According to Jupiter Research, global consumer credit card rewards will hit $92 billion (£71 billion) in 2022. And they’re forecast to rise by 15% a year as consumers opt for single reward-based schemes over multiple loyalty apps.
There’s a host of different credit card rewards to pick from, including cashback, retail vouchers, hotel status upgrades and Avios flights. I’m going to look at some of the more tempting credit card rewards currently on offer, along with other tips for choosing a credit card.
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What are the most popular rewards schemes?
1. Cashback reward schemes
Unsurprisingly, these credit cards offer you cashback on your purchases. The cashback rate’s typically around 5% for the initial promotional period, followed by an ongoing rate of 0.25%-1.25%.
We’ve compiled a list of our top-rated cashback credit cards to help you compare the various options. The American Express Platinum Cashback Everyday Credit Card might be a good option for bigger spenders, offering 1% cashback on spending over £10,000 in a year (and 0.5% under £10,000). The card also has no annual fee.
An even higher cashback option is the American Express Platinum Cashback Credit Card, offering 0.75% cashback (on spending under £10,000) and 1.25% cashback (on spending over £10,000) for a £25 annual fee.
As American Express isn’t accepted universally, other options include 0.5% cashback on the Santander All In One Credit Card and 0.25% cashback on the Barclays Rewards credit card.
2. Loyalty reward schemes
A number of credit cards offer loyalty vouchers or points, including Tesco, Sainsbury’s, John Lewis and Marks & Spencer.
The M&S Shopping Plus Credit Card offers one point for every £1 spent in M&S and £5 spent elsewhere. This works out at an equivalent ‘cashback’ rate of 0.2%-1.0% as each point is worth 1p in vouchers.
I have a John Lewis Partnership Credit Card that awards five points for every £4 spent at John Lewis and Waitrose and one point for every £4 spent elsewhere. Each point is also worth a 1p in vouchers, so this equates to a cashback rate of 1.25% at John Lewis and Waitrose and 0.25% elsewhere.
3. Avios and hotel reward schemes
American Express offers two credit cards with perks for British Airways customers. I use a British Airways American Express Premium Plus card for the majority of my spending. Although it has a fairly steep £250 annual fee, I earn 1.5 Avios points per £1 spent (and three Avios for BA purchases).
For me, the main advantage is earning a companion voucher if I spend over £10,000 in a year. This enables me to book two airmiles flights (in any class) for the price of one.
Alternatively, the Marriott Bonvoy American Express is a hotel-based rewards card that offers privileges such as an upgrade to Gold Elite status.
Are rewards-based credit cards a good option?
Rewards-based credit cards are most appropriate for people able to pay their credit card balances in full each month. But it’s also worth looking at other factors such as the annual fee.
Another important consideration is whether you intend to use your credit card abroad. My BA Amex card is typical in charging a 2.99% ‘non-sterling transaction fee’ when I use the card overseas. If I’m paying for hotels and meals, this can add up.
To avoid this, I also have a Halifax Clarity Credit Card for purchases in foreign currencies. It has no annual fee and no foreign currency charges, but it offers no other rewards, so I only use it outside the UK.
What if you have a bad credit rating?
It can be challenging to apply for a credit card if you have bad, or no, credit. However, we’ve compiled a list of our top-rated credit cards for bad credit to help with this. We’ve also set out eight tips to help you apply for a credit card, including ways to improve your credit score.
1. Balance transfer credit cards
If you have outstanding credit card debt, we’ve selected our top-rated balance transfer credit cards. These cards typically offer 0% interest on balance transfers for at least a two-year period. This could provide the time to clear your debt without incurring extra interest charges.
2. 0% purchase credit cards
These credit cards offer a 0% interest rate on new purchases for an initial period, typically one to two years. They could be an option for people looking to spread the cost of a larger purchase without incurring interest payments. Our experts have researched the market to produce a list of top-rated 0% purchase credit cards.
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Take away
There’s a wide range of credit cards on offer. If you have no outstanding credit card debt, rewards-based credit cards can be a good way of earning different types of rewards on your everyday spending.
