Note: This article does not cover flight reward cards due to the extremely variable nature of their value depending on how and what the accumulated points are spent on.
Currently, the best reward credit card in the UK is the Club Lloyds Choice Rewards credit card, which is actually a combo AMEX and Mastercard account. With the AMEX card, you accumulate 10 points per £1 spent. Lloyds allow you to redeem a £10 shopping gift card from many different retailers including Amazon for 6650 points, translating to a required £650 spend to redeem a £10 gift card, which gives you 1.5% of your spend back in shopping gift cards. You get double points in the first 6 months too, meaning you are effectively earning 3% of your AMEX spend back for 6 months. Mastercard purchases earn you a meager 0.3%, but that’s pretty good for a non-AMEX card and better than nothing at all. The convenience factor is high here, as payments for either card show up in the same credit account. You also get a period of 24 months 0% interest on purchases, so if you manage to get a high limit, you can use the money you’d have otherwise spent to put into savings for accruing interest. The card costs £24 annually, but is reduced by half if you hold a Club Lloyds current account.
The next best, and arguably better card if you prefer the freedom to spend your savings wherever you choose, is the AMEX Platinum Cashback card, which offers a maximum 1.25% cashback on all spend providing you spend in excess of £10,000 in a single year. If you spend less, you will receive 1%. It also offers 5% cashback for the first 3 months. This card costs £25 a year, meaning you’d need to spend £2,500 a year just to break even. American Express also offer the Platinum Cashback Everyday card which is free and gives you 1% cashback on a yearly spend of over £5,001, or half that for anything less. Not great, but a good first step if you’re unsure about your spending and don’t want to commit to an annual fee card.
A more interesting, if rather more involved and complicated way to save money with a credit card would be with a good 0% purchase card. At time of writing, Tesco are currently providing the Tesco Purchases Credit Card, the longest 0% purchase credit card at 28 months. Let’s assume that you receive a credit limit of £7,000 and that it takes you 4 months to re-route the majority of your bills and major purchases in order to fill this limit. That means for the remaining 24 months, you will have £7,000 of credit which is interest free. You can then repurpose the money that you would have otherwise spent straight out of your bank account, and keep it in high-interest current or savings accounts. For example, you could put £5,000 into a Club Lloyds current account and receive 4% interest on it and then put £2,000 into a TSB current account at 5% interest; you would get £400 and £200 in interest over two years, a £600 total which would require close to £40,000 worth of credit card spending on the best rewards credit card. Providing you are not already receiving a large amount of interest in savings, this ought to be well within the Personal Savings Threshold, meaning your interest would be tax free. This card is also a Mastercard, meaning you’ll be able to use it pretty much everywhere unlike a single AMEX card. You may even be able to do this with the Club Lloyds Choice Rewards credit card mentioned at the beginning if you’re able to get a sizeable credit limit with them, you’d also benefit from their rewards scheme at the same time, then.
As noted on many websites concerning credit cards and their rewards, ensure you pay on time, don’t go over your limit, don’t spend what you can’t afford, otherwise the value you receive in benefits will very quickly be absorbed by card account charges and interest imposed by failure to keep on top of your finances.
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