You are spending regularly on different items to fulfill different needs either by using cash or credit cards. But, why shouldn’t you consider reward credit cards if these cards enable you to earn hundreds of pounds while spending? If your credit score is good and you pay back what you borrow every month, rewards credit cards will help you to gain a lot of rewards without having to pay additional interest expenses. So, what differs reward credit cards from other credit cards? Is it worth to pay for them? Which type would fit your needs? And what are the best options available in the market? All of this will be explained in this topic.
What are reward credit cards?
Unlike normal credit cards, reward cards are the smartest type to use on day to day spending. The more you spend the more rewards you get. Based on the type of your card, you get rewards that could be transferred into shopping vouchers to be used on different goods and services. They could be used on restaurant, hotels, or flights. Based on the rates offered by your bank, you can receive three types of rewards, cashback as a percentage of what you spend, shopping points that could be exchanged for shopping vouches, and air miles that could be exchanged for flights.
Some reward credit cards are offered without annual fees while others are offered for annual fees. But is it worth to pay for them? In fact, the way you deal with these cards determines if they are worthy or just a waste for money. In order to deal with them wisely, the following tips should be followed.
Most users of credit cards leave a credit balance on them. so, they pay extra fees and interest expense for using these cards. But, if you want to benefit from reward credit cards, you should pay back what you borrowed in full at the end of the month. So, there will be no balance to charge interest.
Having full knowledge of your budget is essential when you rely on reward credit cards for spending. This will let you control your spending not to exceed the limit you are able to pay back at the end of the month. People who don’t spend based on their budget usually leave a credit balance because their income may not be enough to pay it back.
People who use credit cards with high annual fees usually compare their reward points to these fees. If you are not spending too much, you may your rewards lower than your paid annual fees. So, try to choose a credit card that is offered for free or low annual fees.
Reward credit cards are classified based on what rewards they provide. You need to know what each type offers to choose the one the meets your interests. There are three main types of reward credit cards.
This type is more suitable for savers rather than spenders. Based on your bank, you receive back a money percentage of total purchases you make using your reward card. Most cards offer 1% and some others offer higher percentages. Even if you are not keen on using reward credit cards this type of reward is pretty much straightforward and easy to earn. The more you spend on the card, the more you will get back. Just don't forget to clear your balance each month.
These cards are perfect for people who are shopping regularly. The more you purchase the more points you will get. These points could be used to get shopping vouches that are used on supermarkets and retail stores. They could also be used to get discounts on fuels.
If you love to travel a lot, this type of credit cards is customized for you. Some of these cards are cobranded with flight companies and hotels as well. The more you spend using these cards the more points you earn. These points could be used for travelling and staying at hotels.
After differentiating between the different types of reward credit cards, you may be decided which type is suitable for your needs. But, you still have to choose between many options in the market. We packed three of the best options in the market, each one is related to specific types of reward credit cards.
This card is a flexible option providing his owner with reward points that could be used for different purposes. If you spend £3000 in the first 6 months, you will earn 20,000 reward points that could be used to travel to Europe or even farther, these points could be also exchanged for shopping vouches used on goods and services. Your first year of ownership will be free from annual fees. But, from the second year you will have to pay £140 annually. So, if you are not spending too much using credit cards, it is more recommended to cancel this card after the first year ends. The American express reward credit card is another version that doesn’t require any annual fees. But, it provide only 5,000 reward points for spending £2,000 in the first 6 months.
This card is suitable for travelers. It has no annual fees to worry about. For every £1 you spend using this card you will earn one bonus avios points that could be used for traveling. When you spend £1,000 in the first 6 month, you will earn 5,000 avios points. If you are a higher spender, you are more recommended to another version with a higher rate, it’s the British airways American express premium plus card. This one provides users with a higher bonus of 25,000 avios points if they spend £3,000 in the first 6 months. But, it charges £195 as an annual fee.
This card is perfect for people who love shopping. It provides users with reward points that could be exchanged for shopping vouchers. 100 point equal £1. You will earn 20,000 points which equal £20 when you use this card to buy anything in the first 3 months, and you can earn double the amount if you buy from M&S stores. Furthermore, there will be no interest imposed on your credit balance for the first 6 months. This card is also recommended to be used in M&S supermarkets, for every £1 you spend in M&S you will gain 2 points. But, when you use it in other supermarkets, you will gain only one point for every £5 spent.
Always remember, the only thing that makes reward cards worthy is planning your credit balance. When you prepare yourself to pay back your debs at the end of every month, you will appreciate the value of earning points you get in return of your purchases.
You may want to read about: Credit Cards.