Secured and unsecured loans from leading lenders in the UK.

<< back

Reward Schemes Forcing People To Purchase Beyond Their Means

The re-emergence of credit cards and store cards with loyalty schemes has resulted in many people making large purchases, in order to collect the points or special offers associated with the individual cards. Unfortunately, the buyers then realise that the high interest rates on credit cards, or the fact that they have to spend thousands of pounds to get £10 worth of free goods with a store card make the loyalty schemes less attractive than they seem.

In comparison to a loan, these cards work out to be very uneconomical in the long-term. As mentioned above, you generally have to spend thousands of pounds, (often on things you don't really want or need) in order to accumulate a worthy amount of points. However we all know how addictive the loyalty schemes can be; just a few more points and you can have that free CD or book!

Taking out a loan instead of a credit or store card can save you thousands of pounds if it is being used to make a large purchase such as double glazing or a new car. Loans taken out over 10+ years can have interest rates as low as 8% but a credit card will be around 13% at least. The fact that you will receie a multitude of loyalty points will still not equate to the extra interest you will be paying each year.

If however you desperately want whatever it is that the loyalty scheme is offering, then you could pay for a large purchase with a credit or store card, get the points, and then pay the balance off with a loan. This would mean you get the best of both worlds; the bonus loyalty prize and lower interest rates.

This works for coalition cards as well, that can be used in a wide variety of shops and stores. You can make multiple purchases from different shops and store up the points until you have enough for what you want. Then you can take a loan out at a reduced interest rate to pay off the balance of the card.

Whatever you choose to do, you should bear in mind that a loan is by far the cheaper option, and that many of the loyalty schemes available today are false economies. They may offer great products that are seemingly free, but when the actual cost is worked out they are probably the most expensive 'free' things you will ever buy.