your card balance
Depending on the card, you may get a flat cashback rate across everything you pay for or differing percentages depending on where you shop – like a petrol station or supermarket, or paying a bill. Some cards pay your cashback monthly, some annually. Introductory rates on some cards can offer up to 5% cashback, usually dropping to 1% after a fixed period, while others offer 1-2% for the life of the card.
Travel and air mile credit cards
These cards reward you with points whenever you use your card that you can use to get discounts on flights (hence the ‘miles’). Popular with frequent and business travellers, you can often use travel and air mile cards to get discounts on hotels and merchandise as well.
You can choose a general travel credit card from a bank or if you prefer a particular airline, you may be able to get a co-branded card with benefits specific to that particular company. The number of miles you can earn varies by card, and the number of miles you need to buy a flight varies by airline or frequent flyer programme.
General points credit cards
Similar to cashback credit cards, points cards reward you with points whenever you use your card that can be cashed in for a wide range of goods and services.
These goods and services could be anything from groceries to electronics, plane tickets to gift cards. Reward programmes and promotional offers on points cards can change often and the number of points you earn based on how much you spend will vary from card to card.
Retail reward credit cards
Co-branded with specific retailers like Amazon or Argos, these cards reward you in the same way as general points credit cards but usually offer double or triple points for shopping with the co-branded retailer. You can also only cash in your points with that retailer.
Who is a reward credit card right for?
Reward credit cards aren’t right for everyone and generally better serve people who can pay back their balance in full every month. Things to consider before deciding if a reward card is right for you:
- Have a good or perfect credit rating – you may not qualify to get a reward credit card if your credit score needs improving. You can get an idea of how lenders may see you by checking your free Experian Credit Score.
- Carry no balance from month to month – reward cards often have a higher interest rate than standard credit cards, so carrying a balance from month to month could cost you more than the value of the rewards you’re earning.
- Be a frequent traveller – with all the travel rewards, air miles and frequent flyer cards available, if you travel a lot then a reward card can give you significant savings across a range of travel costs.
- Be brand loyal – if you tend to shop with one particular retailer or fly with one particular airline, a co-branded card can give you even greater savings and reward when you shop with that brand.
What are the pros and cons of reward credit cards?
- Earn rewards, air miles, points and cashback just for doing your everyday shopping.
- Qualify for added rewards, services and bonuses with co-branded cards.
- Managed well and used responsibly, reward cards can provide you with hundreds of pounds of freebies every year.
- Many reward cards come with an annual fee that could outweigh the benefits if you’re not earning enough reward.
- High interest rates can cost you more than you get in reward if you don’t pay the card back in full each month.
- Reward values can appear higher than they actually are so it’s important to check the small print.
How do I find the right reward credit card for me?
Decide what kind of rewards you most want and whether they fit your spending patterns to give you real value. So, if you’re a regular flyer, an air miles or travel reward card would make more sense than a points card. If you use your credit card for your everyday spending, a cashback card could give you better value.
Once you’ve decided what kind of card you want, you can compare cards with us to find the right one for you. But remember, we’re a credit broker, not a lender† – we can help you find deals, but we can’t grant credit.
How do I apply for a reward credit card?
You can see which credit cards you’re more likely to be accepted for when you compare with Experian.
Typically, you won’t know whether you’ll be accepted for a credit card until you apply for it, but that will leave a record on your credit report that can affect your credit score. Search for a credit card with Experian and we’ll show you how likely you are to be accepted, based on your credit information and the lender’s criteria – we call this your eligibility rating.
You’ll see your eligibility rating next to each card listed when you compare credit cards with us.
How do I manage my reward credit card to get the most from it?
Reward cards can be a great source of benefits for doing nothing more than your normal shopping and bill paying. While this sounds great, it’s very important to manage your card properly and use it responsibly, as there can be serious and expensive consequences if you don’t. Some things you can do to get the most from your card:
- Set up a direct debit to pay off your balance in full each month so the costs of the interest don’t outweigh the benefits of the rewards you earn.
- Use your card for your normal everyday spending like supermarket shopping and petrol to maximise the rewards you get, but never buy things just to get the rewards.
- Keep a close eye on the rewards schemes you’re signed up to, as they can change regularly.
- With cashback cards, pay particular attention to the cashback rate, as new cards can come with short-term promotional rates that drop significantly after a time.
- Target the right rewards to use your points on and you can really increase the value of what you get by looking for promotions and offers.