The question of whether or not you should apply for a credit card with a loyalty reward program appears to be a no brainer these days. Over 90% of us do. However, deciding which type of loyalty reward program best suits your needs is far more difficult. So, which type of loyalty reward program should you apply for?



The different types

Although it may seem like there are many different types of credit card loyalty reward schemes available in the UK, the choice basically falls into two different categories: a cash back scheme; or a product-based loyalty reward scheme.

Cash back credit card loyalty schemes

Cash back reward programs are very popular among UK credit card users. However, you need to be very careful before deciding whether or not you should apply for a cash back reward program, as this type of reward program does not suit all card users in the UK.

6 out of every 10 users in the UK will carry over some or all of their card balance at the end of each statement period. If you happen to fall into this category of credit card user, sometimes known as a borrower, then having a cash back loyalty program is unlikely to be in your best interests.

The reason why this is the case is because the interest and fees you'll be charged on your balance will almost certainly be far more than the amount you can claim in cash back rewards. However, if you are the minority 4 out of 10 users who does repay his debt in full on the credit card statement date, then a cash back reward program could be just the ticket you are looking for.

Product-based loyalty reward schemes

For most of a product-based loyalty reward scheme is probably the best reward scheme we could apply for. This is especially so if there is a particular shop or product that we like that is offering a loyalty reward scheme.

However, even here, if you carry over a balance each month on your credit card you should acknowledge that you are not getting something for nothing and your loyalty program will be costing you more than you could get if you just paid cash!

0% credit card

By far and away the best loyalty program is the 0% credit card. It may sound strange, but if you are a borrower than the interest charges you are going to save over a period of time on a 0% card are going to far exceed any air miles you can accrue or any cash back you can obtain.

As such, before you give too much thought to the type of loyalty reward scheme that you should have, but your own interests first and think of which card has the lowest rate on interest because unless you are paying off your debt in full each month, it is highly likely that this is going to be the best reward you can get. In fact, the money you can save will likely buy you all you wanted to get under any other type of credit card reward program several times over.