Only one in three reward credit card holders actually bother reclaiming their rewards, new research from Sainsbury’s Bank has found.
Around 8.19 million people in the UK own a credit card with a rewards scheme of some sort, yet only three million get around to redeeming them.
The problem with reward cards is that they offer far less competitive rates than new purchase or balance transfer cards. So if you aren’t making use of the rewards scheme, you are paying a higher rate for no gain whatsoever.
"Confusing, slow and insignificant"
The two most common reasons card holders give for not claiming their rewards is that the financial value is too small (42%), or they simply can’t be bothered (40%).
Others feel the redemption process is either too long (27%) or difficult (24%), or they don’t know how to redeem their rewards.
“Our research shows that the credit card industry has a lot of work to do if customers are really going to feel that their reward schemes are worth having,” says Sainsbury’s credit card head Donald MacLeod.
“There is no point offering them if there is no perceived value or if it is too difficult to redeem the rewards.”
Changing scope of reward cards
The survey also highlighted how the reward credit card market has changed in recent years, with a strong emphasis now on shopping rewards.
While there were 66 such cards on the market in May 2005, this nearly doubled to 118 in the three years that followed. By contrast, cashback credit cards have seen a sharp decline, from 47 in 2005 to 17 today.
This is an unfortunate development from a consumer perspective, as cashback deals allow you to spend your rewards wherever you like, while shopping reward deals tend to be limited to one store or chain.
Make the most of your credit card
Probably the best cashback deal on the market at present is the American Express Platinum Cash Back card, which repays an impressive 5% on expenditure during the first three months (limited to £4,000), falling to 1% thereafter.
This card – and all rewards cards – are only suitable if you are able to pay your debt off in full every month. If you can’t, then it’s essential you switch to a more suitable card instead.
If you want to avoid interest on your expenditure, then you should opt for a new purchases card. Without doubt the best on the market at the moment is Capital One’s Platinum credit card, which offers 14 months interest free on new spend (excluding cash withdrawals).
Unfortunately, Capital One is very picky about who it’ll offer this card to, so you’ll need an excellent credit rating to qualify (read more about the requirements here). If you don’t quite make the grade, opt for the HSBC credit card instead, which offers 12 months interest free.
