Paying with a credit card can help you manage your money by letting you buy now and pay later or spread the cost of a big purchase. You also get extra protection if the retailer goes bust or there’s a problem with what you’ve bought.
But some credit cards also reward you for using them to spend, giving you cashback and discounts or vouchers to use with retailers, airlines and hotels, which could potentially be worth hundreds of pounds.
You can also get other rewards not linked to your spending, such as travel insurance, early access to music and other events, extended warranties on items you buy, access to airport lounges and bonuses for referring friends.
Cashback cards give you back a percentage of what you spend, which might be added to your account once a year or more frequently.
American Express (Amex) usually offers the best cashback cards in the market and the best reward cards in general, although it’s not accepted in as many places as Visa and Mastercard.
At the time of writing, with the fee-free Platinum Cashback Everyday credit card, new cardholders can get cashback of 5% on purchases for the first three months up to a maximum of £100. You would get this if you spent £2,000.
After the first three months you get 0.5% on the first £10,000 you spend each year (£200 of spending gives you £1 in cashback) and 1% on spending over £10,000 (a £100 spend gives you £1) but you only get the cashback if you spend at least £3,000 a year on the card.
The Platinum Cashback card gives you the same 5% introductory rate but pays you up to £125 and you get higher cashback rates of 0.75% on spending up to £10,000 a year (spending £134 gives you £1) and 1.25% above this (spending £80 gives you £1).
There’s a £25 annual fee for this card though so you need to factor this in when deciding if it’s worth having.
For example, you would get cashback of £75 in a year with this card if you spent £10,000 but the £25 fee would reduce this to £50, giving you the same amount of cashback you would get with the Everyday card. You would have to spend a lot more than this to make the fee worth paying.
Both cards give you other benefits such as special offers, early access to tickets for events and travel accident insurance when you’re on public transport paid for with your card.
With other reward cards, you earn points that give you money to spend at specific retailers. Some are from retailers themselves, such as supermarkets.
One of the best points cards currently available is American Express’s Preferred Rewards Gold credit card. It gives you one point for every £1 you spend and two points for spending with airlines or on foreign currency.
You can then convert these points into gift cards and vouchers to use at eligible retailers, which include Amazon and Currys (200 points, which you can get by spending £100 with an airline, is worth £1), or transfer them to a choice of 12 airline loyalty schemes.
Other benefits include special offers, early access to tickets for events, two free visits to airport lounges each year and £5 back on Deliveroo orders twice a month. After the first year, there’s a hefty annual fee of £140 for this card though.
If you’re a new cardholder and apply by 9 November 2021 you can get 30,000 bonus points if you spend £3,000 on the card in the first three months.
For collectors of Nectar points, there’s an Amex card that gives you two Nectar points for every £1 you spend and three when you spend at Nectar partners, such as Sainsbury’s and Argos. You’ll get £1 to spend for every 200 points you redeem, which you can earn by spending £67 at Nectar partners. There’s a fee of £25 after the first year.
M&S Bank also offers good points cards with no fee that give you extra rewards when you spend at Marks & Spencer.
The M&S Rewards credit card gives you two points for every £1 you spend at M&S for the first year (one point after that) and one for every £5 you spend elsewhere. You’ll get £1 of M&S vouchers for every 100 points you collect, which you can get by spending £50 at M&S during the first year. It also gives you 0% interest on purchases for 12 months.
Alternatively, you can take out the M&S Shopping Plus credit card. You only get one point on your M&S spending from the start but you’ll get interest-free purchases for 22 months.
Other reward cards that give you extra points for spending at specific retailers include ones for Amazon, John Lewis/Waitrose, Sainsbury’s/Argos and Tesco. You can also get cards linked to specific airlines and hotel groups, such as British Airways, Virgin Atlantic and Marriott.
Working out which reward cards will give you the most bang for your buck can be complicated. Follow our tips to choose the best card for you:
Look carefully at how much each £1 you spend on the card is worth in rewards for different types of spending
If you often shop at a particular retailer, consider choosing a card that gives you extra points for shopping there
Factor in any annual fees you’ll have to pay when working out what rewards you’ll get. You’ll often get bigger rewards from cards with fees but they are only usually worth having if you’re a big spender
Make sure you’ll be able to meet any minimum spending requirements that can apply to some cashback cards
Using your credit card for all your normal spending will give you the maximum rewards possible, as long as you pay it off in full each month. This means you’re effectively using your credit card like a debit card.
You can also add additional cardholders to the account, such as your partner, so they can use it for all their spending too.
If your card gives you extra points for spending at a particular retailer it’s worth doing as much of your shopping there as you can. However, bear in mind that if something costs more at the favoured store, buying there could reduce or wipe out any savings the card provides. It could even end up costing you more overall.
It could be worth having an additional reward card that is better for spending elsewhere so you can use whichever card gives you the maximum benefit when spending in different places. Or if there’s another retailer with whom you spend a lot of money, consider taking out a card that rewards you extra for spending there too.
The value of the rewards you get can also depend on how you choose to redeem your points. For example, if you use your American Express points to spend at eligible retailers online through the card fraud prevention service SafeKey you get £4.50 to spend for every 1,000 points you redeem. However, 1,000 points are worth £5 if you convert them into gift cards.
Reward cards tend to have relatively high interest rates so they’re only worth using if you pay your credit card off in full each month. If you use them to borrow money, it’s likely you’ll end up paying over the odds in interest.
You should never use a credit card to withdraw cash as you’ll often pay a fee as well as interest from day one, whether you pay it off in full or not.
Applying for lots of credit in a short space of time can damage your credit score as this could be a sign that you’re in financial difficulty so bear this in mind when applying for a reward card. It could be particularly problematic if you have problems with debt so it’s best to wait until they’re cleared before taking out a reward card.
Using most or all of your credit limit can also have a negative impact on your credit score as this is another thing that can raise red flags about your finances.
With some reward schemes the points you have collected or the vouchers you’ve earned expire after a number of years so watch out for this, too.
And finally, don’t let reward credit cards tempt you to spend more than you normally would or more than you can afford to pay back as you’ll end up out of pocket or find yourself in debt as a result.