A rewards credit card offers you points each time you use it to make a purchase, which you can redeem for different kinds of rewards. The rewards can be airline miles, discounts on electronics or cash back.

How do rewards credit cards work?

With a rewards credit credit card every £1 you spend on the card earns you number of points. As you accumulate these points you can then redeem them for rewards such as frequent flyer miles, flight upgrades, electronics, etc.

For those rewards to be possible, credit card providers often charge annual fees and high interest rates. If you're considering a rewards credit card, it's a good idea to calculate whether you are gaining enough from the rewards in order to justify the cost.

What kinds of rewards do credit cards offer?

The rewards you get from a credit card will depend on the credit card you choose and the programme it offers. Some popular categories include:

  • Shopping and restaurant vouchers

  • Supermarket loyalty points (like the Clubcard and Nectar schemes)

  • Air miles

  • Cashback

  • Hotel vouchers

  • Football merchandise

How to find the best rewards credit card

There are many credit cards that offer a variety of different rewards programmes that cater to different audiences. While there is no best rewards credit card, you can find one that suits the kind of rewards you're interested in. When you compare rewards credit cards, it might help to follow these steps.

  1. Choose the kind of rewards you would like to earn

  2. Filter the results in our comparison so it only shows the ones you want

  3. Work out how much you will spend on the card in a year

  4. Check what rewards you would get on that amount for each card to find the best one

  5. Make sure you are likely to be accepted by checking the application criteria

How is cashback paid?

Typically, cashback is paid annually in the month after you card anniversary. In most cases the cred card provider deducts the among of cashback you've earned from your current monthly statement, thus reducing the amount you'll owe for that month.

So for example you've got £300 in accumulated cashback and if you have a £1,200 balance for the month that you are paid the cashback. The provider will credit you £300, thus you'll only have to pay £900 to pay off your for total balance for that month.

How to compare rewards credit cards

When comparing rewards credit cards, the idea is to find a credit card that suits your lifestyle and offers features that you're interested in. You also want to keep the costs as low as possible. Somethings to consider with a rewards credit card include:

Points earned: Ideally you want to earn as many points as you can per £1 you spend to get good value. As a general rule, look for cards that offer at lest one point per £1 spent on eligible transactions. Some cards also have expiry dates and monthly or yearly caps on the amount of points you can earn, so make sure you're aware of these limits.

Points value: Earning a lot of points per £1 sounds great, but the value of each point depends on how many points it takes to redeem a reward. For example, if you need 5,000 points to get a £50 gift card and your credit card has an earn rate of one point per £1 spent, you would have to spend £5,000 to make a redemption.

Black out dates: Some rewards periods have black out periods during which you cannot redeem your points. Make sure you read the terms and conditions of your rewards programme so you're aware of how that may impact you.

Interest rate: Rewards credit cards typically have high interest rates. If you don't usually pay off your full balance every month, think about how much debt you may accrue because of that.

Fees: Rewards credit cards often charge annual fees. For a credit card to be beneficial, the value of the rewards you receive should at least be equal to the annual fee to break even.

Are rewards credit cards worth the cost?

It depends. If you always pay off your balance each month and spend enough on your credit card, you could earn something for nothing every time you use it.

For example, a card could offer supermarket clubcard points and give you five points for a £4 spend in a supermarket. One point for every £8 you spend elsewhere

You would need to collect 1,000 points for a £10 voucher. You could earn 1,000 points by spending £800 in the supermarket or £8,000 elsewhere.

When are rewards cards not not worth it?

If you do not pay your balance off in full, the interest you have to pay could come to more than the rewards you earn.

It could be cheaper to get a different type of card if you want to: