The ultimate reward credit cards

If you are going to be spending the money anyway, you must be mad not to get something back. John Fitzsimons reviews the best reward credit cards around.

This article is now out of date. For the latest top reward credit cards, please read The best reward credit cards

Everyone loves to get something for nothing. If I'm doing my shopping, my eyes are always attracted by two-for-one deals - you can't beat them! It's also why I have become a regular user of cashback websites (with my personal favourite being GreasyPalm).

Of course, getting something for nothing in this way is not just limited to websites - there are plenty of credit cards around that give you a brilliant return on the money you spend!

Go on holiday - for free!

My favourite rewards cards are those that offer airmiles as I love the things!

If you want official Airmiles, then you can sign up to the Lloyds TSB Airmiles Duo credit card. You get two cards for earning Air Miles: an American Express card, and a Mastercard. So whenever you're unable to pay with the American Express card (because Amex isn't as widely accepted as other cards), you have the Mastercard to fall back on and can still earn airmiles (although not as much). You earn 1 mile for every £10 spent on the Amex version of the card, and 1 mile for every £50 spent on the Mastercard version. But unlike other airmiles cards, the flights you get in exchange for air-miles with these cards include the cost of taxes. So the flight really is 100% free.

You get an extra companion ticket when you spend £15,000 on the Lloyds TSB Airmiles Duo credit card over 12 months, and you get a 1,500 mile bonus for the first £10 you spend on the card. Plus, when you do finally go abroad, you get double points for spending on the card - the only credit card to reward you for spending abroad!

However, I prefer the British Airways American Express cards. For the simple version - which is free - you earn one mile for each £1 you spend. You also get a bonus 1,000 miles for spending £500 within the first three months of having the card. For the premium card - which costs £150 a year - you get 6,000 bonus miles on their first purchase, and then 1.5 miles for every £1 spent thereafter.

To put that in context, you can fly to countries including France, Germany, Ireland and Holland from 4,500 miles, so it's a pretty useful bonus.

Like the Lloyds TSB Airmiles Duo card, another brilliant feature of the card is that if you spend £20,000 in a year on the simple card (or £10,000 on the premium card) and redeem your miles on a British Airways flight, you'll get a free ticket for a companion. On the simple card, that's the equivalent of 20,000 miles, which on their own would cover two tickets to North Africa (worth around £200 to £300), but can be combined with cash to cover flights all the way to North America or South Asia!

Of course it's not just limited to travel - you can get all sorts of rewards from shopping in one place regularly.

For the book and movie buffs

If books, cds and dvds are a major part of your life, then you might want to consider one of the credit cards on offer by the major retailers. Two of the better cards are from Amazon and Play.com.

Let's start with Amazon. With their card, not only do you get 12 months 0% interest on balance transfers (not the best, but not bad), and 0% interest on all purchases at Amazon for nine months, you also get loyalty points for your spending - one point for every £1 spent at Amazon, and one point for every £2 spent elsewhere.

Once you get to 1,000 points, you get a £10 Amazon gift certificate. So basically, you get a 1% return on the money you spend at Amazon, and 0.5% on the money spent everywhere else. You clearly need to do an awful lot of shopping at Amazon for this to be worthwhile.

It's a bit better with the Play.com card. Here you get one point for each £1 you spend generally, but two points for each £1 you spend at Play.com. You also get a bonus of 1500 points if you make £150 worth of purchases anywhere within the first 90 days. 500 points then translate into a £5 voucher.

So for your shopping at Play.com, you get a return of 2%, or 1% for shopping elsewhere. Once again, you really need to do a lot of shopping at Play.com for this to be worthwhile.

A reward for your groceries!

My own preferred way of getting a decent return on your spend is to go with a supermarket credit card.

I personally have the Tesco Clubcard credit card, which gives you five clubcard points for every £4 you spend in the store, and one point for every £4 spent elsewhere. I've only had it a couple of months and have already been sent a fair few vouchers for money off my shopping. I can also trade the points in for all sorts of treats, from Airmiles to discount hotel rooms.

Plus, you get 0% on new purchases for 12 months!

Sainsbury's have their own credit card which offers two Nectar points for each £1 you spend in the first two years (or 1 point for each £5 you spend elsewhere). The great thing about Nectar points is that you can collect them in loads of different ways, so you'll soon have a decent return on your money. Again, you get 0% on new purchases for 12 months with this card.

Find out more about the Sainsbury's credit card in this video.

Rewards on the high street

If you're a keen shopper on the high street, check out the Express Rewards Credit Credit card. This card offers you up to three points for every £1 spent at supermarkets, 2 points for every £1 spent at UK department stores, and 1 point per £1 spent elsewhere. Once you get 5,000 points, you can exchange them for a £25 gift voucher from a range of high street shops, including Marks & Spencer, Harrods, HMV and  Amazon.

The cashback alternative

Of course, the downside to a reward card is that you can be quite restricted in what you can spend your points on. While it's great that you might get some free cds or books from Amazon or Play.com, you might prefer a simpler arrangement: cashback, in your pocket, to do with as you please.

In this case, the best way to pay is with a cashback credit card, which gives you a guaranteed return on your spending.

And the market leader by an absolute mile is the amazing American Express Platinum Cashback Card, which offers 5% cashback over the first three months (up to a maximum of £100), and then up to 1.25% after that.

That's an absolutely terrific deal in anyone's book, particularly when you consider that in real terms the return you get on standard reward cards tend to be, at best, 1%.

However, do bear in mind that Amex isn't accepted everywhere. And you do have to be a big spender to qualify for that 1.25% cashback rate. You may prefer the Egg Money card instead, which offers a flat rate of 1% cashback. It does charge a £1 monthly fee though. Read an in-depth comparison of the relative merits of these two cards.

Remember to pay off your bill in full

Reward cards and cashback cards reward you for spending - but you don't pay off your bill in full each month, the rewards you receive will be far outweighed by the interest you'll run up. They're simply not worth getting unless you can afford to pay off that bill as soon as it hits your doormat. If you can't, you're always better off opting for a 0% on purchases card instead.

Play your cards wisely

If you need to know a bit more about how to use credit cards, we at lovemoney.com can help.

Related goal

Pay off credit card debts

How to destroy your credit card debt quickly and effectively.

Do this goal

First, adopt this goal: Pay off your credit cards

Next, watch this video: The 3 worst things you can do with your credit card

Finally, if you have any questions about the best way to handle your card, and get the most from it, why not head over to Q&A and pick the brains of other lovemoney.com members for hints and tips about what worked best for them?

This article was updated in April 2010

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