While credit card rewards claims increase, cards with rewards schemes decrease

CompareTopCards.co.uk

One of the effects of the credit crisis has been there are fewer credit cards with rewards schemes, especially cash back and shopping rewards, available in the UK today than a year ago. Only 66.8% of credit cards offer rewards compared with 78.2% a year ago. Sainsbury's credit card's research based on analysis by Defaqto shows a 7% drop in number of credit cards with rewards schemes from a year ago. The biggest drop (20%+) is in the cash back & shopping rewards credit card categories.

This decrease in available rewards credit cards has occurred while more and more consumers are taking advantage of rewards provided by these cards. According to a survey carried out by ICM Research, 54% of rewards card holders have claimed some or all rewards they earned in the past year compare to just 23% a year ago. Craig Hunter at Sainsbury’s Credit Cards said: “The recession has made a lot of people reassess their finances and it’s great to see that people are starting to make the most of the rewards on offer via their credit cards."

While the increase in number of card holders taking advantage of the rewards schemes is encouraging, there are still 46% that are not making use of the rewards they have earned. The average value of these rewards is estimated to be around £80. The main reasons these card holders let their earned rewards go unclaimed are -
financial value of the rewards is too small, the redemption process is too long or too difficult, they don't know how to redeem, or they are too lazy to be bothered.

To avoid unclaimed rewards, consumers should do two things:

1) More upfront research on the rewards credit cards to ensure they understand the reward scheme and the value it offers: They should know what is the value of the points or miles of the cards they are considering. For example what is the value of 1 point on the MBNA Platinum card vs 1 mile on the British Airways Amex card. How many points or miles do they get when they spend £1. Most have different point schemes (1 point/mile per £1 to 10 points per £1 spend. The value of these points differs so it is harder to do apples to apples comparison. Use calculators at credit card comparision sites such as CompareTopCards.co.uk to determine the value of the rewards. Ideally they should choose the card that provides a benefit value of 1% or higher of the spend (i.e. £1 in rewards per £100 in spend).

2) Follow some simple common sense rules: Understand how they spend money with their credit card. Do they shop often and spend sizable amounts at Sainsbury's, ASDA, Tesco? If they do then a shopping club credit card maybe a good option as usually stores give you 2x-5x the normal points when you spend at their stores. If they travel often which airline/ or alliance do they usually prefer. This will ensure you earn miles on airlines you usually fly and have enough miles to claim rewards. Also, most airlines usually offer 2x-3x miles on purchases with the airline.
If they don't shop frequently at certain stores or travel as much cash back cards might be the best choice. Most cash back credit cards typically provide between 0.5% to 1.5% cash back. This is usually based on tiered level of spending on the card, i.e. the more they spend greater the percentage of cash back. Some cards also have a higher promotional rate for first 3-6 months. So if they are planning on making some big purchases, it might be ideal time to get a cash back credit card.