10 reward card pitfalls to avoid this ChristmasThe credit card tricks that could cost you cash

20 November 2011

Credit card pointing at camera

Reward credit cards can be a great way to earn a bit of extra cash on your shopping, but there are many pitfalls that could mean you lose your rewards or pay more interest

Reward cards could help you earn a bit of money back on your Christmas shopping. However if you don't play your cards right, you could end up paying more in interest and charges than you earn in points.

1. Compare the value not the number of points

Credit card websites may claim 'Earn one point for every £1 you spend', but that's meaningless unless you know the value of that point. Points from RBS/NatWest, for example, are worth only 0.5p each when taken as high street vouchers.

And the Tesco Bank credit card makes claims such as 'Doubles as a Clubcard', but you'd get these extra points anyway by using a regular Tesco loyalty card, regardless how you pay. The rewards from the credit card alone are worth a paltry 0.25% when taken as money-off vouchers.

Our independent reward card reviews take account of both the rate at which you earn points and how you can spend them.

2. Use your credit card rewards or (potentially) lose them

Several card providers reserve the right to change their point schemes at any time. BHS, for example, reserves the right to revalue points or, with 30 days’ notice, to withdraw the scheme altogether.

Last year, the most generous reward scheme was from the GM Card, which allowed consumers to save up points to get a discount on a new Vauxhall vehicle. However, this card and its reward scheme have now closed. It's not possible to earn new points and any points not spent by January 2014 will be lost.

3. Use your reward points or (definitely) lose them

Once you've been sent a shopping voucher, use it quickly. For example, while cards from both BHS and House of Fraser offer top reward rates, their vouchers last a measly three months, after which they're worthless. Debenhams vouchers also only last three months.

If you don't earn enough points to trigger a shopping voucher, most card providers roll your points over to the next period. However, if you still haven't reached the threshold within 12 months, you'll lose all of those points with BHS and House of Fraser.

4. Pay off your bill in full

Reward cards are only suitable if you pay your bill off in full - interest rates tend to be high. For example, BHS, House of Fraser, American Express, Debenhams and Capital One all charge 19.9% APR.

Of the Which? members who chose their card primarily because of the reward scheme, one in 10 doesn't pay off their bill in full. If you spend £1,000 on a card charging an APR of 17.9% and don't pay off your bill, you'll earn around £5-£10 in reward points, but will pay £14 of interest per month, wiping out the rewards.

5. Use the card or pay extra

If you don't use your reward credit card, some providers impose a dormancy fee. For example, the House of Fraser and Debenhams cards, both provided by Santander, may charge £10 if you don't use them for six months.

6. Set up a direct debit

Points are not earned if you're late making a payment or go over your credit limit. Setting up a direct debit for the full monthly bill will keep your points safe and help you avoid interest.

7. Don't withdraw cash on your credit card

No rewards are paid on cash withdrawals or gift card purchases. You'll also get no interest-free days and the APRs can be even higher than for purchases.

8. Don't confuse credit and store cards

Some retailers offer both a credit and a store card. A store card can only be used within the retail group that issues it. Debenhams, for example, decides which of its two cards you'll be offered.

9. Treat your vouchers as cash

Take care of your vouchers once you've received them - if you lose them, they won't usually be replaced.

10. Check the reward deal you're on

68% of Which? members have had their card for over five years. If you already hold a reward card, check the deal you're on before you switch. You may be earning more points than are offered to new customers, but the reverse can also be true – you may not be earning as many points now as you were when you took out the card.

More on this...

  • The best and worst reward credit cards revealed - Which? experts uncover how much rewards are really worth
  • High street 0% credit deals - all the best 0% deals available from high-street retailers, as well as the ones to avoid
  • Store cards - read our review of all the major store cards and our tips to avoid paying too much interest