What do points make? Prizes of course! Yet, with Airmiles, Nectar or Buy and Fly points, sorry Brucie it ain't that simple. Credit card rewards schemes promise ‘something for nothing,' but many deliver ‘nothing for something'. However play your cards right with the
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Spend on a rewards credit card and you're repaid for spending in either points - used to redeem gifts, flights, trips or holidays – or a cash rebate. Other credit card transactions, such as balance transfers (shifting debt from other cards), generally don't generate points.
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"Only choose a card for rewards if you're never, ever, ever charged interest. This means you must pay the card off in full each and every month."
Fail to do this and the interest cost massively dwarfs the rewards earned, and you're substantially better off choosing a card that minimises the interest rather than maximises rewards. So if you need to borrow, read the Best Card For Purchases article instead.
The best way to follow the golden rule is set up a Direct Debit, as unlike with a standing order, the amount taken from your account needn't be fixed, it can ‘pay the card off in full each month'. Sadly some card providers deliberately miss this option off their DD forms, as it's not lucrative for them. If so, just write ‘pay off in full' and send it in; they should honour it, though phone after a week or so to check.
The only other thing to watch for is an ‘annual fee'. This is rare these days, however avoid any card that does have one as it detracts from the benefit.
Always use your reward card
Follow this golden rule and your reward card is effectively paying you to spend on it. This isn't an excuse to overspend, but does mean use it for as much of your normal spending as possible, replacing debit cards, cheques and cash.
A further bonus of spending on a credit not debit card is you legally get ‘Section 75' consumer protection, which means for anything costing over £100, providing some of it is paid for on the card, the card company is equally liable with the retailer if things go wrong (see Consumer Rights article).
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Banks salivate over customers who blindly grab their standard card without thinking. Sadly many do this, which is why big banks needn't pay rewards, a waste for those who pay off in full each month. While the best schemes (see later) pay over £2 per £100 spent, most major cards aren't close.
| Major Credit Cards' Reward Schemes Return on £100 Spent (as at May 2006) | |||||
| Card |
Scheme |
Return |
Card |
Scheme |
Return |
| Barclaycard |
None |
- |
MBNA |
None |
- |
| Capital One |
None |
- |
Mint |
None |
- |
| Egg Card |
Cashback |
10p |
Nationwide |
None |
- |
| None |
- |
NatWest |
Airmiles |
ended Jun 07 | |
| HSBC |
None |
- |
Tesco |
Clubcard pts |
£2/50p (1) |
| Lloyds TSB |
None |
- |
Virgin |
Rewards |
40p |
|
Source: MoneySavingExpert.com rewards checker – based on average redemption value for the standard outstanding cards. (1) £2 if redeemed on ClubCard Deals, £0.50 if redeemed in-store, this is the valuation for existing cardholders, new cardholders get less. | |||||
Read a full article on the valuation process
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Cold, hard, cash is the ultimate flexible points scheme, after all it can be spent on anything, anywhere; so cashback cards, which simply reward in cash are the benchmark. Any points scheme that doesn't beat the top cashback cards is an automatic loser, as then instead just grab the cash, buy the reward with it and take your change.
Cashback Kings
Undisputed cashback king is the American Express Platinum* card. Its cashback rates are tiered up to 1.5% (£1.50 per £100 spent), but it also includes a bonus of 5% (5p per £1 spent)on everything for the first three months, though you need a minimum £20,000 income to apply.
If you earn less than this, or are worried about Amex's acceptability, Egg Money (not the bog standard Egg card), pays 1% back on all spending (up to £200/year). See Best Cashback Cards for full details.
Rewarding Rewards Cards- Driven into first place: The GM Card* £3 per £100 spending.
GM Points earned in the last four years can be used to discount up to £2,000 off Vauxhalls and £2,500 off Saabs; dealers should treat them like cash (though when negotiating, tactically don't mention the points until the handshake is done, see New Car Buying). It's a great scheme for GM lovers, or GM company car drivers (as then points can go towards high street spending vouchers at the same rate), though everyone else should drive away. - A Second to Savour. Existing Tesco Customers £2/£0.50 per £100 spending.
Existing Tesco Credit Cardholders have the high street's top paying card – providing the points are correctly used. Use its Clubcard points towards discounted Tesco shopping and it rewards a paltry 50p per £100 spending. However, redeem from Tesco's special Clubcard Deals brochure, which includes days out vouchers, gifts and the like, and the points are worth £2 per £100. Unfortunately in April 2006, Tesco halved the points per pound that new cardholders will receive, so it's no longer worth it.
At this point any one spending over £5,000 a year who doesn't like those above should automatically consider the American Express Platinum* cashback card as it beats the rest (Best Cashback Credit Cards article).
- Skycard: £1 per £100 off your Sky TV bill
- BMI Classic Mastercard*: Flight Rewards at £1.19 per £100 plus free points on sign-up
- BA Amex Card*: 70p per £100 on flights, however spend over £20,000 and you get a free partner flight to the same destination, making it £1.40 per £100 when you top that level of spending.
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 RewardsChecker – See how much you could earn |
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| Reward Cards Ranked by Value |
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| Reward Cards Ranked Alphabetically |
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| Never balance transfer on a reward card! |
It's no coincidence many reward cards have top balance transfer offers, tempting you to both spend on the card and shift debts to them. This is because monthly repayments are automatically allocated to repay cheap balance transfer debts first, leaving the high interest debts from spending trapped until all the cheap debt is repaid. In other words you can't simply ‘pay off the costly debts'.
By far the best thing to do is use separate cards for rewards and balance transfers (see Best Balance Transfers article).
The vast majority of credit cards don't have reward schemes and thus pay nothing. Those who pay cards off in full can make serious cash by switching. Someone spending £15,000 a year on a card could get £210 in cash from the Amex Platinum, or £450 in car discounts off the GM card!
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Rewarding Cards: The value of Reward Schemes | |||||
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|
Annual Spending On The card | |||
|
£5k |
£10k |
£15k |
£20k | ||
|
HSBC Classic |
None |
£0 |
£0 |
£0 |
£0 |
|
Amex Platinum |
Cashback |
£65 |
£145 |
£220 |
£350 |
|
GM Card |
Car Discounts |
£150 |
£300 |
£450 |
£600 |
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