The best reward credit cards

When you choose your reward card, look for the card that will pay you the most points based on where you do your shopping now. You also need to look at what kind of rewards you'll receive.

Because we all have different shopping habits, and attach different values to various rewards, there's no clear market leader in the reward credit card market.

So it makes sense to look at a range of different reward cards and you can then pick the one that will work best for you.

Travel
Let's start with cards that will help you pay for your holiday.

First up is the British Airways American Express card. It rewards your spending with Avios points - the replacement for the old Airmiles scheme.

For just about every pound you spend, you'll get one Avios point. And if you spend at least £500 during the first three months you have the card, you'll receive 1,000 bonus Avios points. Once you've accumulated 20,000 points, you'll be entitled to a free return flight to Moscow. 15,000 points would get you a free return flight to Rome.

The most attractive feature of the card is a free 'companion' flight ticket if you spend at least £20,000 during the course of the year. So if you used your Avios points to buy a ticket to, say, Johannesburg, you could then get a ticket for a companion to join you on the plane.

You can also earn Avios points if you sign up for the Lloyds TSB Duo Avios cards. You'll get two cards with this deal - an American Express card and a MasterCard. The Amex one will give you more rewards - one Avios point for every pound you spend. You'll have to spend £5 on the MasterCard before you'll get an Avios point.

The downside to Avios is that you can only collect points on British Airways and Iberia flights. If you'd rather fly on Virgin, you might prefer the Virgin Atlantic White Card, which pays points that are redeemable on Virgin Atlantic.

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High Street
If you don't travel that much, you might be better off going for a card that gives you rewards at your favourite shop.

Given that Tesco now receives one in every seven pounds spent at UK shops, a Tesco reward card will make sense for a lot of us. The Tesco Clubcard Credit Card for Purchases pays you five points for every £4 you spend at Tesco, including fuel purchases. And you'll get one point for every £4 you spend elsewhere.

Once you have 150 points, you'll get a £1.50 voucher which you can use to reduce your bill at Tesco. Even better, you could use the voucher to buy days out, meals at restaurants or even Avios points. In some cases, you'll get a reward worth four times the face value of the voucher.

The Tesco card isn't just good for rewards. It also comes with a great 0% deal for purchases. If you want to buy a 'big ticket' item, pay for it with a new Tesco purchase Clubcard, and you won't have to pay any interest on the resulting debt for 16 months. All you need do is make the minimum repayment every month.

Be careful though, the 0% period begins when you take out the card, not when you make the purchase.

The M&S credit card is another card that combines an attractive rewards scheme with a tasty 0% offer. You'll get one point for every pound spent at M&S or two pounds spent elsewhere. 100 points gets you a £1 voucher you can spend in store.

On top of that, you won't have to pay any interest on a big credit card purchase for 15 months - almost as good as the Tesco deal.

Nectar
Sainsbury's is another household name with a decent rewards card. The great thing about the Sainsbury's Nectar Credit Card is that you can spend the Nectar points you gain in a wide range of stores and websites. You can see all of the participating businesses on the Nectar website.

For the first two years you have the card, you'll get two Nectar points for every pound you spend in Sainsbury's. You'll get one Nectar point for every pound you'll spend elsewhere.

The card also comes with a decent 15-month 0% offer for balance transfers.

Cashback
Of course, you don't have to earn rewards on your credit card. Another option is to go for cashback, where you'll get pure hard cash as a reward for your spending.

There are several attractive cashback cards on the market at the moment, but several have annual fees. That's why we prefer the Capital One Aspire World card, which gives you money back and doesn't charge a fee.

For the first three months you have the card, you'll get 5% cashback up to a limit of £100. (That's on £2,000 of spending).

After that, a tiered rate of cashback applies, depending on how much you spend. Spend up to £6,000 and you'll earn 0.5% cashback. If you spend between £6,000 and £9,999, you'll get 1% cashback while you'll get the top rate of 1.25% if you spend more than £10,000.

Pay off your bill
Whether you go for a cashback card or one with rewards, just remember that you must pay off your credit card in full each month. If you don't make the full payment, you'll start paying horrendously high interest rates that will easily outweigh any gains you make from cashback or rewards.

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