4 traits that make you a good rewards card candidate

By Emma Lunn

The idea of earning rewards on money you'd already be spending is a tempting thought -- and the reason behind rewards cards' popularity.

However, reward cards aren't for everyone. Before you apply for one, take an honest look at your life and personality and make sure you embody the following four traits:

1. You can pay off your balance every month.
You should get a reward card only if you're sure you can pay off your balance in full and on time each month as rewards cards tend to have higher interest rates.

"If you're not in a position to clear your statement balance in full, avoid these cards as the interest charges will wipe out any benefits you've earned," says Andrew Hagger of MoneyComms.

Don't fit the bill? Consider getting a low-interest card instead.

"If you carry a balance on your card, you should seek out a card with
a low interest rate, rather than paying over the odds on a rewards
card," Hagger says. rewards-card

A card with a low standard rate will mean you won't have to worry about high interest charges mounting up if you must carry a balance. Sainsbury's Bank offers a low-rate card at 6.9%, while the Barclaycard Platinum Simplicity card charges 7.9%.

2.  You'll actually use the rewards on offer.
Some rewards cards are tailored to certain types of spenders -- travellers, for instance. For example, both the Lloyds TSB Avios Duo card and British Airways American Express card offer Avios points. These can be spent on flights, hotels and car hire.

"If you're a frequent flyer looking to rack up a lot of bonus miles, your airline's co-branded credit card might be the right choice," says Brian Kelly, founder of The Points Guy. "If it's free nights at hotels you want, consider a hotel credit card that either awards you free nights as a bonus, or lets you earn points toward award redemptions."

If you're not a traveller, however, these exciting rewards will do you little good, and your hard-earned points will likely gather dust.

Don't fit the bill? Go for a cash-back card to achieve maximum rewards flexibility. Because cash-back credit cards give you rewards in cash form (rather than in "point" or "mile" form), you can use your rewards earnings on anything.

Best buys at the moment include the American Express Platinum Cashback Credit Card, which offers 5% cash back for the first three months, capped at £125.

3. You're willing to be loyal to certain retailers
Some rewards cards let you maximise your rewards if you're loyal to certain retailers. For example, the Marks and Spencer credit card will give you 1 point for every £1 spent in Marks and Spencer -- but only half the rewards on purchases elsewhere (1 point for every £2 spent). Plus, those rewards can be redeemed only for vouchers usable at Marks and Spencer.

Don't fit the bill? Find a rewards card that allows you to shop around. If you prefer to use a lot of different retailers rather than the same one constantly, there are reward cards that allow points to be spent in different shops.

For example, with the Natwest YourPoints World MasterCard, you earn one point for every £1 spent on the card. Points can be redeemed for vouchers for numerous retailers, including Amazon, M&S, Homebase and Boots.

4. You can keep your spending in check
One temptation with reward cards is to overspend to earn more points. In some cases, cardholders will buy things they don't need, or that could be bought cheaper elsewhere, just to earn points.

This is false economy, so a rewards card is right for you only if you can keep your spending in check.

Don't fit the bill? Monitor your spending. Before applying for a rewards card, practice asking yourself whether you really need something before buying it, and develop the discipline to track your spending.

If you find that you're still tempted to overspend, then it might be better not to have a credit card at all -- or use it only for emergencies.

See related: 3 rewards card mistakes that lose you money, Is the new Asda cash-back card a good deal?

Published: 13 November 2012