Credit Card Benefits – Cashback v Reward Points

Written by Karen Bryan

£1 coin stack2Choosing the right reward credit card can be a difficult task – there are so many different ones, each with their own advantages and disadvantages. Traditional reward credit cards fall into two main categories: cashback and reward points.

The former offers cardholders a percentage of their purchases back to their account, whereas reward cards allow you to earn points for spending. This quick guide will help you learn about the advantages of each type of card.

Comparing the Two

Cashback credit cards credit a certain amount to your account based on each purchase you make. The rate will vary from card to card, but is usually upwards of 0.5% – with bonuses often available during an introductory period. The money you earn will be paid into your account on either a monthly or yearly basis, effectively allowing you to earn as you spend.

Traditional reward credit cards give you points, which can be redeemed for various things, such as shopping vouchers, entertainment and experience days.

Benefits of Reward Cards

Reward credit cards may benefit consumers who do a large portion of their spending at one retailer.

This is because some reward credit card providers offer a higher reward percentage for in-store spending compared to spending elsewhere.

Depending on the provider, some reward credit cards also offer you the chance to redeem reward points for vouchers, when points hit a certain level, allowing consumers to put this towards any future purchases they may make.

Benefits of Cashback Credit Cards

So, with all that in mind, why choose cashback credit cards? While cashback rates generally start at 0.5%, some providers offer as much as 5% cashback on purchases.

This means that if you always pay off the balance in full, you can earn cashback, for spending in exactly the same as you always have.

However, it is important to note that larger cashback offers often only apply for an introductory period, and may revert to a flat cashback rate once this period is over.

This article is published in association with Asda Money.

Sources:

  1. http://www.which.co.uk/money/credit-cards-and-loans/reviews-ns/credit-cards/reward-credit-cards/

  2. http://money.aol.co.uk/2013/08/28/the-top-cashback-credit-cards/