A new way to earn free money!

We review the new rewards scheme hoping to knock spots off the competition.

Later this month, Barclaycard will be launching Barclaycard Freedom, a new loyalty credit card initiative which promises to be the broadest and simplest retail rewards scheme in the UK.

Here, I’m going to outline the scheme’s pros and cons, so you can decide whether Barclaycard really has stolen a march on its rivals.

The nuts and bolts

When the Barclaycard Freedom loyalty scheme launches on 17th March, it will be automatically available to eight million Barclaycard holders in the UK. If you already have a Barclaycard, you won’t have to do anything new, take out a separate card or pay anything to join.

Here’s how the initiative works: Customers will earn rewards - called ‘Reward Money’ - every time they use their Barclaycard at a retailer participating in the scheme.

Reward Money is recorded in pounds and pence, just like ‘real’ money. You’ll usually be able to view your Reward Money balance on a retailer’s card machine, before you enter your PIN to pay.

You’ll then be able to choose to redeem some or all of that balance towards that transaction, or to save your Reward Money to spend at another participating retailer.

Your Reward Money rate will be 1% at most retailers involved in the scheme. In addition, retailers will periodically offer cardholders extra ‘exclusive rewards’. And for the first two months of Barclaycard Freedom, all Reward Money will be doubled, so you’ll earn 2% instead of 1%.

So far, retailers involved in the scheme include Pizza Express, LA Fitness, YO! Sushi, Firebox.com, Goldsmiths and Nationwide Autocentres. Unlike most other loyalty schemes, Barclaycard Freedom has also linked up with many small and independent retailers across the UK.

The catch

Barclaycard seems proud of how simple and easy to use the scheme is. It emphasises that there is no need to collect and save vouchers and coupons, no need to replace a card or carry an additional one, and no need to calculate points.

But hang on… don’t all those benefits also apply to a decent cashback credit card?

So what’s the advantage of ditching one of those in favour of this cashback/reward card ‘hybrid’? In a sense, this is just a cashback scheme with a rather limited range of participants.

The plus point

One of the main plus points of the scheme is that it should support some local businesses. At the moment no major supermarkets are part of the Barclaycard Freedom initiative; but many small and independent retailers are.

In addition, one of the best cashback cards on the market; the American Express Platinum Cashback card; still isn’t accepted at many small retailers. So, supporters of the ‘little guy’ in their neighbourbood may find Barclaycard Freedom gives them an extra financial incentive for doing so.

Following the scheme’s launch, you’ll be able to find all retailers involved in the scheme on the Barclaycard website. And you should be able to search by postcode or location, to find any participants in your local area.

The verdict

The initiative’s ease of use is attractive: If you don’t want (or are not able) to take out a separate cashback credit card, you can stick with your existing Barclaycard and start earning a little extra with minimum hassle.

However, the limited choice of retailers means that many people would be better off making the effort to take out an alternative as well - one with more spending options or a better rate of cashback. This is particularly true if you shop regularly at a retailer not involved in the scheme.

• Watch our Two top ways to get cashback video

The alternatives

In terms of the rate of cashback on offer, the American Express Platinum Cashback card is still hard to beat: It offers 5% cashback in the first three months (up to £100), and up to 1.25% after that, depending on how much you spend.

And although it isn’t accepted everywhere, there are other good cashback cards which small retailers will accept. For example, the Egg Money World MasterCard has a typical APR of 17.8%, and offers 1% cashback on all spending, up to £200 per year.

Just remember that this card charges a flat fee of £1 per month, which means you'll need to spend at least £1,200 each year just to break even. And you’ll need to spend at least £500 on the card each year in any case, or you won't qualify for any cashback at all.

If you need more help on the best way to earn rewards on your shopping, why not to wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?

More: The very best cashback credit card | The six best credit cards