Retail Reward Credit Cards

How to choose a retail reward credit card...

Taking out a retail reward credit card, as opposed to a cash back credit card, is a great way of making extra savings for specific items, as they often offer added perks you won't get with a standard cash back card.

Retail reward credit cards give you points when you make purchases with the card, these points equate to a monetary value that you can 'spend', and of course, the more you spend the more you earn.

:: These cards are good for:

The careful spender and reliable payer is the short answer.

If you are happy to get all your return in the form of discounted groceries or money off your broadband subscription then retail reward credit cards are perfect, but don't change your habits to match the cards services, pick a card that matches your spending habits.

This calculated attitude must also be applied to the monthly payment. As with cash back credit cards you must pay off your full monthly balance at the end of every month to avoid paying any interest charges. The rate of interest will be high enough as to negate the work of a years saving with just one missed payment.

:: These cards are unsuitable for:

The same reasons that make a retail reward credit card ideal for some people will make it useless for others.

If you like the freedom to buy whatever you like and spend on whatever tickles your fancy as you pass a shop window, then these cards will be too restrained for you. A cash back credit card would offer you a similar return on your spending, but with no ties on what you can buy.

Look for:

Reward credit cards are a double-edged sword and you need to be careful with both the earning and spending side of it.

- Things you want, and things you buy
This may sound like the same thing, but it isn't, and you need to get a card that suits both spectrums.

Firstly you need to choose a retail reward credit card that is going to allow you to earn points for something you will actually buy. It would be pointless getting a Tesco credit card if you live next door to Sainsbury's. Equally, while the point's scheme on a GM credit card may seem handsome, it may take a while to save enough to make a dent into the price tag of a brand new car.

- How many points your spending will earn
The amount of points you can earn on different items is often skewed. Companies often offer double, or even triple points on some items or some spending. Do a bit of market research to see if your spending is likely to earn you big bucks.

- The standard APR
Just in case you slip up and miss a payment it is worth knowing the interest you will have to pay. It also acts as a good standard to begin your card comparison with.

Watch out for:

- Points scheme trickery
As mentioned, generally speaking retail reward credit cards either offer discounts or points. We are all aware of what a discount means, but different points schemes operate in different ways.

Unfortunately you can't wander into your local post office and get an exchange rate for your points in pound sterling, as there is no benchmark that points are set at. This means that different company's points are worth different amounts.

For example: 1 Marriott point is worth approximately 0.21p, whereas 1 GM point is worth £1. You would need over 400 Marriott points to better just 1 GM point, yet which one looks more enticing on paper?

This isn't truly as bad as it seems, as the products GM offer reductions on are vastly expensive. However, this is only one factor in the equation. To understand the power of your point you must also calculate how much you have to spend to earn a point.

To sum up simply, to work out the value of the points you earn you must look at:

1. How much each individual point is worth.
2. How much you have to spend to get a point.

Don't worry if you still feel confused by the whole process ChooseMoney has a tool to calculate how much rewards are really worth, as well as how many you will earn on your spending - calculate now!

- Expiry dates and reward point limits
Most companies will have some sort of term, in which, the points or discounts are valid and/or a maximum limit that you can reach. This is to prevent you hoarding thousands of points for years on end so that you can get a free Ferrari.

Don't panic buy though! The points are usually valid for a good few years and the top limit for point collection is dependent on the type of product you can save for. For instance, they aren't going to impose a 3-month spending limit and £100 maximum points when the only product available is a new car.

Make sure you are aware of the time and point limits though to ensure you don't over accumulate and run out of time.

- Annual fees
These are charges at the end of each year just for being an account holder. Although they generally don't apply to retail reward credit cards, some card issuers do impose them, so make sure you check.

Don't forget:

- To use your card as much as possible!
Make sure you use your retail reward credit card instead of your debit card for all your typical purchases. The amount you spend on food shopping alone probably outstrips all your other purchases per year, so it's a good way to rack up points quickly. Not to mention, by using a credit card you are automatically protected on purchases over £100 under section 75 of the consumer rights bill, which holds the card company equally liable with the retailer if things go pear shaped.

- You can only earn points on card purchases
Cash withdrawals will not earn you points and you will be charged a higher interest rate for the withdrawal and incur a handling fee for your efforts.

It's no coincidence that many of these companies also offer enticing balance transfer offers in conjunction with the rewards. Don't be drawn in by them! Once you transfer over an existing balance any spending debts on the card will be trapped behind this lump sum until you pay it off. This is a clever trick that allows credit card companies to rack up interest from the expensive spending debts, whilst you struggle to pay off the large, but cheap, balance you have transferred.

If you have a balance to transfer why not consider taking out a specific card for the purpose. See our balance transfer section for help.

Compare retail reward credit cards