Most of us wouldn’t want to look a gift horse in the mouth, but if you are not taking advantage of a
rewards or cashback credit card
you could be missing out on free cash, vouchers or other treats.
These deals enable you to earn money every time you spend on your card, as your provider usually rewards you with points which you can exchange for goods or services, air miles or cash.
How do they work?
You usually build up rewards each time you use your credit card, based on the amount you have spent – you might receive a point per pound for example.
These points can be swapped for a massive range of goods from washing machines to DVDs, or services from car hire to spa days.
Every scheme is different but most include wide-ranging benefits, with something to appeal to everyone. The MBNA Platinum Rewards Card for example gives you points that you can redeem against entertainment, shopping vouchers, wine and travel services. It also comes with 13 months’ interest-free credit on balance transfers.
Others give you free air miles, or ‘destinations miles’, whenever you use your card, like the bmi American Express Credit Card from MBNA. Plus, as well as accruing the air miles, you get membership to its frequent flyer programme - the Diamond Club – and 0 per cent on balance transfers for a year.
Cashback cards usually credit a percentage of your spending back to your account each month. One of the best is the American Express Platinum Cashback Card which gives you 5 per cent cashback in your first three months up to £100, after which you can earn up to 1.25 per cent cashback with no limits.
And next month, a brand new rewards scheme is set to launch across the UK - Barclaycard Freedom.
Instead of earning points or vouchers many Barclaycard customers will get their own Reward Money account, credited with cash each time they spend on their card. This Reward Money will be redeemable in thousands of large and small retailers, with customers able to view their available balance at the till.
Is a rewards card right for you?
The most important thing to remember with any rewards or loyalty card is that they are most suitable for customers who pay off their bill each and every month, and therefore do not rack up any interest charges.
If that’s the case you can focus on finding a card that gives you the best benefits and rewards for your needs, because you don’t need a deal with the lowest rate of interest.
However, if you don’t pay off your bill every month you will be charged interest on your outstanding balance and are much better off looking for a card with a low rate.
In fact, you should consider switching to a 0 per cent balance transfer card, giving you a chance to make a dent in your debt by paying no interest for a year or more.
Remember, if you have a substantial balance there is no point paying over the odds in interest just to bag a few points or pounds. But for many credit card customers, rewards cards are brilliant deals and simple to use.
Plus you can maximise the benefits by putting more of your monthly spending on your plastic (as long as you can afford to repay it each month).
