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Rewards Credit Cards: How do they work?

rewards credit card work image
Robert Bester, Consumer Finance Expert

17th January 2022

3 minute read

While a good reason for getting a credit card in the UK is to get a new line of credit or spread the cost of regular spending, there are also additional benefits. In fact, if you plan on spending anyway, you can really make the most of doing so with a Rewards Credit Card, which will come complete with a set of perks that are unlocked the more you use the card.

By using a product such as a rewards credit card, you can boost your loyalty points with a particular retailer, gain a cashback bonus or even accumulate air miles to use the next time you travel abroad. Ultimately, with any reward you are aiming to save money on your regular spending, whether it is food shopping or otherwise.

To find out more about rewards credit cards, along with how they work in the UK, keep reading our handy article below.

What is a rewards credit card?

  • Earn rewards every time you spend
  • Perks available such as loyalty points, air miles and cashback
  • Compare rewards to find which one fits with your spending habits
  • Always check for terms and conditions

A rewards credit card is designed for those who make frequent purchases and would like to earn extra rewards at the same time. This can generally be loyalty points at a particular supermarket or retail outlet, cashback at selected stores or even air miles that can be used to save money on flights with a particular airline.

If you spend frequently during the month on things like food shopping or petrol, a rewards credit card allows you to capitalise on your spending and hopefully save money at the same time. This requires you to be organised with your credit card and avoid accumulating interest or additional charges as much as possible, to ensure you are still saving money.

How does a rewards credit card work?

  • Your rewards credit card will have certain criteria that will allow you to earn rewards
  • Spend on your card and you will be rewarded, though it’s best reading the terms first
  • You will still incur interest on any outstanding balance so try to pay off your card every month

The idea behind a rewards credit card is for you to spend frequently and earn rewards every time, meaning the more you spend, the more you should save. However, since you still have to pay interest on any outstanding balance, you can end up cancelling out these rewards by paying extra on interest and additional charges.

The best way to avoid this is to manage your rewards credit card effectively, making sure you spend on the card and pay it off immediately, or at the very least within the same month. If you can keep an eye on your credit card in this way, be aware of what you’re spending and manage to reduce the balance to £0 every month, you can take advantage of the rewards on offer.

What rewards are available?

It’s a good idea to find out what rewards are available on a credit card before you apply, as this will allow you to find the card that matches your current spending habits. The rewards available usually consist of one of the following:

  • Supermarket loyalty points - many retailers often employ tactics that will benefit shoppers who remain loyal to a brand, usually in the form of a member’s card or points scheme. This strategy is the most common for supermarkets such as Tesco, Sainsbury’s, and even Marks & Spencer, who each have loyalty programmes that are well-used by customers to save money on their weekly shop.
  • Cashback – when it comes to cashback, you will either find an offer giving you exclusive discount at a limited number of retailers, or a set cashback percentage you will receive on all purchases. Often the latter is a much smaller percentage and you might even have a cap on how much you can earn, so always check your terms and conditions
  • Air miles – you can also earn air miles depending on how much you spend using your rewards credit card. You can compare credit cards to find the airline that you use the most, before applying

Rewards credit card eligibility

  • Make a list of regular expenses as well as retailers you shop at frequently
  • Compare rewards credit cards by seeing if any perks align with your current spending habits
  • Check your eligibility
  • Apply for your rewards credit card when ready

Are you eligible for a rewards credit card? Try our FREE online eligibility tool MoneyMatcher to find out whether you can apply today. Use the link below to get started.