Forget boring balance transfers and lacklustre purchase deals, we highlight the credit cards which really reward you...
As the New Year quickly approaches, it looks like the credit crunch is set to bring more woes and worries in 2009.
But why is Britain so dependent on credit? After all, as Fool reader supasap recently pointed out, many of us automatically assume that living on credit is the norm, when in fact we should be doing more to live within our means.
However, fellow Fool Shuggster was quick to highlight that depending on your circumstances, credit cards can sometimes prove useful when you need it most, providing perks which won't cost you a penny extra.
Jane Baker recently highlighted the benefits of Section 75 credit card protection, which can give you peace of mind if the goods you buy are faulty, damaged, or if the retailer you bought them from goes bust. However, for some users, the rewards can be greater.
This is because as well as well as the benefits of Section 75, you could also take advantage of the further perks available, by paying for your goods using a reward credit card.
Rewarding everyday spend
Reward credit cards give you back a proportion of what you spend in points, which you can then redeem against a variety of rewards and services.
However, it's worth emphasising that you should only consider a rewards credit card if you pay off your balance in full each month. If you're not a habitual balance clearer, the interest you'll accrue on your debt will far outweigh any benefits, and should be avoided.
Here's an idea of a few of the reward cards available at the moment, together with the benefits they offer:
| Card | APR | Rewards Scheme | Extra Rewards |
|---|---|---|---|
| British Airways American Express Card | 19.9% | One point earned for every £1 spent on everyday purchases, redeemable on BA flights. | Includes 1,000 bonus miles on first spend. Spend more than £20,000 in a year and qualify for a complimentary companion ticket |
| Virgin Atlantic White American Express Credit Card | 17.9% | One point earned for every £1 spent on everyday purchases. Two points for every £1 spend on Virgin Atlantic flights and holidays. Redeemable on Virgin flights, upgrades and experiences. | Includes 3,000 bonus miles on first spend. Spend over £15,000 in one year to receive a complimentary companion ticket. |
| Marks and Spencer Credit Card | 15.9% | One point earned for every £1 spent at Marks and Spencer. One point earned for every £2 spent elsewhere. 500 points = £5 M&S spend. | Money off vouchers and opportunities to earn extra reward points. |
| American Express Sainsbury's Nectar Credit Card | 18.9% | Two points for every £1 you spend With nectar partners (plus an extra two points for using a nectar reward card). One point for every £1 spent elsewhere. Redeemable on a range of Nectar rewards. | Includes 5,000 Nectar Bonus points on first spend of £200. |
| Tesco Credit Card | 16.9% | Five points for every £4 spent in Tesco stores and affiliates. One point for every £4 spent elsewhere. | Money off vouchers and opportunities to earn extra reward points. |
| John Lewis Partnership Card | 16.9% | One point for every £1 spent in John Lewis stores/Waitrose. One point for every £2 spent elsewhere. 500 points = £5 John Lewis partnership spend | |
| Sony Credit Card | 15.9% | One pulsebeat earned for every £1 spent. Redeemable on Sony products. | 4,000 extra reward points on first spend. Triple pulsebeats when you buy a Sony product |
| Lloyds TSB Airmiles Duo Credit Card | 15.9% | One Airmile for every £10 spent using the AMEX card. One Airmile for every £50 spent using the MasterCard. Redeemable on Airmiles flights and experiences. |
Maximise Your Rewards
The key to choosing the right card is to select one that compliments your spending habits.
For example, £10,000 of ordinary spend on the American Express Sainsbury's Nectar credit card would bag you 10,000 points - enough for £50 off your next Sainsbury's shop.
However, if you spent that same £10,000 exclusively at Nectar partners, you'd collect a total of 40,000 points (if you also used your Nectar reward card) - four times what you'd normally accrue, and enough for £200 of Sainsbury's spend.
Similarly, frequent jetsetters may be enticed by a reward card that offers airmiles instead of points. Airmiles is big business in the rewards world, and many airlines now offer their own branded cards, promising all manner of riches and rewards.
But many airmiles reward schemes fall short because miles earned for flights do not include fees and taxes, which let's face it, make up the bulk of many airline tickets these days.
One company that doesn't do this is the original 'Airmiles' group, so you can rest assured that miles you redeem with them won't be hiding any hidden charges. In addition, if you haven't accrued enough miles to cover your journey, you can top up your Airmiles with cash.
Both the Lloyds TSB Airmiles Duo card and Tesco's Clubcard credit card offer Airmiles as part of their reward schemes, which can be redeemed on a variety of deals -- not just flights.
The complimentary tickets or flight upgrades offered with both the BA and Virgin AMEX credit cards are also a nice bonus (taxes and fees apply), but are only worth considering for the big spenders among us, as you'll need to spend at least £15,000 in any one year to qualify.
Money talks
Of course, if you're still unsure of the best scheme to go for, you could always forget reward credit cards altogether and opt for a cashback credit card instead.
For example, £10,000 of ordinary credit card spend using the American Express Platinum Cashback credit card will get you £82.49 in cashback (0.5% on purchases up to £3,500, 1% on purchases from £3,501 to £10,000, and 1.5% cashback thereafter) to spend on whatever you like -- and that's not including the 5% bonus cashback you'll accrue during the first three months..
So with plenty of freebies up for grabs, why not take the rewards plunge? After all, if you play your cards right, it could turn out to be your most rewarding financial New Year's resolution...
More: Credit-Card Pact Could Bring In Fees / Beware Of This New Year Travel Trick!