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By Reno Charlton
Staff Writer, 1 August 2008
REWARD credit cards are a popular choice for people who regularly repay their balance in full, allowing them to benefit from savings or money-back while not having to pay any interest.
People who repay their credit card balance in full each month can benefit the most from reward credit cards because the APR has no effect when the standard interest free period on purchases is used.
When you don't pay any interest on credit card spending - the rewards earned on a reward credit card offer a real saving or money-back offer as nothing is being paid for indirectly through interest charges.
Reward credit cards are available to offer air miles, travel rewards, shopping discounts, savings, cash back and many more rebate offers.
Are we failing to cash-in our points?
A number of recent reports have suggested that many people may be failing to take advantage of the incentives they’ve been earning on their reward credit card.
And, as ineffective as paying interest on spending to earn cash back, not claiming rewards or redeeming points is just as bad and is leaving many people using a credit card that’s not actually benefiting them in the way it should be.
5 million UK cardholders don't redeem their points
Reward credit cards can prove very useful, but only for those that actually take the time to reclaim the reward.
Research carried out by industry professionals some months ago, showed that many people were sitting on unclaimed credit card rewards such as air miles, gift vouchers, and various other reward points.
This research has been backed up by the results of a recent survey carried out by Sainsbury's Finance, which showed that many people had failed to make a claim to redeem their credit card rewards.
The research showed that over 8 million people used reward credit cards in the UK last year. However, out of these only around 3 million actually redeemed their credit card rewards, and some officials have questioned whether this is connected to how easy or difficult it might be to reclaim the rewards.
One official involved in the research said: "The redemption process isn't straightforward. It may either take a while before you get the vouchers or it's just too difficult and awkward and people are just thinking they haven't the time or energy to do that. For instance, where you accrue points and then redeem against flights you might have all the points sitting there but when you actually go to book the flight it is quite a tricky operation to get the flight you want to the destination on the date that you want."
How to make your rewards work for you
Choosing a reward credit card can be tricky business, you want to be earning the most points for your pound, but you also need to be earning something you're going to use or benefit from.
If you want to save on flights, air miles offer a tempting proposition, but unless you're the kind of person to close your eyes and point at a map to find your next holiday destination, or are prepared to book up a few years in advance, they can become incredibly difficult to redeem.
Travel reward credit cards that offer an instant rebate stop the points accruing year-on-year and leaving you with the unparalleled task of trying to work out how to spend those miles on the flight you want to go on for your pre-set one week off a year.
Instead an instant rebate travel reward credit card accrues 'money' on your credit card account - then the next time you buy a flight - any flight - the cost of the flight comes straight out of the 'money' you've accrued - instant savings!
easyJet offer a travel rebate credit card with a reward scheme that works just like this.
Similarly, for people who want to earn points they can spend on a range of rewards, cash back is the best instant reward option.
While you may have to wait a year for the cash back to be paid to you - it will simply be credited to your account - automatically - for you to spend on anything you like!
When you compare reward credit cards remember to think carefully about how easy it'll be for you to redeem those points - do you really want a Sony TV (not a Toshiba or a Samsung?), do you really want to drive a Vauxhall or Saab (instead of a Mini or a Mercedes?), do you really want to wait 3 years to save money on a flight to Australia?
Unless the answer is yes - chances are you'll benefit far more from an instant reward credit card like a rebate scheme on petrol, rebates on easyJet flights, or straight up simple cash back.
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