If you pick the right credit card, you could earn something back every time you spend.
Some card providers offer cashback on the amount you purchase, while others offer rewards which allow you to earn points as you shop. Once you’ve collected enough, these can then be exchanged for perks such as flights, hotels or days out.
A reward card can work well when used for all normal spending, as even relatively small bonuses can add up over time, as well as big ticket purchases if you’re buying new furniture or jewellery.
However, you can end up paying some hefty interest, so it’s best to make sure you can clear the balance every month.
The key is to choose one card and stick to it. Andrew Hagger of MoneyComms, a personal finance website, said: “If you have a wallet or purse full of reward cards you’ll be spreading your spend quite thinly and it could take a while to earn anything meaningful.
“If you’re savvy with your card selection you can get a decent financial kick back in return for your loyalty.”
Here, Telegraph Money digs out some of the best credit card rewards on offer, as well as pointing out the pitfalls to avoid.
What credit card rewards are on offer?
Cashback credit cards
If you’re after cashback, the American Express Platinum Everyday Cashback credit card is the most generous card without a monthly or annual fee.
There’s an introductory rate of 5pc cashback for the first three months, where you can earn up to £100. After that, cashback is paid at 0.5pc on the first £10,000 of spend, and 1pc over that. The representative annual percentage rate (APR) interest is 31pc (variable).
The American Express Platinum Cashback credit card offers 5pc cashback on up to £125 for the first three months, then 0.75pc on spending up to £10,000 and 1.25pc cashback on spending over this threshold. It has a 36.7pc representative APR and a £25 annual fee.
If you’re eligible for the Halifax and Lloyds Bank’s World Elite Mastercards, you can earn 0.5pc cashback on spends up to £15,000 per month, then 1pc above this. Purchase APR is high, at 55pc, and the cards cost £15 a month.
Alternatively, the Halifax Cashback card and Lloyds Bank’s Cashback credit cards both pay 0.25pc on the first £4,000 of spending per year and 0.5pc above that. Barclaycard Rewards Visa, meanwhile, pays 0.25pc in cashback.
Elsewhere, Santander’s All in One credit card pays a higher rate of cashback at 0.5pc and includes a 0pc introductory purchase offer for 15 months, though there’s a £3 monthly fee.
Reward credit cards
Credit card reward schemes are more difficult to compare, and the benefits can be quite complicated. In general, it makes sense to go for the deal that comes with the retailer where you do most of your spending.
You get paid in points that can typically be converted into vouchers to spend with a particular retailer. Marks & Spencer regulars, for example, can get lots of different rewards with the M&S credit card Shopping Plus offer.
In addition to 0pc interest on purchases for 18 months, and 0pc on balance transfers for 15 months, you can also earn reward points each time you shop, which are then converted into M&S vouchers. You get one point for every £1 spent at M&S, and one point for £5 spent elsewhere, and 100 reward points is equivalent to £1.
Big spenders could upgrade to M&S Club Rewards for £10 a month, which boosts your rewards. You get an extra two points per £1 spent at M&S, and you’ll also earn three points for every £1 spent abroad on purchases made in the local currency.
The membership also includes £65 in vouchers to spend on clothing or home goods, 32 hot drink vouchers for the M&S café, a £12 gift voucher on your birthday to spend on food, and free next-day delivery for online orders (normally £4.99).
The John Lewis Partnership card works well for loyal shoppers of John Lewis and Waitrose.
You earn five points for every £4 spent on purchases at both stores and one point for every £4 spent elsewhere. There’s an introductory offer – those who open a Partnership credit card by January 8 2024 and spend a minimum of £250 on eligible purchases in the first 90 days can receive £40 in vouchers to spend at John Lewis and Waitrose.
For every 500 points you collect you’ll get a £5 voucher to spend with either brand. You can also have up to three additional cardholders so you can pool the points for household spend.
Sainsbury’s shoppers, meanwhile, can boost their Nectar points with the Sainsbury’s Bank Everyday credit card. You can collect up to three Nectar points for every £2 spent at Sainsbury’s, Argos, Habitat and Tu Clothing when you pay with the credit card and scan your Nectar app or card. You’ll also earn “at least” one point per £5 spent elsewhere.
Sainsbury’s has announced it will wind down its financial services operations with a “phased withdrawal”, but there will be no immediate changes to the products it provides, and the change won’t impact the future of the Nectar card.
Elsewhere, Tesco Bank credit cards pay five Clubcard points per £4 spent in store, and one point per £8 spent elsewhere. You can also earn points for filling up on Tesco fuel. You get £1 in vouchers per 100 points.
Every three months your points are turned into vouchers to spend at Tesco, or they can be exchanged to get up to twice the value of your vouchers with reward partners. The rules were changed last June making this offer less generous than it was.
With the free Amex Rewards card, new members receive 10,000 Amex Rewards points if they spend £2,000 in their first three months. For everyday use, you earn one point for every £1 spent.
There are 16 other Amex cards to choose from, including the Gold and Platinum cards, which come with the chance to earn tens of thousands of reward points. The latter costs £650 each year but perks include £300 to spend at restaurants, worldwide family travel insurance and Priority Pass airport lounge access.
What to be wary of
The sky isn’t the limit when it comes to cashback, as some cards have a cap setting a maximum amount you can earn, so make sure you’re aware of this before you sign up.
If you max out your cashback, it may be better to swap to a debit card for any extra spending – or even an alternative reward card.
You should also crunch the numbers if you’re tempted to apply for a card with a monthly or annual fee. Will you reap enough benefits to offset the cost?
With the reward cards, be sure to read the small print on how you actually earn rewards. If you need to spend thousands just for £5 off your shopping, it could be worth going for a different card.
Another fact within the terms and conditions is that anyone taking out an American Express cashback card won’t be eligible for the introductory bonuses if you’ve had an Amex card in the last two years.
You should also be aware that Amex is not accepted at all businesses and online retailers, so check that it’s accepted wherever you want to spend.
As we’ve mentioned, bear in mind that reward cards are not for those who need to borrow. These are only of benefit to those who pay off their balance in full every month, as usually the interest rates are relatively high, which means any interest charges would likely wipe out the value of any rewards earned.
It can be a good idea to set up a direct debit so the balance is automatically repaid in full each month.
Finally, keep an eye on your spending. Mr Hagger said: “Reward cards are a good way to cash in on the way you spend but remember, it shouldn’t be used as an excuse to overspend.”
Credit card repayment calculator: how to cut your interest by thousands
Which are the best credit card rewards you have come across? Tell us in the comment section below
This article was first published on July 20 2023 and has since been updated.