Credit card rewards explained
You really can earn as you spend. How can you do this? You can do this with credit cards that will “reward you” as you spend – let me explain more.
A credit card is a simple and easy way of financing the purchase of goods and services. You are able to purchase goods and services even if you do not have the money to do so. This is because you can spread the cost over a period of time. But to fully benefit from cash back and reward points, you need to ensure that you pay outstanding balances in full each month. The credit card lenders want you to use your credit card to purchase goods and services. To encourage you to spend and to reward you for spending, many credit card lenders offer incentives.
These incentives can be cash back or reward points.
The cash back incentive works like this: you spend £500.00 in a particular month. Typically the cash back reward is 0.5%. So the credit card lender will return to you £2.50 from your expenditure of £500. However, remember that the cash back will only work if you repay the outstanding balance each month. Otherwise you will be paying interest on interest and this will negate any cash back benefit.
The rewards point incentive works on the basis that you are awarded points depending on how much you spend e.g. 1 point for every £1 spent. You can then redeem these points at outlets such as stores or from catalogues that run the promotion.
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