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How do credit cards work
The type of rewards credit card you choose may depend on how you’ll spend and what you’d like to earn.
A rewards credit card is a card that lets you earn rewards whenever you use it. While different cards can offer different types of rewards, most typically, the rewards you earn come as points you can then exchange for shopping vouchers, cashback or frequent flyer miles (previously known as air miles).
If you tend to use a credit card for your everyday spending, or to make major purchases, a rewards credit card can be very beneficial. That’s simply because the more you use it, the more points you’ll collect and rewards you’ll enjoy.
Just so long as you pay off your balance in full each month, you’ll earn these rewards without paying any interest at all.
You’ll find different credit card companies will offer different rates for earning points on your spending, as well as different things you can use your points for. So, when considering a rewards credit card, it’s always worth thinking about how you’ll use your card, how often you’ll use it, and what type of rewards you’d like.
Here are some of the ways a rewards credit card can work for you:
Some rewards credit cards will give you a percentage of what you spend as cashback. For instance, if you spend £100 and your card pays 1.5% cashback, you’ll earn £1.50. Similarly, if your card pays 2% cashback, you’d earn £2.00.
Cashback is generally paid into your bank account or as a credit on your card, either monthly or annually, and can be an effective way to earn money on your everyday spending. Some credit cards also allow you to convert the cashback into vouchers you can spend in the supermarket and on the high street, as well as all sorts of other activities like experience days, theme parks, bus tours and more.
Learn more about cashback and how it works.
A rewards credit card issuer may also partner with an airline so you can earn frequent flyer miles (previously known as air mile points) on every purchase you make using your card. The points you collect can then later be exchanged for rewards – most often travel related benefits, like discounted flight bookings, airport lounge upgrades, hotel stays and more.
With some reward credit cards, the points you earn on your spending can be exchanged later for shopping vouchers or money off on everything from cinema tickets and museum visits to restaurants and hotel rooms. As you might expect, the points you get depends on the card you choose. So, while some may offer a point for every pound you spend, others may offer a point for every £5 spent.
With a rewards credit card, the amount you spend whenever you make a purchase is recorded automatically, so you have a record of how much you’ve spent, and how many points you’ll have earned. In fact, most rewards credit cards offer online account management tools that make it easy to keep track of your spending – and the points you can claim.
While buying things with any type of credit card can help build your credit score, by using a rewards credit card, you get the added bonus of earning points as well. You can then exchange them for cashback, frequent flyer miles, shopping vouchers and more – all things you wouldn’t have got otherwise. Find out more about how your credit score is calculated.
If you like to travel, it needn’t be such a stretch. A rewards credit card can help keep your costs down. By using it for your everyday spending, you can easily collect reward points, which can then be redeemed for flights, hotel upgrades, airport transfers, train tickets and all sorts of other travel expenses. And should you travel abroad, you’ll make a saving there too – with no fees to pay whenever you use your card to make a purchase or withdraw cash from an ATM when you’re overseas.
Using a rewards credit card for your everyday spending is a simple way to gather points as you go and enjoy benefits you otherwise wouldn’t have had. You can choose a card that offers the type of rewards you want, and if you pay your balance off in full each month, you’ll make the most of what your card has to offer.
If you like the idea of earning rewards, just for using your card, now could be the perfect time to consider one of our rewards credit cards.
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