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Loan Protection: Interest on reward credit cards cancels out any benefits

Consumers are unlikely to benefit from reward credit cards due to high levels of interest, it has been claimed.

Reward cards offer users the chance to earn loyalty points, cashback and prizes such as CDs, holidays and flights.

However, these credit cards often charge high rates of interest (up to 20 per cent APR), leading one expert to question the advantages of the schemes.

Raffick Marday from compareprepaid.co.uk, said: "Unless you can set up a direct debit to repay the credit card in full each month, so you will never have to pay interest, there is little point in using reward cards. What you will be paying in interest more than wipes out any gain."

Mr Marday also revealed that some providers even charge cardholders if they do not use the card for a prolonged period.

"Some credit cards will hit you with [a] dormancy fee if you spend nothing in a year which can be a £20 dormancy fee or an annual fee," he said.

Posted by Jennifer Haines

Jennifer's speciality knowledge is credit card changes and balance transfers ADNFCR-2776-ID-800117400-ADNFCR



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