A rewards credit card works in the same way as any other credit card, but it allows you to earn something back as you spend. This is usually in the form of either loyalty points or cashback.
For example, you might earn points each time you spend on your card that can later be exchanged for shopping vouchers or flights. Or your card might offer cashback as you spend, which is then paid straight into your account.
The number of points or the amount of cashback you can earn depends on the card you choose and how it works. You might earn a higher number of points for spending in a particular store, for example, or a higher percentage of cashback in the first three months. All of this should be taken into account when you’re looking for a suitable card.
There’s a range of different reward credit cards to choose from, so it’s worth thinking about how you use your card and which reward scheme might suit your needs best.
Cashback schemes let you earn a percentage of your spend back. For example, you might earn 5% of each card transaction in the first three months and 0.5% after that. Cashback is often capped, however, so that you won’t be able to earn more than a set amount. . Read more on how cashback cards work and how to use them.
Supermarket reward schemes let you earn points whenever you spend on your card which can then be redeemed in-store. Common schemes include Tesco Clubcard or Sainsbury's Nectar points.
Air miles schemes let you earn points you can exchange for flights whenever you spend on the card. Popular schemes include Avios and Virgin Atlantic's Flying Club.
Department store schemes let you exchange your points for vouchers you can spend in shops such as John Lewis and Marks and Spencer.
Football club schemes offer free team merchandise, such as a shirt, if you spend a certain amount within the first few months of using the card.
Hotel reward schemes including IHG Rewards Club give you points you can use to book hotel rooms or flights.
There are also provider specific schemes, such as HSBC's Premier Rewards and Barclaycard Freedom Rewards. These let you choose between a range of rewards including shopping vouchers, flights or restaurant vouchers.
As well as checking how many points you can earn per pound you spend, it’s just as important to check how much each point is worth.
If Card A offered 10 points for every pound you spend but you need to save 100,000 points to get a £1 voucher, you would only be earning 0.01 pence of rewards per pound you spend.
If Card B offered just one point per pound you spend but gave you a £10 voucher for every 1,000 points you save, you would earn a penny for every pound you spend on the card.
Although Card A sounds like it earns you more points, Card B would earn you 100 times more than Card A.
Each scheme is different, but you’ll usually only receive your rewards once you have reached a certain number of points.
Get your reward immediately: Some schemes such as Sainsbury's Nectar points take up to 48 hours to be added to your account. Once you have 500 or more (worth £2.50), you can spend them in store or online whenever you like.
Get your reward every few months: Rewards such as Tesco Clubcard vouchers are issued every three months as long as you have earned enough points.
Get your reward once a year: Some schemes will exchange your points for rewards once a year. For example, if you had 1,030 points after a year and got a shopping voucher worth £0.50 for every 50 points, you would get a voucher for £10. The extra 30 points would be carried over into the next year's balance.
Cashback is usually paid monthly or yearly and is typically used to reduce the balance you owe on your card.
Some schemes will automatically send you a voucher by post, while others let you select from a range of different rewards online. You can then use your voucher in the shop or online store it applies to.
If you have a card that lets you use your points immediately, you can simply present the card or sign into your account online and choose to pay with your points without the need for a voucher.
Most reward points expire after a certain period, such as Clubcard vouchers, which expire two years after you receive them. Nectar points do not expire unless you close your account. However, your account may be closed if you do not use it for 12 months. Check the terms and conditions of each scheme to find out how long points last for.
Many credit cards offer the chance to earn bonus points, especially in the first few months you have the card. For example, a card might offer you an extra 10,000 points if you spend more than £3,000 in the first three months.
Others might give you a point for every pound you spend on the card but offer two points per pound spent during the first three months. You may also get more points when you spend with certain retailers.
To maximise the number of points you can earn on your card, it’s best to use your rewards credit card any time you spend. However, this will be on the condition the retailer accepts that particular card.
American Express cards often give the highest rewards, but some retailers do not accept them, so you should keep this in mind.
You should also keep in mind that if you’re going to use your card for everyday spending, it’s crucial that you can afford to pay the balance back in full each month. Many reward credit cards charge high rates of interest and if you can’t clear your balance each month, the amount of interest charged will outweigh any of the rewards received.
"One of the cardinal sins of the points and miles world is using a debit card or cash to make purchases. When you think about rewards credit cards as earning a valuable currency, you’ll want to leave your debit card in the sock drawer. Each purchase made with a rewards credit card means you’re inching closer to a reward." — Nicky Kelvin, Travel and Loyalty Expert from The Points Guy UK
Generally speaking, you’ll only earn rewards on purchases you make with the card. Transactions that will not earn you any points include fees, cash withdrawals, balance and money transfers, paying interest or purchasing foreign currency.
Some reward and cashback credit cards, particularly those that offer higher rewards, charge an annual fee. This could be anywhere between £25 and £250 depending on the rewards on offer, so check to see whether this is affordable before signing up.
Remember that interest rates can also be high. And if you are unable to pay off everything you spend, the interest and other fees you are charged could come to more than the value of the rewards you earn.
You could also have to pay other credit card charges if you:
Miss a monthly repayment
Break the card’s terms and conditions.
If you regularly spend on a credit card but are also confident about paying off your statement balance in full every month, a rewards credit card could work for you.
Provided you choose a card you’re most likely to benefit from, set up a direct debit for the full amount to make sure you do not miss any repayments, and only ever spend what you can afford to repay, a reward credit card can be a great way to earn something back as you spend.
You can compare rewards credit cards using our comparison tool. When you choose your card, look beyond how many points you earn for each pound you spend. Instead, think about:
How much you are likely to spend on the card. You can then work out what rewards you would earn.
Decide what type of rewards you would actually use. For example, if you prefer shopping to travelling, a scheme that offers high street vouchers will suit you better than one that gives you air miles.
You can use our credit card eligibility checker to find the rewards credit card that you're most likely to be accepted for.
No, you cannot swap points between schemes, but some points can be swapped for vouchers from different retailers.
This will depend on the credit card provider and the type of scheme, so check carefully. Points may be limited to a set number per year.
Most schemes let you check your points balance online, providing you have an online account. If you don’t bank online, your provider might send you regular statements in the post.