What’s best: Cashback or rewards credit cards?

Credit card companies offer all sorts of perks to get our business, such as cards that reward us for spending with cashback schemes or reward points.

The UK Cards Association says that 61% of credit card users pay off their balance in full each month and don’t carry a balance forward – so these reward cards could actually benefit the majority of credit card users.

Despite this, reward cards are only used by a minority of card users.

If you pay your credit card balance off in full each month, you’re effectively missing out on being paid to use your credit card. The question is: do you stand to gain more from cashback credit cards or point-based reward credit cards?

To answer that, we compared what you’d get back from a range of leading reward and cashback cards if you were to spend £1,000, £1,500 and £2,000 (this includes £500 in a supermarket, £300 on fuel and £200 in department stores).

Reward cards

The Marks & Spencer Credit Card (representative APR: 15.9% (variable))  gives you 1 point for every £1 you spend at M&S and 1 point for every £2 you spend everywhere else.

Four times each year your points are converted into M&S Reward vouchers, which must be spent in M&S stores.

So, if you spent £1,000 each month for 12 months using our spread formula, you’d amass 9,000 points – or £90-worth of M&S vouchers. Up your spend to £1,500 a month and you get 12,000 points (£120 voucher) Spend £2,000 each month and your 15,000 points will bag you a £150 voucher.

Sainsbury’s Nectar Card Credit Card (representative APR: 16.9% (variable)) is currently offering double Nectar points; 4 points for each £1 spent at Sainsbury’s, 2 points for each litre of Sainsbury’s fuel and 2 points for every £5 you spend elsewhere.

This means spending £1,000 each month for a year earns you 30,288 Nectar points (a £150 voucher), spending £1,500 earns you 32,688 points (£162.50 voucher) and £2,000 earns you 35,088 points (£175 voucher).

Nectar vouchers can be spent with brands like Amazon, Easyjet and more. In most instances, 500 points is worth £2.50 but some places (such as Alton Towers, Thorpe Park and other Merlin attractions) double your points’ value to £5.

The American Express British Airways Card (representative APR: 19.9% (variable)) rewards you with 1.5 Avios points (formerly Airmiles) for virtually every £1 you spend and three points for each £1 you spend on BA flights and BA holidays. If you spend £3,000 in the first three months you get a bonus 30,000 points.

Spend £1,000 each month for a year and you’ll earn 13,000 points. Spend £1,500 and you’ll earn 19,000, while £2,000 points will earn you 24,000 Avios points.

Avios points are of course redeemed against the cost of flights. At the time of writing, an economy return flight (with one or more connections) to Cairo from London would cost you 25,000 Avios points.

Finally, Tesco’s Clubcard Credit Card (representative APR: 16.9% (variable)) rewards you with 5 Clubcard points for every £4 spend with Tesco (store or fuel.) You’ll earn 1 point for every £4 spent elsewhere.

So, spend £1,000 each month for one year and you’d amass 12,600 Clubcard points (£84 voucher), spend £1,500 and you’d get 14,100 points (£94 voucher) and spend £2,000 and you’ll get 15,600 points (£104 voucher.)

You can only spend your Clubcard vouchers in Tesco, but regular promotions such as the Summer Clubcard Voucher Exchange allow you to up the value of your points.

Cashback cards

Santander’s 123 Card (representative APR: 22.8% (variable)) gives you 1% cashback on supermarket spending, 2% cashback on department store spending and 3% on fuel – up to £300. You won’t get cashback on anything but these three options, and the card has a £24 annual fee.

Taking the fee into account, spending £1,000 each month for a year would earn you £190, £1,500 would earn you £190 and £2,000 would earn you £190.

The American Express Platinum Cashback Card (representative APR: 18.5% (variable)) pays 5% for the first three months, up to a maximum spend of £2,000. After that the cashback rate is 1.25%, barring one month each year when you get double cashback of 2.5%.

Taking the £25 annual fee into account, spending £1,000 each month for a year would earn you £200 cashback, £1,500 earns you £280 and £2,000 earns you £350.

Finally, the Aspire World Card (Formerly Capital One Aspire World Card, representative APR: 19.9% (variable)) earns you 5% cashback in the first 99 days up to a maximum spend of £2,000. On the next £5,999.99 you’ll earn 0.5% cashback, between £6,000 and £9,999.99 will earn you 1%, and spending £10,000 or more will earn you 1.25%.

£1,000 a month for a year will earn you £159.99, £1,500 would earn you £219.99 and £2,000 would earn you £292.48.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct

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