Reward Credit Cards in the UK: How They Work, Who Should Use Them, and What to Watch Out For

Reward credit cards promise everything from cashback and travel perks to loyalty points and in-store savings, but are they really worth it? For some, these cards can offer tangible value. For others, they’re a financial trap dressed up in shiny marketing. Before jumping at the promise of free flights or extra points, it’s important to understand how these cards actually work, what types of rewards are out there, and how your credit profile affects eligibility. This guide cuts through the noise to help you decide whether a reward credit card makes sense for your situation or if you’re better off without them altogether.

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Common Reward Types

Here are a few common types of reward credit cards you should know:

• Cashback: This simple reward card involves getting a percentage of your spending back. Some cards offer a flat fee of 1%, while others have tiered amounts based on what types of goods or services you’ve paid for by credit card.

• Points-based loyalty schemes: Some reward cards offer points instead of cashback. These points can be bank-specific, transferable to various partners, or even tied to a specific retailer.

• Airline or travel miles: Rewards can include travel miles that can be used to book flights or accommodations.

• Supermarket & retail co-brands: Some cards are linked to specific stores or brands, providing enhanced rewards when you shop there. 

• Hybrid “earn now / convert later” ecosystems: These cards let you accumulate rewards points and convert them when you’re ready.

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Are Reward Credit Cards Worth It for You?

Reward credit cards are well-suited for specific individuals. However, it’s worth weighing the pros and cons carefully to see if they’ll work for you. Here are some signs that your financial habits can handle a reward credit card:

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Spending Pattern: If 60% or more of your spending falls into categories where the card offers a bonus, such as groceries or travel, it may be worthwhile to consider.

Pay-in-Full Discipline: Reward cards are most effective when you pay off your balance in full every month. If you carry a balance and pay interest, those charges can quickly wipe out any reward value you earn.

Alternatives: Consider whether you might benefit more from no-fee cashback debit cards or loyalty schemes that don’t require credit. Additionally, investing money in a savings account with a competitive interest rate may be a better option for some individuals.

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Eligibility & How to Qualify

Getting approved for a reward credit card in the UK depends on a few different factors, like getting a credit profile reality check.

There are multiple credit reference agencies (CRAs) in the UK.  Equifax, Experian, and TransUnion are the three leading organisations, with each using a tailored process to determine your suitability for credit.

Additionally, most lenders have unique internal processes for improving credit, which means your eligibility can vary from one bank to another.

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Factors that lenders consider for credit applications

• Length of your credit history and your repayment behaviour.
• How much credit you currently use relative to your limits, known as your credit utilisation rate.
• Any recent hard credit checks or new accounts you have opened.
• Your income and your ability to manage repayments versus your current expenses.
• Registration on the electoral roll and address stability.
• Any existing relationship you might have with the card issuer. For example, if you currently hold a current account or have a positive credit history, it can help.

Credit Tiers & Product Access

If you want to get your hands on a premium reward card, you’ll typically need a score between good and excellent. 

It’s worth noting that starter or rebuilding credit cards rarely come with meaningful rewards. If that’s all you can apply for, wait until you build up your credit so that you can start accessing rewards.

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Soft Eligibility Checks

Before applying, use a soft eligibility check where possible. This lets you see your likelihood of approval without a hard search, which is especially useful if you’ve done a Google search to see what kind of score you need to get the rewards card. Of course, more importantly, using soft eligibility checks reduces the risk of rejection or multiple hard checks, which can hurt your credit score temporarily.

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Improve Your Odds Before Applying

If your credit score needs improvement before you can qualify, you can prep your credit profile with the following options.

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• Pay down any existing loan balances.
• Correct errors on your credit score.
• Register to vote.
• Set up direct debits for any regular payments.
• Use your app’s credit coaching tools.

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Hidden Traps & Unforeseen Issues

You should never apply for anything credit-related until you’ve got the unvarnished truth. Here's how you can get fully up to speed on hidden fees and unforeseen consequences.

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High APRs on Carrying a Balance: If you don’t pay your balance in full each month, interest charges usually outweigh any rewards you earn, often quite considerably.

Annual / Monthly / Companion Fees: Some cards charge fees. You have to factor these outgoings into your break-even analysis because they reduce the net benefit.

Foreign Transaction & Cash Advance Fees: Rewards typically don’t apply to foreign currency spending or cash withdrawals. So, if you spend a lot of time overseas, don’t expect to unlock rewards.

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Additionally, interest on cash advances usually starts immediately. So ensure that’s part of your overall calculation, too.

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Intro Bonus Traps: Beware of overspending just to hit a welcome bonus, missing application deadlines, or returning items, which can void your qualifying spend.

Reward Scheme Changes: Reward programs can change without warning. As a result, your points can lose value, categories where you earn rewards may be removed, or partnerships may be shuttered. Any of these situations can give credit rewards.

Point Expiry / Inactivity Rules: Unused points may expire if you don’t use the card regularly. If you’re not making use of the rewards, it undermines the whole point of the credit card.

Credit Score Impacts: Each application leaves a hard search on your report, which can ding your score in the  short term. Carrying a high-utilisation ratio can also hurt your ongoing score. In other words, the rewards are not worth the impact on your credit score.

Multiple Applications in Short Window: Applying for several credit cards too quickly can make lenders wary because it looks like you’re in financial distress.

Promotional Emails Encourage Unplanned Spend: Marketing from card issuers can tempt impulse buying, which can put you under financial stress or even bump up your credit utilisation rate. However, you can filter out or turn off these messages if you’re concerned they’ll have too much influence on your spending.

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Improve Your Financial Habits with Pave

It's important to understand what you're getting yourself into whenever you sign up for a new financial product. Improving spending habits and being more involved with your finances can help you qualify. 

And the Pave app can help!

Pave is an award-winning credit-builder app that actively works with you to help you build your credit score. No hard credit checks required. In addition, Pave will help you keep on top  of your finances by giving you personalised credit fixes, bill reminders and much more. 

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To learn more and see why hundreds of thousands of people across the UK have turned to Pave to improve their credit score, download the app today. Available on App Store and Google Play, or sign up online.

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