The Best Rewards Credit Cards

In this section:

• What is a rewards credit card?
• Which credit card has the best rewards programme?
• How we picked the winners
• An important note about rewards cards
• Comparing rewards credit cards
• Types of credit card rewards
• 6 ways to accumulate rewards faster
• What’s the catch?
• Is a rewards card right for me?
• Learn more

What is a rewards credit card?

Reward cards are exactly what they say they are: credit cards that offer rewards for spending. Rewards can vary, but typically come in the form of reward points, cashback or Avios.

With the best rewards credit cards, you don’t have to do anything special — aside from using the card — when you spend. You just swipe your card and earn rewards.

Some credit card issuers have rewards programmes that allow you to earn discounts or rewards by spending on very specific items or jumping through other hoops. This can be a nice added perk in some cases, but we typically wouldn’t categorise these as ‘rewards credit cards’.

It’s well worth noting that while earning rewards is nice, this isn’t a good reason to overspend or buy things you can’t afford. Getting rewarded for spending you would have done anyway is great. But spending beyond your means can cause problems that even the best rewards programmes can’t mend!

Which credit card has the best rewards programme?

The answer may be disappointing, but we can’t really say that any one credit card has the best rewards programme.

Why’s that? Because many programmes are aimed at specific types of redemptions or specific places to shop. A card with great Avios rewards may be considered a superb programme for a frequent traveller. But for someone that rarely travels, it’d be a fairly miserable reward system. Likewise, a regular Tesco shopper may get a lot out of the programme on the Tesco credit cards. But if you don’t shop at Tesco, it won’t have the same value to you.

For that reason, it’s important to match the card’s reward programme to your life and lifestyle. Just because you could theoretically get a high return from one card’s programme doesn’t mean much if you’d have to change your life to actually see that high return.

How we picked the winners

There are many types of reward card available and sorting through them all can be a bit dizzying. In choosing which cards we think are best, we focused on these factors:

• High reward yields – If you are taking out a reward card, then you want one that will really reward you. One of the key factors we considered was a high rewards yield per £1 of spending.
• Annual fees that make sense – Not all cards in our list have an annual fee. For those that do, we wanted to make sure it wouldn’t significantly reduce the overall value of the card’s offering.
• Extra perks – For some credit cards, the benefits don’t end with the rewards you get for each £1 of spend. Some offer additional perks like travel discounts, extra rewards for spending on partner offers, travel insurance, or access to airport lounges.
• Sign-on bonuses – These are added extras that really help you make the most of your reward card. We tried to include cards that offer sign-up bonuses with the most value.
• Introductory 0% interest periods – Included in our shortlist are cards that also offer some sort of introductory 0% interest period for either purchases, balance transfers or both.
• Standard APR – The ideal is to not carry a balance on a rewards credit card. But there may be times when that’s unavoidable, so for those cases, it’s preferable to have a lower APR.

An important note about using rewards credit cards

Rewards credit cards are typically best for those people who consistently pay down their credit card balance in full at the end of the month. If you don’t think you’ll always be able to repay your balance in full each month -– a rewards credit card is probably not right for you.

Why is this? It’s quite simple. A good rewards credit card might have a rewards yield of 1% — that is, 1p worth of rewards per £1 in spend. Many credit cards charge an annual interest rate in the 19% range. That means that a balance carried for even one month will land you with more interest charges than what you’ve earned in rewards.

It can be misleading to think of credit card rewards as ‘free money’. But if you pay off your credit card balance in full every month, those rewards are about as close to free money as possible.

And what if you often do carry a balance on your credit card? In that case, there may be some better options than a rewards credit card. If you already have a balance on another credit card that you’re paying high interest on, then a balance transfer credit card may be able to save you a good deal of money. If you don’t currently carry a balance on a credit card, but you have an upcoming purchase that you’d like to pay off over time, a 0% purchases card could be better. These cards provide an introductory period of 0% interest for new purchases.

Finally, there are cards on the market that provide rewards and 0% balance transfer offers, 0% purchases offers or simply low standard APRs. You may have to compromise a bit with these cards — that is, you may not get the highest rewards yield or the longest 0% introductory period. But they can be a great middle ground to get rewards while avoiding high interest charges.

Comparing rewards credit cards

It’s all well and good for us to tell you which cards we think are best. And hopefully one of these cards is a good match for your needs.

However, everyone’s financial situation is slightly different. That makes it important to know a bit about how to compare these cards on your own, so you can confirm that a particular card really does fit your personal circumstances.

Here are some key features to compare when lining up rewards cards:

• Rewards type – Unlike cashback cards, the earnings on rewards cards can be a bit more complicated. In some cases, these rewards can be restrictive. The John Lewis scheme, for instance, mails cardholders vouchers that can be used solely at John Lewis & Partners or Waitrose & Partners. Other programmes are more flexible. For example, rewards earned with the American Express Membership Rewards programme can be redeemed on everything from car hire with Sixt and flights on British Airways to Amazon.co.uk gift cards or even paying part of your card balance with points. The bottom line is to choose a programme that fits you and your needs.
• Rewards yield – This refers to how much rewards value you get for each £1 of spend. There are two parts to figure here. First, you need to determine the rewards earning rate. That is, how many rewards points you get per £1 spent. With some schemes this is very easy, as you’ll simply get one point per £1 in spend. Other schemes have different levels of points depending on where you’re swiping your card. The latter is typical of store brand cards. The other side of this is the rewards value, or how much value you get per rewards point. Again, sometimes this can be easy to figure. The John Lewis card we mentioned mails £5 in voucher credit per 500 points. More flexible programmes — like Amex’s Membership Rewards — can be more complicated, as redeeming points for gift cards can, for example, have a much lower value per point than redeeming for airline tickets. You don’t need to perform advanced mathematics here, but it’s a good idea to look at the rewards earning rates and rewards value in light of your own spending habits to help you compare the rewards value to you from various schemes
• Annual fee – Many rewards cards do not have an annual fee. That’s a great thing, since it means you get rewards without having to pay anything extra out of pocket. All else equal, we prefer rewards cards that don’t have a fee attached. But all else is not always equal. Rewards cards with annual fees often allow you to accrue rewards at a faster pace or they may come with better perks, like access to airport lounges. The trick here is to compare the cost of the fee with the value that you’ll get out of the additional rewards or perks. At that point it’s simple: if you think you’ll get more value, then the fee is worth it. If not, skip the fee-carrying card and get one of the many cards with no fee.
• Additional perks – These add-on perks come in many flavours. Some cards provide accelerated rewards for spending with partners. Some let you put your feet up in exclusive airport lounges. Yet others may help you get events tickets before other people. The value in these rewards is highly dependent on what’s important to you. But keep an eye out for them, because they can be valuable.
• Sign-up bonus – The idea of a sign-up bonus sounds great. Wouldn’t it be nice to get a big pile of rewards just for signing up? Don’t get us wrong, sign-up bonuses are great, but except for cards that carry annual fees, sign-up bonuses tend to be modest. If you can’t make your decision based on the factors we’ve already listed, the sign-up bonus can be a good tie-breaker. But it likely shouldn’t be the primary factor you focus on when choosing a rewards card. And when it comes to cards with annual fees, the sign-up bonuses can be impressive, but the same rule holds as we discussed above: consider the value you get versus the annual fee you pay and only choose a card with an annual fee when you believe you’re getting more value than when you’re paying.
• Foreign transaction fees – Most credit cards charge a fee of up to 3% when you transact in a currency other than sterling. This can be a real pain when travelling abroad. Travel credit cards waive this non-sterling transaction fee, so that you can spend abroad without stress. Unfortunately, though many rewards cards offer travel-related rewards, few waive non-sterling transaction fees. So you may be best served earning rewards for your holidays with a rewards card, but then spending on your holidays with a fee-free travel card.
• Everything else – There are many other features to potentially consider here. For instance, some cards offer introductory 0% interest periods and rewards. Others may have a lower-than-average standard APR. If these are features that are critically important to you, you may want to consider a different type of card. That is, if you have a big purchase coming up and think 0% interest on new purchases for a number of months could be useful, you may want to look specifically at 0% purchases cards. But if you’ve been through all of the other points we’ve mentioned and still can’t make up your mind. These other features can help tip the balance in favour of one card or another.

What type of credit card rewards are there?

Credit card rewards – the benefits you receive for every £1 you spend on your credit card – come in three main forms:

Reward points

These are reward points for your spending. The reward rate will depend on which card you choose. Cards that offer reward points are often affiliated with a retailer or supermarket and offer higher reward points on money spent in store compared with that spent elsewhere. For example, you could earn one point for every £1 you spend in store, but only one point for every £2 spent at another retailer. Typically, reward points accrue over one month or three months and are then given to the cardholder in the form of a voucher.

If you’re not already familiar with the rewards scheme, it’s a good idea to examine it prior to taking out a card. While some programmes are restrictive, others can be quite flexible and allow you to redeem your rewards in many ways.

Cashback rewards

Some cards offer rewards in the form of cashback. The level of cashback you can earn depends on the individual card. For example, you could receive a cashback yield of 0.5% for every £1 spent, meaning if you spent £100 on your credit card you would earn 50p of cashback. It is best to check whether a particular cashback card has any limit on how much cashback you can earn over a certain period.

Avios

Avios reward points were previously known as Airmiles. You can put the value of Avios points towards paying for air fares, hotels and other travel perks.

6 ways to accumulate rewards faster

There are plenty of ways to accumulate extra points without spending extra money. Here are some top tips for helping you make the most of your reward card.

1. Use your card like a debit card – If you are looking to earn lots of rewards, then the best way to go about it is to spend lots of money – but rather than rack up lots of debt you can’t afford to repay, use your credit card like your debit card. If you make your credit card your main means of payment but make sure you pay off the amount immediately or budget to pay off the full balance monthly, then you can maximise the amount of rewards you can earn. If you do all your spending in one place, then everything you spend is earning you a reward. Just make sure you keep on top of your balance, and don’t fall in the trap of spending above your means.
2. Add an additional user – Some reward cards let you add an additional user at no extra cost. This could be a partner or a close family member, who could then start accruing points with their own credit card linked to your account. Something to note though, is that adding an additional user makes you responsible for their debt. Additionally, any mistakes you make, like a late payment, will show up on their credit report and vice versa.
3. Put large expenses on the card – If you have some home improvements coming up or are looking to book a holiday, you could put the cost on your credit card and earn reward points as a result. This is best only done if the card also offers an introductory 0% interest period on purchases or you plan to pay off the balance in full at the end of the billing period. Otherwise you could run the risk of incurring interest charges on your balance and wiping out any reward benefits you have earned.
4. Card referrals – Look to see whether your credit card offers bonus reward points for referring someone else for the card. This is often a way of injecting bonus points into your account.
5. Select a reward card to suit you – Make sure the card reflects your shopping habits. You won’t really benefit from a Sainsbury’s reward scheme if you do all your weekly food shopping at Asda.
6. Redeem your rewards wisely – Look at how best to redeem the rewards. You may receive Clubcard vouchers that equate to £9 in cash when spent in store, but if you were to use the Clubcard Boost programme you could convert your vouchers into the equivalent of £27 to spend at Cineworld, for example. It is best to make sure you understand the reward scheme you select and therefore how best to use the vouchers once you have earned them.

What’s the catch?

As with anything, there is always a downside. Reward cards are a great idea in principle, but there are some things to be aware of before you get spending.

• Reward cards typically have high interest charges. Therefore, reward cards are best suited to borrowers who can repay their balance in full each month. Any remaining balance, unless you have a card that offers an introductory 0% interest period on purchases, could incur interest charges that outstrip any reward benefits you might have accrued.
• As mentioned before, some reward cards carry an annual fee. You will need to take any fee into account when calculating whether it would be worthwhile to take a card out that carries an annual fee.
• It is also best to look at what you can earn reward points on. Typically, reward points can only be accrued on purchases, so balance transfers would not qualify. Also, some cards specify which purchases qualify for reward points; for example, travel money purchases would be unlikely to earn you any reward points.

Is a reward card right for me?

As with any credit card, you have to look at your individual circumstances. If you think you can pay off your balance in full every month and would spend enough on a credit card to accrue points, then a reward card could be a good fit for you.

As to which reward card you select, the best choice depends on where you tend to shop and which vouchers you would get the most value from. When choosing which card to apply for, decide on the type of rewards you want to receive, calculate how much you are likely to spend on that card each year, and then compare the rewards you would earn on that amount from a range of different cards.

It is also best to check the application criteria for the card, in order to assess whether you would be likely to be accepted. All our reviews for reward cards include a guide to which credit score band you would need to achieve in order to be likely to be accepted for that card.

If you don’t think you would get any value from a reward points scheme then maybe look at cashback credit cards, which offer a cashback yield for money spent, rather than vouchers.

Learn more

• Why having two credit cards could be a great idea
• Do wealthy people use credit cards differently?
• Should you consider a Sainsbury’s credit card if you don’t shop there?
• How much credit card debt does the average Brit really have?

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