Category Archives: Choosing a Card

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Comparing Cashback and Rewards Credit Cards

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The common perception is that most people carry a balance on their card when it comes to credit card usage. However, reality is a bit different. The UK Cards Association reports that 61% of credit card users pay their bill in full each month. Therefore, if you fall in this category, it might be a good idea for you to have a card that will reward you for spending on it.

It is worth exploring the numerous rewards and cashback cards that are available if you really do pay your card off in full each month. In this way, the provider will actually pay you for using your credit card. However, you will need to make a decision whether to go for a card which will help you earn some form of reward points or for a straightforward cashback card.

1Here we will make a quick comparison of some of the leading cashback and reward cards in order for you to see how much you really get back for your spending.

We will make a quick comparison between credit cards and cashback cards. We will use the American Express Platinum Cashback Everyday credit card and the American Express Preferred Rewards Gold charge card. For the purposes of this comparison, the following numbers will be used. , £6,000 is spent on each card for the duration of one year, with £2,000 spent in the first three months and £2,000 of the other £4,000 spent in big supermarket chains and petrol stations over the following nine months.

What you earn from the Platinum Cashback Everyday card is around £100 which is about 5% on up to £2 000 spent in the first three months. For the next £4 000 that are spent, the cashback is earned at 1% which adds £40 more to what you have received.

Now we will see what you get for the same amount of money with the Preferred Rewards Gold card.  It should be noted that the first three months give you an introductory bonus of 20 000 American Express Membership reward points. These points can be easily converted into £100-worth of gift vouchers for a lot of shops and big brands. This means that you have 5% return which is the same as the introductory bonus on the Platinum Cashback Everyday card.

So it might be the case that rewards cards prove to be better than cashback cards in terms of value. Nevertheless, it is worth exploring your options carefully before choosing which one you will go for.

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Tips to avoid unrewarding credit cards

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Reward credit cards are usually offered to customers with excellent credit histories. The idea behind reward credit cards is to encourage you, as a customer, to spend. This may be spending in general on your credit card, or spending your money with particular business partners your credit provider has a relationship with. Rewards can take the form of cash, gift cards, air miles or even hotel stays.  Reward schemes can be an important factor when choosing one card over another. Savvy consumers, can take advantage of such reward schemes and enjoy the benefits.

Reward credit cards tend to be associated with higher annual percentage interest rates and higher fees. Before choosing a reward credit card, consider: will the value of the rewards outweigh the extra costs associated with such a card? In some cases, it may be better decision to have a standard credit card with overall lower fees and rates of interest.

Cash back rewards are by far the simplest. It is pretty straight forward. You receive cash for spending a certain proportion on your credit card. Although cash back may not deduct the balance on your account, it’s still money! You can use it on whatever you like.

It is always important to weigh up the cost and benefit of reward credit card schemes. Some may not be as rewarding as they first seem. Use the following tips to avoid unrewarding credit cards:

  • Be wary of limited rewards.  A good reward credit card is one that increases reward as you increase the amount of money you spend. A limit on how many rewards you can incur is clearly not to your advantage. This is a restriction to stay clear off.
  • Be aware of when your reward will expire. Will you have a reasonable amount of time to use your reward before it expires?
  • How easy is it to redeem your reward? For example, if it is a free hotel stay, how accessible and affordable is it to get to the hotel destination?
  • How much money you are required to spend before you can start earning rewards?
  • Don’t spend on things you usually wouldn’t to chase rewards! This can lead to unmanageable debt.