How to find the best rewards credit card for air miles and shopping

A REWARDS credit card can be a great way to earn points that help with paying for your holiday or the weekly food shop.

Here's how to find the best rewards credit card.

What is a rewards credit card?

A rewards credit card gives you a reward on your everyday spending.

This could be in the form of cashback, airmiles or just points that you then redeem to purchase special offers.

How do rewards credit cards work?

Similar to a standard credit card, you get an approved balance. But reward credit cards go slightly further, as the more you spend, the more points or cashback you receive.

This can be a nice bonus on top of money you were going to spend anyway.

You still need to pay off the full balance each month, or you may be charged interest at an annual percentage rate that can be as high as 20% or more.

There may be certain limits on how much cashback you can receive each month – plus there may be annual fees.

What kinds of rewards do credit cards offer?

The most common type of reward credit cards pay cashback, airmiles or points.

Some may combine different rewards.

A cashback credit card typically pays a set percentage of what you spend each month.

This could be on certain items, in certain stores, or on everything you buy.

For example, if your card pays 5% cashback, you would earn £5 if you spend £100.

These cash rewards can usually either be paid into your bank account or go towards paying off your credit card bill.

Credit cards with reward points are often offered by supermarkets and retailers.

The idea is that you earn points or vouchers for shopping with them and chosen partners.

Regular travellers may also benefit from an air miles reward card.

These let you earn frequent flyer points each time you spend that can be spent on travel-related spending, such as flight tickets, hotels or airport lounge access.

How to find the best rewards credit card

Many shoppers may already be signed up to reward schemes, such as Nectar with Sainsbury's, Clubcard with Tesco or Avios with British Airways.

A rewards credit card provides another way of earning points through these types of programs.

You could sign up direct with a supermarket you shop with regularly, or through loyalty schemes with airlines such as British Airways and Virgin Atlantic.

A comparison website can also be a useful place to compare credit card rewards in one place.

You can search for the best credit card deals with rewards on a comparison website, based on the types of perks you are looking for.

Once selected, you can follow a link to the provider's website and sign up.

What is the best credit card for rewards?

The best credit card for rewards will depend on your needs.

If you shop regularly at a supermarket, then it can be a no-brainer to sign up to their rewards scheme and use a credit card to pay for your shopping.

This could earn you discounts on your shop and give you access to special offers.

Similarly, an air miles credit card can be useful to reduce your holiday costs; especially if you fly regularly with a particular airline.

It may be worth having a combination, so one for your shopping and another for cashback, or to earn air miles: as long as you can repay the balance each month otherwise you risk being charged a pricey annual percentage rate (APR).

How many rewards cards can I have?

There are no limits on the number of reward cards you have.

However, each time you apply for any type of credit card the provider will do a credit check.

Successive rejections can harm your credit rating and make it hard to get loans, overdrafts or credit cards in the future.

It is best to do a soft search through a comparison website first, to see which deals you would most likely be approved for.

Make sure you can repay the balance on multiple cards as this could also damage your credit rating.

Are rewards credit cards worth it?

A rewards credit card can be worth it if you are shopping regularly in a store, or are happy to build up points or cashback as you spend to redeem on flights or special offers.

There are a few catches though.

The APR on reward credit cards is typically higher than on standard cards, so you could end up paying high interest charges if you only pay the minimum bill and don't clear the full balance or exceed it each month.

That could offset any perks earned on even the best rewards credit card.

Missing payments or going over your limit could also damage your credit rating.

The number of points a perk such as an airline ticket is worth may not correspond to its real money value.

Check how many points you can earn for each purchase and how much you are actually spending to access a special offer such as a flight ticket.

There may also be annual fees and a minimum spend to qualify for rewards, but make sure you aren't spending unnecessarily to get this.

Who pays for credit card rewards?

Credit card rewards are funded by the provider but come from a few different places, including you.

Any fees you pay for the credit card are going to a provider's coffers and could be used to fund other people's rewards.

Additionally, providers get money through payment networks such as Visa and Mastercard when you make a transaction.

They will also get money from shops where you can earn cashback or rewards on your spending.

All this goes towards paying credit card rewards.

Do rewards cards build credit?

All credit cards can help boost your credit score if used properly.

Providers like to see evidence that borrowers can theirmanage debts on time.

There is also a risk that you could harm your credit rating if you miss repayments or have successive application rejections.

There is a risk that the more cards you have, the higher the chance of falling behind on what you owe.

Lenders may also question why you need so much credit.

Is it better to get cashback or points?

A cashback credit card pays you a decent amount of interest based on your spending.

In contrast, a rewards card gives you points that can be redeemed against further spending.

A cashback credit card is easier to understand, as you get a set monetary amount based on a percentage of what you spend.

A rewards card is different, as you earn points and need a certain amount to purchase items.

Your provider will be able to tell you how many points you need if you want to use your rewards for something like flight tickets or experiences, and may even give you bonus points.

You need to work out how much you are spending initially to get the points and how this compares with buying the same thing separately.

Do I get Section 75 protection on rewards credit cards?

There is an extra benefit once you have found the best rewards credit card for your needs.

Spending on a rewards credit card, like all credit cards,also benefits from  protection under Section 75 of the Consumer Credit Act.

This lets you claim money back from your credit card provider if a company you have purchased an item, such as clothing or tickets, from has failed to supply adequate goods or services.

Do rewards points expire?

Cashback and reward points don't usually expire, but you may miss out on special offers if you don't use them in a certain period.

Airmiles do expire though, so it is best to check with your credit card provider when they need to be redeemed.

You may be able to convert them into points to spend elsewhere if you are unable to fly.

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