Affinity points cards

Points and reward-based affinity credit cards are offered by a bank in conjunction with a commercial partner - examples include British Airways, Virgin and the Nectar loyalty scheme.

Such affinity cards can offer great rewards, ranging from free CDs, family days out and free flights to exotic holidays on exclusive Caribbean islands.

Whilst the rewards on offer can look very tempting, it's very important to consider how useful any given affinity card would be to you personally before applying and transferring your spending to it.

For instance, with the Amex BA affinity credit card, someone who earned enough BA Miles could redeem them for a free first class flight to Australia, complete with a free companion ticket. Whilst rewards like this make for great reading in affinity card promotional materials, they may not be achieveable based on your own, personal spending.

The key is to review the rewards on offer from the points-based affinity cards you're interested in and to see how many of them you could realistically expect to be able to choose from using the points that you would earn from your typical spending. A good idea is to look back at your last few credit card statements, work out the average amount you spend in a month and see how many points you would have earned in a year, had you used an affinity card instead.

Of course, you do need to reasonable - you can't expect to be offered a very valuable reward without spending a lot of money on an affinity card. Nor is there anything wrong with saving up for something special - as long as you'll be able to reach your affinity points target within a resonable length of time (don't set out to save for something that will take 50 years to earn!)

Some affinity cards offer a broad range of gifts and rewards, specifically trying to make sure that there is something for everyone, no matter how little or how much they may be able to spend on their affinity card each month.

Other affinity cards allow households to combine or "pool" their points. This way, a number of family members can each use their own, separate affinity card, with the points they earn getting combined together. As a result, the total pot of points builds up into a worthwhile value much more quickly - perhaps to be redeemed for something that everyone can share, like a new television.

Why cash back may be better

If, despite the wide range of affinity cards available, you're struggling to find one that offers the kind of rewards you'd like - and at a points level that you'd be able to afford - then a cash back card may be a better option.

The one thing that stands out about a cash back card compared to an affinity card is flexibility - in short, you can spend your cash on whatever you want. You don't even need to have earned enough cash back to cover the full cost of whatever it is you'd like to buy - you always have the option to pay the difference yourself.

One downside is that the theoretical value of your cash back may be lower than what you could have had with affinity points that you would have earned for the same amount of spend.

With supermarket loyalty schemes, you typically get better value for money by redeeming a reward voucher against a partner offer instead of having the money off your shopping. But that only makes sense when there's a partner offer that you actually want to take advantage of. Otherwise, having the money off your shopping is a better use of the reward than getting no benefit at all.

So it is with cash back cards versus affinity cards' points-based rewards: if there aren't any rewards that you want, regardless of their theoretical value, the better option may be to take the money and run - to the shops to spend it!