Reward credit cards offer cardholders additional benefits with every purchase, typically in the form of points or vouchers that can be redeemed at various retailers. Some well-known rewards include Air Miles, which you can swap for complimentary flights and upgrades.
When used wisely, these cards can be an excellent way to earn perks on your regular spending, such as petrol and groceries. However, the advantages can quickly be negated by interest and other charges, so it’s vital to assess how the benefits truly stack up before applying.
What Exactly Is a Reward Credit Card?
Reward credit cards are named for the simple fact that they reward you for spending. The more you spend, the more rewards you accumulate. These rewards can then be exchanged for discounts at selected retailers, or converted into vouchers for things like flights, hotel stays, or car hire.
Different Kinds of Reward Credit Cards
There are several types of reward credit cards, each tailored to different spending habits:
- General Reward Credit Cards: These cards grant you points when you make purchases, which can be redeemed across a broad range of retailers. Major supermarkets like Tesco and Sainsbury’s, along with department stores such as M&S and John Lewis, offer these types of cards. They often provide bonus points for spending directly in their stores.
- Supermarket Reward Credit Cards: Available from many supermarket chains, including Tesco, Sainsbury’s, and Asda, as well as department stores like M&S and John Lewis. You can typically earn extra points when you use your credit card at these specific retailers, and your accumulated points can often be converted into vouchers to reduce the cost of your shopping.
- Air Miles Credit Cards: A highly sought-after type of reward credit card where you earn “Air Miles” as you spend. These miles can then be exchanged for free or discounted flights and flight upgrades, making them popular among frequent travellers.
How Reward Credit Cards Function
Every time you make a payment using a credit card, the card issuer (like Mastercard, Visa, or American Express) receives a small fee for processing the transaction. With a rewards credit card, the provider shares a portion of this fee with you. This comes in the form of points that you can redeem for discounts with major retailers or airlines, or for vouchers covering things like cinema tickets, theme park entry, and dining out.
Some card providers offer tempting introductory promotions, allowing you to earn significantly more reward points during the first few weeks or months after opening your account. Others might place a cap on the total amount you can earn or offer extra points for spending at specific stores.
In exchange for these benefits, some providers may charge an annual fee, require you to spend a minimum amount before you start earning rewards, and might expect you to redeem points within a set timeframe. There’s also a risk: you could lose your accumulated rewards if you miss a minimum monthly payment.
As long as you’re not prone to overspending or missing payments, you can maximise your rewards by using your card for everyday expenses. However, it’s crucial to clear the balance in full each month before any interest is applied, as reward credit cards typically come with a higher Annual Percentage Rate (APR).
You can use a reward credit card just like any other credit card: for in-store or online shopping, up to your credit limit. Each month, you’ll receive a statement detailing your spending and the minimum payment due. Your statement will also show how many points or how much cashback you’ve earned, and when they might expire, if applicable.
Choosing the Right Reward Credit Card for You
Before you apply for a rewards credit card, carefully consider which one best fits your needs. Ask yourself the following questions to guide your decision:
- Can you pay your bill in full every month? If not, you could end up paying more in interest than you earn in rewards. In this scenario, an alternative, such as a 0% interest purchase card, might be a more suitable choice.
- Which rewards are you most likely to use? Some reward credit cards only permit you to redeem points with specific retailers, so it’s important to ensure this aligns with your shopping habits. For instance, earning points on your regular supermarket shop could be a great way to cut down your grocery bill, but you’re less likely to benefit from points redeemable only at a retailer you rarely visit. If you’re considering a card offering Air Miles, verify which airlines you can use them with.
- Is there an introductory offer? These can help you accumulate more rewards quickly, especially if you’re planning a large purchase. Some providers offer an initial points bonus that could be worth over £100.
- Are there any fees or a minimum spend requirement? Some providers charge an annual fee, though this might be waived for the first year. Others require you to spend a minimum amount before you become eligible for rewards. Always scrutinise the terms and conditions carefully and calculate your potential savings before applying.
Advantages of Reward Credit Cards
Compared to other types of credit cards, reward credit cards offer several benefits:
- You could earn rewards worth hundreds of pounds simply by using your card for your regular spending.
- Introductory offers can be very generous, making them an excellent way to earn extra rewards if you’re planning a large purchase.
- Different cards offer diverse types of rewards, including Air Miles and redeemable points, allowing you to choose the reward that suits you best.
- You can sometimes boost your rewards by spending at specific partner stores.
- You benefit from Section 75 of the Consumer Credit Act 1974 for purchases between £100 and £30,000. This protects you if the retailer goes out of business or if there’s an issue with your order.
- Managing your card responsibly can contribute to improving your credit score over time.
Disadvantages of Reward Credit Cards
Reward credit cards also come with certain drawbacks:
- They may have a higher APR than other types of credit cards. If you don’t pay your bill in full, you might save more with a 0% interest purchase card.
- Some reward cards charge an annual fee or demand a substantial minimum spend before you can start earning points.
- Unless you clear your bill in full each month, you could easily end up paying more in interest than you earn in rewards.
- You risk forfeiting your rewards if you miss a monthly repayment.
- You might only be able to redeem your rewards with a limited selection of retailers.
- The cash equivalent value of your reward points may be very low.
- Your reward points may have a limited period for redemption before they expire.
Am I Eligible for a Reward Credit Card?
Reward credit cards are widely available to individuals with good credit scores, and some providers even offer credit cards for those with less-than-perfect credit.
Before you apply, use an eligibility checker to gauge your likelihood of being approved for the card you want, along with an indication of your potential credit limit and APR. This check won’t appear on your credit report, helping to protect your score by reducing the chance of an unsuccessful application.
While eligibility criteria vary between providers, generally you will need:
- To be over 18 years old.
- To be a UK resident.
- To have a permanent address.
- To be earning a minimum annual income.
- Not to have declared bankruptcy or have any recent Individual Voluntary Arrangements (IVAs) or County Court Judgements (CCJs).
It’s also crucial to check your credit score. This three-digit number is what lenders use when deciding whether to offer you credit. Various factors influence your credit score, including missed or late payments, defaults, or high credit utilisation.
Checking your credit score can also mitigate the risk of an unsuccessful application by allowing you to identify and correct any errors, or to take steps to improve your score. You can check your credit score for free with credit reference agencies like Experian and Equifax, or via platforms such as ClearScore and Credit Karma.
How to Apply for a Reward Credit Card
Depending on the card you choose, applying for a credit card can usually be done online. Alternatively, you can sometimes apply in person at a relevant bank branch. The provider will conduct a credit check, so you’ll need to share some information, including:
- Your contact details.
- Your current address (and all addresses for the last three years).
- Your bank account details.
- Your income.
You might receive an instant decision when applying online, but it could take a few days to find out if your application has been successful.
If your application is approved, you’ll need to sign a credit agreement. This can typically be done digitally for online applications, or you’ll be sent paperwork to sign and return. Before signing, double-check your credit limit, APR
Do not sign if you’re not entirely satisfied with all the terms, as you have the right to walk away with no obligation. You also have a 14-day cooling-off period, meaning you can cancel the agreement within this time without providing a reason, even after you’ve signed. However, you will need to repay any money you have borrowed, plus any applicable interest.
If your application isn’t approved, avoid applying with a different provider immediately. Each application leaves a mark on your credit report, and multiple applications in a short period can suggest financial difficulties to lenders, making it even harder to obtain credit.
Instead, review your credit report to identify ways to improve your credit score, and use eligibility checkers before your next application to reduce the likelihood of another rejection.
Maximising Your Reward Credit Card
The following five tips will help you get the most out of your rewards credit card:
- Pay your bill in full every month: The interest your provider charges will likely wipe out any rewards you earn if you don’t clear your bill completely each month. Ideally, set up a direct debit to repay the full balance automatically.
- Use your card for everyday spending: To maximise your rewards, use your reward credit card instead of your debit card for routine expenses. Just ensure you’re not spending more than usual and that you can still clear your credit card bill in full.
- Boost your rewards: Depending on your card, you might be able to increase the rewards you collect by shopping at specific stores, redeeming your points or vouchers at particular times of the year, or converting your points into higher-value vouchers. You could also earn more through referral programmes, completing surveys, or taking advantage of special bonus offers.
- Check for fees and spending limits: Before applying, confirm if there are any fees for using the card, a minimum amount you need to spend to be eligible for rewards, and any time limits before your rewards expire. Only proceed if you’re confident you’ll spend enough to qualify while still being able to clear your balance in full monthly.
- Choose rewards that work for you: Everyone loves a freebie, but you won’t truly benefit unless you’re earning rewards that you genuinely value. Whether it’s discounts at your regular supermarket, vouchers for activities, or Air Miles, carefully consider how much you stand to earn and how you’ll use your points before you apply.
Is a Reward Credit Card the Right Fit for Me?
Unless you’re confident that you possess the discipline to repay your credit card bill in full every single month, a rewards credit card is likely not the best option for you. In fact, you stand to make greater savings with a card designed to help you save money on interest, such as a 0% interest purchase card or a balance transfer credit card.
If you’re already facing financial difficulties and are tempted to apply for a cashback or rewards credit card because it seems like a way to access extra cash, this could quickly worsen your situation as your debt will increase.
Before applying, explore all your options, including seeking free debt help from charities such as:
- StepChange
- Citizens Advice
- National Debtline
Reward Credit Cards: Frequently Asked Questions
How much can I borrow on a rewards credit card?
Your credit limit is determined by several factors, including your credit score, income, and overall affordability, as well as the lender’s specific policies. Using an eligibility tool before you apply can give you an indication of the credit limit you’re likely to be offered. These tools are available on provider websites or comparison sites.
What are the alternatives to rewards credit cards?
There are various types of credit cards available, including 0% interest purchase cards, balance transfer credit cards, credit builder cards, and credit cards for bad credit. Some prepaid credit cards also offer rewards, and you can earn reward points by signing up for loyalty programmes at many stores and supermarkets.
What is the best credit card for rewards?
Typically, the credit cards offering the most generous rewards often come with an annual fee and may require a minimum spend before you can start collecting rewards. For this reason, consider what “best rewards” means to you. Ultimately, the most valuable rewards are the ones you will genuinely use—and that won’t cost you extra money in interest or fees. So, you might want to narrow your search to find the best credit card for points or the best credit card for Air Miles that align with your lifestyle.
How can I spend my credit card reward points?
Depending on the type of card you possess, there are various ways to spend your reward points. In some cases, points can be converted into vouchers redeemable at specified stores, while other providers allow you to use points to cover flights, hotel stays, general travel costs, or to purchase gift cards.
Will I earn rewards on items I return?
No, if you purchase an item and then return it, your rewards balance will be adjusted to reflect the final amount you actually spent.
Can I get a reward card with bad credit?
While you’ll typically need a good credit score to qualify for the most attractive rewards cards, some providers do offer these cards to individuals with less-than-perfect credit scores. Always use an eligibility tool before applying to reduce the risk of an unsuccessful application. Crucially, consider carefully whether you can afford to clear your balance in full each month; if not, your rewards are highly likely to be cancelled out by interest and other charges.
Do credit card reward points expire?
Yes, some providers expect you to use your rewards within a set timeframe. Always check the terms and conditions to ensure you redeem them before they become invalid.
Can I view my balance and points online?
Yes, many providers offer a website and a mobile app where you can log in to check your reward points balance, view available offers, and redeem your points.
How many reward credit cards can I have?
There isn’t a formal limit to the number of reward credit cards you can hold. However, it’s essential to manage them well and keep your credit utilisation (the percentage of your available credit that you’re using) as close to 30% as possible. Exceeding this can negatively impact your credit score. If you travel regularly, you might benefit from having an Air Miles reward credit card alongside another that offers bonus points for your supermarket shopping or fuel purchases.
Should I choose a reward credit card that gives bigger rewards in one specific store?
This could be a good idea if you’re a particularly loyal customer and spend a significant amount of money at a store that offers a co-branded reward credit card. For example, if you consistently do your weekly supermarket shop and buy fuel at Sainsbury’s or Tesco, you have the potential to earn substantial extra points when you shop in-store. Don’t forget that you can also earn points just by using the store’s regular loyalty card, so take some time to compare the different reward and cashback credit cards on offer before deciding which one is truly right for you.
How can I use my Amex points?
There are various ways to spend your American Express (Amex) points, allowing you to choose what works best for you. Common options typically include:
- Converting them to airline miles or hotel points: Through schemes like Avios, Virgin Atlantic Flying Club, or Marriott Bonvoy.
- Converting them to Nectar points: These can then be spent at Nectar partners, including Sainsbury’s, eBay, and Argos.
- Using them to pay online: You’ll often be presented with this option at checkout when shopping with participating online retailers.
- Exchanging them for gift cards: At popular retailers such as Amazon, Selfridges, and M&S.
- Donating to charity: You can use points to support your chosen charity when donating via platforms like Just Giving.