Credit cards offering rewards give you the chance to earn supermarket loyalty points, air miles or even just plain cash back when you spend. But are they worth it?
Credit cards with rewards can seem tempting but users need to balance the value of any rewards against higher interest rates.
The best credit cards that do not offer rewards boast interest rates from as low as 7% APR, or around 12% APR for all but those with the best credit scores.
These are significantly lower than the APR on most reward credit cards where rates tend to start from about 16% APR.
Compare the latest best buy credit cards…
But if you are using your credit card for spending and always pay off your balance then a credit card with rewards may be right for you.
New Figures from the British Banking Association show that the number of credit card purchases increased to 173m in August, compared to 169m in July and 158m last year.
At the same time, overall balances have reduced year on year, from £64.1bn in August 2009 to £60.7bn in August 2010, which suggests that while people are using their credit cards more they aren’t leaving a balance outstanding.
Chris Griffin, head of credit cards at Confused.com, said: ‘Customers who use their credit card as a means of spending should seriously consider the additional benefits offered by a rewards credit card. By paying for goods and services with a card that offers rewards, ahead of one that doesn’t, users can earn air miles, cashback, or shopping points from their spend.’
It is perhaps best to regard reward credit cards as an alternative to spending you would normally do with cash, or a debit card. Pay the balance off in full each month and you pick up the rewards but dodge the higher interest charges.
There are a number of different cards on the market at the moment, ranging from cashback to airmiles rewards.
If you’re thinking about taking out a credit card which offers rewards you should think about which one you will get the most benefit from. Some cards offer stronger deals in certain shops, while other offer BA Miles or AA points.
The best cards for cashback and rewards
We’ve rounded up a few of the cashback and reward credit cards available at the moment. If you want to compare the deals yourself then use our credit card finder. AMEX Platinum Cashback
Reward: For the first three months, customers will receive 5% cashback on purchases, up to a maximum of £100. After that, they can receive up to 1.25% cashback. 0% on purchases for 6 months
Typical APR: 19.9%
Balance transfer offer: None
AMEX Platinum Cashback
Lloyds TSB Airmiles Duo Credit Card
Reward: Collect double airmiles when you spend abroad.
Typical APR: 15.9%
Balance transfer offer: 0% balance transfer offer for 6 months, 3% fee Contact: www.lloydstsb.com*
Tesco Clubcard Credit Card
Cashback offer: Collect 1 Clubcard point for every £4 spent on Clubcard Credit Card anywhere in the world and get points as usual from shopping a Tesco
Typical APR: 16.9%
Balance transfer offer: 0% interest on balance transfers for 9 months from account opening(2.9% fee)
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