Should I have a Rewards credit card?

Rewards credit cards can be an enticing option for consumers, offering various perks that range from travel discounts to cashback and retail rewards.

But are they really worth it? To answer that question, let’s explore the different types of rewards available and weigh the pros and cons.

 

Types of Rewards

  1. Travel and Air Miles
    One of the most popular types of rewards credit cards is the travel or air miles card. With these, you can earn points or miles that can be redeemed for discounts on flights, hotel stays, and other travel-related expenses. The number of points needed for a flight or hotel booking depends on the specific card and its associated travel partners. Frequent flyers, particularly business travellers, often find these cards valuable because they can significantly reduce travel costs. For instance, a businessperson who flies frequently may accumulate enough points over time to cover an entire trip, saving hundreds or even thousands of pounds. Find credit cards that offer travel and air mile rewards.

 

  1. Cashback Rewards
    Cashback cards allow you to earn back a percentage of what you spend on the card. This cashback can be paid out monthly or annually and is often deposited directly into your account or applied as a statement credit. Some cards offer a flat rate of cashback on all purchases, while others provide higher rates for specific categories like groceries, dining, or fuel. Initially, many cashback cards offer an introductory rate of 5% on certain categories, which typically drops to 1-2% after this fixed period. This type of reward is ideal for those who prefer flexibility, as cashback can usually be used for anything, from paying down the card balance to funding a vacation. Find Credit Card that offer cashback rewards.

 

 

  1. Retail Rewards Points
    Retail rewards cards are often co-branded with specific retailers, such as Amazon or Argos, and allow you to earn points at a higher rate when shopping at those stores. These points can then be redeemed for discounts, gift cards, or even free products. For loyal customers of a particular retailer, these cards can provide substantial savings. For example, if you frequently shop on Amazon, using an Amazon co-branded card could earn you double or triple points on purchases, accelerating your ability to earn rewards. Find credit cards that offer retail rewards.

 

The Pros of Rewards Credit Cards

  1. Significant Savings on Travel
    For frequent travellers, rewards credit cards can offer substantial savings. Whether it’s a free flight, an upgraded hotel room, or access to exclusive airport lounges, these perks can add up quickly. Business travellers, in particular, can benefit from these savings, as they often have the opportunity to rack up miles and points through regular travel. Even if you’re not a frequent flyer, accumulating points over time could result in a discounted vacation, making these cards a smart choice for long-term planners.
  2. Cashback and Earned Savings
    Cashback rewards are straightforward and provide immediate value. With every purchase, you’re effectively getting a discount, which can add up over the year. Some cards also offer rotating categories where you can earn a higher cashback rate for specific types of spending, maximising your savings potential. For those who use their credit card regularly for everyday purchases, a cashback card could be a simple way to earn money on spending you would do anyway. Those who are loyal to specific stores can greatly benefit on savings.

 

The Cons of Rewards Credit Cards

  1. Higher Interest Rates
    Rewards credit cards often come with higher interest rates compared to standard credit cards. If you don’t pay your balance in full each month, the interest you accrue could quickly outweigh the value of any rewards you earn. This makes rewards cards a poor choice for anyone who tends to carry a balance.
  2. Limited Value for Infrequent Users
    If you don’t travel often or shop at specific retailers regularly, a rewards card might not provide enough value to justify the potential costs. For example, a travel rewards card might be less beneficial if you only fly once or twice a year, as it could take a long time to accumulate enough points to redeem for a significant reward.
  3. Annual Fees and Spending Requirements
    Many rewards cards come with annual fees, which can range from moderate to quite high, depending on the card's benefits. Additionally, some cards require a minimum spending threshold to unlock the full value of their rewards, which might encourage unnecessary spending.

 

So, is it worth having a rewards credit card?

If you know you will make full use of the rewards offered then they could be of great value to you and your habits despite the higher interest. As always, make sure you always pay on time and in full to receive the full benefits of your credit card.