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Credit Cards & Loans

The best credit cards that reward you for spending

John Fitzsimons
Written By:
John Fitzsimons

Rewards credit cards are a fantastic tool for sensible spenders. The idea is that every time you spend using the cards, you’ll get something back, whether it’s some form of loyalty point or cashback.

So long as you clear your card balance in full every month, then you are getting something for nothing. In fact, putting all of your usual monthly spending on the card is an excellent way to maximise those returns and get even more significant rewards.

Of course, if you fail to clear the balance in full every month, then rewards cards are not such a good choice – the interest you’ll have to pay on your outstanding balance will swiftly erode the benefits you have built up.

Why rewards cards are disappearing

The rewards card market is not quite as bountiful as it once was however. Just this week for example MBNA announced it will be closing two of its American Express rewards cards next month, affecting 75,000 existing card holders (these cards have been closed to new customers since 2015).

In the last few years, a succession of rewards cards have been pulled or at least amended to be far less attractive. That’s all down to the EU introducing a cap on interchange rates back in 2015. This is the fee that retailers pay to card providers when customers pay using their cards; the cap has reduced the amount card providers make from purchases, which they argue has made it less affordable to offer such generous rewards cards.

The cap doesn’t apply to American Express cards issued by American Express, but it does apply to American Express cards issued by other providers, such as the MBNA cards.

The best replacement rewards cards

Given their exemption from the cap, American Express’s own cards are well worth a look as they are generally the most generous, though it’s important to bear in mind that many retailers don’t accept the cards, which will limit the rewards you can build up.

For example, the American Express Platinum Cashback Everyday card offers 5% cashback in the first three months (capped at £100), followed by 0.5%-1% cashback on all future spending, depending on how much you use it. Best of all, there’s no annual fee to worry about.

If you’re a bigger spender, then you may be better off with the American Express Platinum card, which also pays 5% in the first three months (with a higher cap of £125), followed by up to 1.25% depending on how much you spend. There is a £25 annual fee to consider though.

If reward schemes are more your thing, then it really comes down to which points scheme you find the most appealing.

For example, if you are a big collector of Clubcard points and regularly shop at Tesco, then it’s worth a look at one of the Tesco Clubcard credit cards. With most of its cards, you earn one point for every £4 spent in Tesco and for every £8 spent elsewhere. Its Purchases card is also worth a look, offering a bumper 30 months of 0% interest on spending.

Alternatively, if you are more likely to do your big shop in M&S, then the M&S Bank Card may be one to consider. You earn one point for every £1 spent in store and for every £5 spent elsewhere. Each point is worth 1p, and you’ll get vouchers sent to you every three months.

Similarly, if you are looking to cut the cost of your next holiday, then one of the Avios-linked cards may be worth a try. With the British Airways American Express for example you earn one Avios for every £1 you spend, with a bonus 5,000 Avios if you spend £1,000 in the first three months. Spend £20,000 in a year and you’ll qualify for a free companion ticket too.

Other airlines boast their own credit cards too. If you are a big fan of Virgin Atlantic, then the White Credit Card (though it’s actually two cards – a Visa and an American Express) could help you save on next year’s travels. You’ll earn 3,000 Flying Club Miles when you make your first purchase, and then further miles every time you use the card. Spend £10,000 in a year and you’ll qualify for a free economy upgrade, while at £15,000 you’ll qualify for a free companion ticket.

See’s Cut through the jargon: credit card glossary for more information.