IF you don't earn a reward when you spend on your credit card, you could be missing out.
Almost half (42%) of all credit cards now offer some sort of reward, according to research from Sainsbury's Finance.
The most common reward is a points or vouchers. But 28% of cards give you cashback every time you spend and 10% offer some sort of deal on air miles.
Santander's 123 credit card pays three different cashback rates depending on where you use the card. You earn the highest rate of 3% on petrol spending of up to £300 a month, so the maximum monthly cashback on fuel is £9. The rate is 2% in department stores and 1% in supermarkets. You do not earn cashback if you spend anywhere else. Customers must factor in an annual fee of £24 and the interest rate is 18.9%, or 22.8% including the fee. But the card could work out well for people who regularly fill up at the pumps.
A number of cards pay a high cashback rate for a short introductory period. Others pay a lower rate over a longer time frame.
The American Express Platinum Cashback card pays a whopping 5% cashback on the first £2000 you spend in the first three months. The standard rate of cashback is 1.25%, one of the highest available. Customers also receive double cashback – 2.5% –every year during their anniversary month, as long as they've spent more than £10,000 on their card over the previous 12 months.
The big drawback is the £25 annual fee. However, if you are planning a spree in the first three months, the generous cashback rates could more than make up for it. The typical interest rate is 14%, or 18.5% if you include the fee. You must have a household income of at least £20,000 a year to qualify and remember, some retailers do not accept American Express cards.
The Capital One World Mastercard also pays 5% cashback in the first three months up to a maximum of £100. In other words, if you spend £2000 you will reach the maximum. Customers who apply before the end of the month also enjoy a £10 bonus. The cashback rates are then tiered. If you spend £5999.99 or less, you will earn 0.5% cashback, rising to 1% between £6000 and £9999. The rate is 1.25% above £10,000. Rates are reset on the anniversary of the account, dropping back to 0.5% until you pass each threshold again. Typical APR is 19.9%.
If you are a frequent traveller, you might prefer to collect points towards flights. The British Airways American Express card, BMI's credit card and the Lloyds TSB Duo Avios card are worth a look.
But as rewards are an incentive to spend, it's easy to run up debts. Andrew Hagger, of Moneynet, says: "If you are going to use a credit card specifically to earn rewards, you need to be disciplined and pay off your full statement balance every month, otherwise the interest charges will cancel out the rewards."
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