Getting a rewards credit card
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
18th January 2021
4 minute read
Do you want to get a credit card with more benefits or perks? If you want to receive a bonus for spending, the best way is to apply for a rewards credit card.
You can choose between rewards such as supermarket loyalty points, cashback and air miles, allowing you to save money in other areas, just for spending on your card. If you already collect certain loyalty points, it might even allow you boost your total every month.
The Guru has already benefited from buying so many different men’s facial products that he has enough points to get a free bamboo moustache comb and a special beard cream made from Yak’s milk. If that doesn’t sound like the type of rewards you would like to claim, perhaps just stick to collecting Nectar points instead.
How does a rewards credit card work?
A rewards credit card works on the basis that the more you spend on the card, the more points you will accumulate and use as part of a loyalty scheme.
There is usually a choice of rewards schemes you can choose from, including points for supermarkets such as Tesco, Sainsbury’s and M&S, as well as Air Miles from travel companies such as British Airways and Virgin. You can also take advantage of cashback rewards where a certain percentage of your spending will come back to you as a bonus, usually after a whole year of spending.
If you are already used to spending frequently every month and paying it off in full, it means that by switching to a rewards card, you can get an additional bonus without changing your spending habits. However, if you only spend very infrequently on a credit card, chances are you won’t get the full benefit.
What rewards can I choose from?
When browsing, you can usually see straight away what reward you will receive by spending on the card. This should indicate which card would be best for your purposes, especially if you already shop at a certain supermarket or travel with a certain airline.
For example, if you already shop at Tesco, choosing a rewards card that will accumulate Clubcard points will allow you to collect point faster and get more discounts off your weekly shopping, allowing you to save money in the long term. Choosing the right rewards card should benefit your current lifestyle and complement your current spending habits too.
Have a look at the following options you can choose from:
Getting cashback from your credit card is always a welcome bonus, especially when that gets deposited in your account to top up your spending. You will often find that card providers will only give you back a cashback amount once a certain amount of time has passed, such as a month or a year, but it will be a set percentage of your spending over that period.
Depending on the offer, you might have a limited period where your cashback percentage is higher, meaning that you should aim to spend responsibly within this period, but as much as possible to get a good amount of cashback.
You might also get a cap on the amount of cashback you can claim back, so be aware of this when calculating your bonus. Most cashback percentages are fairly low (between 1-3%) so make sure you are consistently spending a large amount, and paying it off before the end of the month, to qualify for a decent bonus.
Learn more about earning cashback on a credit card here.
Collecting air miles is always appealing, especially if it translates to money off your next holiday, or even a free flight altogether. Of course, it relies upon you spending consistently so you can earn enough air miles to really make a difference.
Many airlines offer the chance to earn air miles when you spend, including both British Airways and Virgin Atlantic. Usually, you will earn 1 air mile for every £1 you spend, but you can also earn more miles as a welcome bonus, as well as receiving more air miles for surpassing a certain amount of spending on the card.
If you travel a lot with work, or like to go on a few holidays with family and friends throughout the year, collecting air miles through your credit card makes perfect sense. If you aren’t a frequent flyer, there’s nothing stopping you saving up your points to make a big holiday a lot more affordable.
Supermarket loyalty schemes
A credit card reward that is much more universal than air miles is the ability to collect supermarket loyalty scheme points. The good thing about this perk is that even by spending money elsewhere, you can still earn points that you can therefore use on your weekly shop in the supermarket. They include:
- Tesco Clubcard
- Sainsbury’s Nectar
- M&S Sparks
A rewards credit card that allows you to collect these loyalty points will translate into money off vouchers, limited offers and discounts off a regular shop. In itself, this can reduce the price of your food shopping every week, all by just transferring your regular monthly spending onto a rewards card. As ever, the more you spend, the better.
Using a rewards credit card
Whilst a rewards credit card is a good prospect if you want to earn a bonus during the month, if you aren’t a frequent spender, then you might not gain much benefit from having it. Try to use the following rules to get the full benefit:
- Pay off your balance every month – if you still have an outstanding balance you will be charged interest, and this could cancel out your cashback bonus or money you save on air travel or on your food shop
- Never miss a payment – similarly, if you miss a repayment then you will be forced to pay a late fee, which could cost you more than you would be saving
- Never overspend – overspending can also lead to charges being applied, so always be aware of your balance while spending
- Never withdraw cash – taking out cash at an ATM can incur a percentage fee, so try to avoid these to make sure you’re still in profit by the end of the month
Compare credit card rewards
Now that you’ve read everything you need to know about rewards credit cards, it might be time to start choosing the right one for you. If you’re still a bit unsure, why not use our free moneymatcher comparison tool? Just enter a few personal details and you will receive a tailored list of cards to choose from. The best bit is it won’t affect your credit score.