Credit card rewards explained

Some credit cards come with a range of rewards and benefits for spending such as cashback and air miles. See how reward cards work and what the potential benefits and considerations are.

What is a reward credit card?

On a credit card that offers reward points, you can earn points for your everyday spending. These points can be redeemed for a range of goods and services, such as shopping vouchers and flights. They can also be used for discounts on fuel, family days out, restaurants and hotel rooms.

While reward points can be a smart way to benefit from your normal spending, it’s important to always spend within your means.

What to consider before taking a reward credit card?

As they offer such rewards, these kinds of credit cards may have higher fees and potentially a higher interest rate. So before taking a reward credit card you want to be confident you’ll be able to repay your balance in full each month and also can afford to pay the annual fee. If not, you may end up paying more in interest and fees than you earn in rewards.

Explore more: What is APR?

What should you look for?

If you feel a reward credit card will suit you, it’s important to consider what you’re looking for from the card. Banks will offer different rates for earning points for spending and also different things you can use your points for.

For example:

  • Shopping points - You may receive points for every purchase you make on your credit card, for instance 1 point for every £1 you spend. The points earned can be accumulated and exchanged for vouchers that you can spend in supermarkets and certain stores.
  • Cashback - Some credit cards give you a percentage of what you spend as cashback. For example, if you spend £100 and your card pays 2% cashback, you’ll earn £2. These credit cards generally pay cashback into your account monthly or annually. Some credit cards allow you to convert the cashback into vouchers that you can spend in shops.
  • Air miles - If you’re a frequent flyer, it may be worth considering a credit card that earns you air miles on every purchase you make. These earned miles can then be exchanged for flights.