Reward cards

Reward credit cards reward you for spending, typically offering "points" or cashback every time you spend using your credit card.

The benefits of reward cards

Earn points when you spend

Think of them like a supermarket rewards card: you get a set amount of points per pound spent with selected retailers or for spending within certain categories. The points you accumulate can be exchanged for shopping discounts, vouchers, goods or flights, depending on the type of card. For example, some cards allow you to collect points towards flight upgrades or tickets with certain airlines. Others offer points which can be redeemed on your supermarket shop with a certain brand.

Earn cashback

Cashback cards usually pay you a small percentage of your credit card spending back in cash each month, usually back into your card balance.

Other perks that come with your card may include 0% interest free periods, the ability to flexibly choose between different rewards, a second type of card which can collect points in a different way, or even 0% on balance transfers for a set period.

The downside of reward cards

Interest rates on reward point and cashback credit cards are usually not as competitive as other credit cards on the market. So, if you're unable to clear your balance at the end of every month, they may not be suited to you. If you allow the interest to build up on the balance, it's likely that it could outweigh any rewards.

Before applying, take a good look at the terms and conditions, and use any reward calculators the lender provides conservatively so you get an accurate estimate of what you could expect to earn with the card. They tend to be most beneficial for everyday spending with an aim in mind. For example, if you only shop at a particular supermarket, or you're a frequent flyer, you could rack up points. If you intend to only occasionally spend on the card, it may not reward you well.

There might not be much to gain by transferring your balance to a reward credit card – they usually only reward spending.

Last updated: 22 May 2015