How to Compare Reward Credit Cards - part 2
Reward Credit Card Best Buys
Reward Credit Card FAQ's
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Reward credit cards are fantastic things, and used wisely they can really earn you free rewards on all your everyday expenses.
Choosing the right reward credit card for you can mean the difference between earning a load of points you'll never use and really saving some money off the things you need to buy anyway!
Follow our guide to choosing a reward credit card and you’ll be able to see some real dividends for your shopping!
What to look for...
- What reward do you want?
The most important question to be asking when comparing different reward credit cards is the actual reward on offer.
An air miles credit card offering 100 miles for each £1 you spend might look like a tempting proposition - but if you rarely travel and are actually saving up to buy a new car, you'd be much better suited to a reward credit card offering points for money-off a new car.
When you know which different reward credit card options are available you can decide which one suits you best - the one you will actually make good use of, and also one that earns you a decent amount of rewards on your spending.
These are the following types of reward credit cards:
- Cash back - the simplest form of reward, these cards earn you straight cash on your spending.
- Air miles and travel rewards - these reward cards earn flyer miles or points that can be redeemed for a range of travel rewards, including flights, hotels, holidays and other travel related services like car hire, airport parking and days out.
- Retail rewards - offer points that can be redeemed for goods or services from the specified retailer or company. They can include rewards such as savings on a new car, brand name products, vouchers to spend at selected shops, and money-off services like broadband.
- General rewards - often offered by banks or building societies, these cards offer points that can be redeemed for a range of different rewards, including brand name goods, travel, shopping vouchers and cash.
- Charity donations - these cards allow you to earn funds that are donated by the card issuer to the specified charity.
- How many rewards will your spending earn?
Different reward credit cards will operate different types of reward scheme, each offering varying amounts of points or miles on your spending.
Some specific reward credit cards, such as air mile or retail cards will offer double or triple points or miles when you spend with their company.
Remember to choose a reward credit card that suits your spending, and try not to alter your spending to earn more reward points.
- How much are your points or miles really worth?
Unfortunately, reward points or miles do not have a set monetary value - and each reward scheme is worth varying amounts.
Comparing reward credit cards can become slightly tricky, because whilst Card A might offer 200 points for every £100 spent, and Card B might offer only 50 points for every £100 spent - if Card B's points are actually worth 50p each and Card A's points are only worth 5p - though you'll be earning less points, you'll be earning more rewards by opting for Card B.
If this all sounds incredibly confusing, don't worry! Consumer watchdog ChooseMoney.co.uk have done the hard work for you - working out the real value of each credit card reward scheme and combining it into a nifty tool that also calculates how many rewards your individual spending will earn.
To find out how many rewards your spending will earn, and also how much they are really worth, simply visit our reward credit card comparison page.
What to watch out for...
- Interest rates
Like any other credit card, reward credit cards will charge you interest on any outstanding balances left on your credit card each month.
By not repaying your reward credit card balance in full, the interest you are charged will always outweigh any of the money-saving benefits of reward earning.
Always try and repay your credit card balance in full each month, not only will it keep you in good standing and away from spiralling credit card debt, but it will keep your rewards free.
- Tempting balance transfer offers
Many reward credit cards will offer tempting propositions for transferring current credit card balances over to them.
If you do need to transfer a balance, it's a good idea to use a separate credit card for the job, one that is designed especially for balance transfers.
Unless the card is suitable for both, balance transfers and spending rarely sit well with each other on the same credit card. This is because card issuer's will generally always allocate payments you make to your card to your cheapest balance first - leaving any standard or higher rate balances, such as purchases or cash transactions, to accrue interest whilst you try to repay your balance transfer.
See our 0% balance transfer section for balance transfer credit cards.
- Cash transactions
Using a reward credit card for cash transactions will not earn you any rewards.
On top of not earning rewards, cash transactions will usually also be subject to higher rates of interest and handling fees - so it's always a good idea to use your debit card for any cash transactions, including ATM withdrawals, getting 'cash back' at the supermarket, buying foreign currency or traveller's cheques and gambling transactions.
- Annual fees
Some reward credit cards, especially air mile cards, may charge an annual fee.
The annual fee is a charge made to your account each year just for holding the account.
Whilst they are usually limited to premium air mile credit cards, they are an added expense that is worth taking into consideration.
Don't forget!
- Repay your balance in full!
The most important thing to do when using a reward credit card is to always repay your balance in full each month.
The interest rates charged on credit cards for outstanding balances will always be higher than the amount of rewards offered on your spending.
Because of this, if you leave a balance on your reward credit card, the interest you are charged will effectively remove any of the money-saving benefits of earning credit card rewards.
- Expiry dates
Some reward schemes may set expiration dates on the points or miles you earn.
Although they will always give you plenty of time to accrue enough points or miles for a decent reward, it's important to find out exactly how long you have to tot up your points, so that you can redeem them whilst they are still valid.
- Rewards are only earned on purchases
Reward credit cards will only offer rewards on your purchase spending - paying for any goods or services with your credit card.
You will not earn rewards on balance transfers or any cash transactions - including, ATM cash withdrawals, getting 'cash back' at the supermarket, buying foreign currency or traveller's cheques or gambling transactions.
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