Reward credit cards aren’t just regular plastic; they’re a gateway to a range of perks. When you use them for purchases, you can earn:
- Cashback: Get a portion of your spending back.
- Store Points: Accumulate points redeemable for vouchers.
- Shop Discounts: Enjoy lower prices at various retailers.
- Airline Points: Fly cheaper with accumulated points.
The Catch: Paying Balances and Avoiding Interest
The key to benefiting from these cards is to pay off the balance in full every month. Failure to do so results in interest charges that can quickly eclipse any rewards earned.
Minimum Spend Requirements
Some cards require a certain level of spending to unlock rewards. Always read the fine print to maximize your benefits.
Credit Score Impact
Applying for a new card can affect your credit score, which is crucial for future loans. Fortunately, many issuers offer soft credit checks that don’t impact your credit history. This preliminary step is highly recommended.
Auto-Pay: A Smart Move
Setting up a direct debit to automatically clear your monthly balance can be a smart strategy to avoid interest charges.
Avoid Cash Advances
Withdrawing cash or borrowing on these cards can incur high fees and immediate interest charges. It’s often better to explore other credit options for these needs.
American Express Cards: Special Considerations
American Express cards offer attractive bonuses but are not universally accepted. Adding these to a PayPal account is a workaround, though it forfeits certain protection rights.
Top Picks for Reward Credit Cards
American Express Preferred Rewards Gold Card
- Introductory Offer: Earn 25,000 points on spending £3,000 in the first three months, plus an extra 5,000 points in month 15.
- Perks: Points can be converted to vouchers, air miles, or Nectar points.
- Fees: Free for the first year; £160 annual fee thereafter. 31% purchase rate if not repaid in full.
American Express Nectar Card
- Earning Points: 2 points per £1 spent, increased to 3 points at Nectar partners.
- Introductory Bonus: 20,000 Nectar points on £2,000 spend in the first three months.
- Fees: No fee for the first year; £30 annual fee afterward. 31% purchase rate if balance isn’t cleared.
M&S Reward Offer Card
- Point System: Earn double points at M&S in the first year, then one point per £1.
- Club Rewards: Extra benefits for a £10 monthly fee, worthwhile for regular M&S shoppers.
- Fees: No annual fee, but optional Club Rewards cost.
Best Cards for Cashback
American Express Platinum Cashback Card
- Rates: 0.75% up to £10,000, then 1.25%.
- Annual Fee: £25, but higher cashback rates can offset this.
- Introductory Offer: 5% cashback in the first three months, up to £125.
American Express Cashback Everyday Card
- Cashback Rate: 0.5% up to £10,000, then 1%.
- Introductory Offer: 5% cashback for three months, up to £100.
- Fees: No annual fee, but a 31% purchase rate applies.
Chase’s App-Based Account
- Cashback: Earn 1% for 12 months on most purchases.
- Extras: Includes an easy-access savings account with 4.1% AER.
- Fees: No credit check or fees, making it an accessible option.
Making the Right Choice
Remember, reward credit cards are most beneficial when used for regular spending and paid off in full each month. Avoid the temptation to overspend just to earn rewards. With careful management, these cards can be a valuable tool in your financial arsenal.