In Depth

Six reasons to ditch your reward credit card

Most companies charge high interest, offer low-value benefits and can often change terms with little notice

credit debit cards

Reward credit cards promise you all sorts of treats in return for your custom, from gift vouchers to free holidays. But these freebies are not all they can seem. Here are six reasons to ditch your card.

1. High interest rates

The interest rate on reward credit cards tends to be astronomical. Credit card companies hope you'll pay them far more in interest than they have to pay out in rewards - and more often than not achieve their aim.

Interest rates of up to 36 per cent APR mean you should dump your reward card unless you can pay off the balance in full each month before incurring extra charges. 

2. Pitiful reward rates

Despite spending and spending and having hundreds of points, quite often when you check it turns out you need tens of thousands of points before you qualify for a bonus.

For example, you need to spend £2,000 on the Amazon Reward credit card in order to earn a £10 voucher, reports Emma Gunn on This is Money.

3. Expiration dates

Some schemes set a time limit on how long you have to claim your reward. The Avios scheme, for example, gives out free companion flights if you spend more than £20,000 a year on your British Airways American Express card - but you have to use it within 12 months or it's gone.

4. Diluting value

There is nothing to stop a reward scheme diluting the value of its rewards at any time. In 2015, Avios increased the number of points you needed in order to fly at peak times.

Reward card users saving for a trip to Sydney suddenly found they needed an extra 17,500 points to pay for their flight, meaning they needed to spend an extra £17,500 on most Avios credit cards.

5. Cancellations

There is no consumer law in place to prevent a reward scheme being cancelled and giving you little notice to spend the rewards you have accrued. A few years ago, MBNA closed its LastMinute.com credit card and gave customers just a few months to use their points or lose them.

6. Insurance

Book a holiday or flights with your rewards points and you could find you are not covered by your travel insurance. Wording like this in the small print of Aviva'stravel insurance is far from unusual: "This policy won't cover… any claim for… unused travel or accommodation arranged by using air miles, loyalty or points-based ownership schemes," reports James Daley in The Telegraph.

What to get instead

If you pay off your credit card balance in full then you may as well get some reward for using your credit card sensibly. But instead of opting for a store reward card, get a cashback card instead.

With a cashback card, you can clearly see how much you are earning and the credit card company can't devalue the offer or put a time limit on when you must use it.

The American Express Platinum Cashback card pays five per cent for the first three months (capped at £125) then 1.25 per cent after that. There is a £25 annual fee.

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