Reaping the rewards from credit card spending
With Christmas fast approaching, some Brits will be turning to plastic to fund the festive period, but many will be missing out on the opportunity to earn extra bang for their buck by not using a cashback or rewards credit card, according to MoneySupermarket.
With recent research from the comparison site revealing one in ten people (10 per cent) will be putting festive spending on a credit or store card, choosing the right card is essential. This can often be a daunting prospect for consumers, with a vast range of incentives on offer, including cash back, air miles and loyalty club points. Matters are made more confusing by the range of introductory zero per cent APR periods now on offer from many providers, either on balance transfers or purchases. Customers need to consider how often they will use their card, and which type of reward will be most useful to them.
A cashback or reward card will bring extra benefits to those spending on their cards, effectively receiving a discount on their purchases. For example, Barclaycard's Cashback Credit Card offers up to 6 per cent cashback on all spending for the first three months up to a maximum of £120. The card doesn't have any introductory periods so is only suitable for those who will pay off the balance in full each month. Alternatively, The M&S Credit Card offers 0 per cent on purchases for the first 15 months, and offers 1 point for every £1 spent on the card in M&S stores, with 100 points being worth £1 in M&S vouchers. Spending elsewhere earns 1 point for every £2 spent.
Kevin Mountford, head of banking at MoneySupermarket.com, said: "Every reward or cashback card offers cardholders something different. As such, anyone looking to use one of these cards needs to work out what sort of rewards suit their personal circumstances and shop around for the best deal. For a frequent flier, this might be a product that offers them air miles towards their next trip, whereas people who are planning to use their card in the shops might be better off with a card that gives them money off their next purchase. It is essential anyone thinking about taking out a reward card, considers how and where they are likely to use the card before applying. Many schemes are tied in to certain retailers and purchase types, and if you don't use them regularly in the right place your card may not provide such a good deal after all.
"Card offers change frequently, but we have seen some rich reward products being offered by card providers, offering cashback or retail rewards which can help cardholder make the most of their money. Customers must remember however, that any interest charged on the card will always negate the value of the rewards, even on the most generous schemes.
"Anyone thinking about taking out a reward card needs to be disciplined and ensure they are paying off the full balance each month, ideally by a direct debit, to avoid getting stung by interest charges. If you do pay off your balance each month, then interest rates are of little relevance to you. However, if you intend not to repay your debt in full each month then you should avoid reward cards and opt for a card with a lower interest rate instead. If you are looking to get a new card for your Christmas spending, and know you'll be able to pay off your balance each month, then you need to be quick as time is running out in order to receive the card in time."