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Credit Card's Loyalty Stretched as Cash Back Rewards Culled

Personal_Finance / Credit Cards & Scoring Apr 24, 2018 - 03:57 PM GMT

By: MoneyFacts

Personal_Finance

Shoppers looking to get a little back when they spend often turn to reward or cashback credit cards. Unfortunately, if customers look closely at the rewards they get when they spend, they might feel they are getting get back very little back on their spending, particularly in comparison to a few years ago.

One reason for this decline stems from a shake-up in the credit card market in 2015, when the EU interchange fee cap ruling was implemented. Its purpose was to save consumers money at the tills by capping the transaction fee for using their card. Yet, as a result, consumers are now facing a cull in the number of rewards and cashback credit card offers, as providers pull back their generosity.


In fact, the latest research from moneyfacts.co.uk reveals that, in some cases, 0.50% is the most cashback shoppers will get as standard without paying a fee, which is £0.50 per £100 spent. Still, this is more than some reward cards, where points vary considerably depending on how shoppers spend.

 

Top cashback credit cards

Credit card

Cashback

Card fee

Purchase APR

American Express Platinum Cashback

Intro 5% (£125 cap), std 1%-1.25%

£25 pa

28.2%

American Express Platinum Cashback Everyday

Intro 5% (£100 cap), std 0.50%-1%

Nil

22.9%

Santander All in One Credit Card Mastercard

Standard 0.50% on purchases

£3 pm

21.7%

Tandem Bank Cashback Credit Card Mastercard

Standard 0.50% on spends over £1

Nil

18.9%

First Trust Bank (NI) Visa/Mastercard Option 1

Standard 0.50% on spends over £5K, plus £25 for the first £5K spend

Nil

18.9%

Selection of points cards

Credit card

Max points earned on £100*

Min points earned on £100*

Purchase APR

Barclaycard Freedom Rewards Visa

200 points (Two points per £1 at selected Freedom partners and UK supermarket/petrol stations)

100 points (One point per £1 elsewhere)

21.9%

Debenhams Mastercard

300 points (Three points per £1 in store)

50 points (One point per £2 elsewhere)

24.9%

M&S Bank Shopping Plus Mastercard

100 points (One point per £1 at M&S)

20 points (One point per £5 elsewhere)

18.9%

Sainsbury's Bank Purchase Credit Card Mastercard

200 points (Two points per £1 at Sainsbury's stores/petrol stations)

20 points (One point per £5 elsewhere)

18.9%

Tesco Bank Clubcard Credit Card with Low APR Mastercard

125 points (Five points for every £4 at Tesco stores/petrol stations)

12.5 points (One point per £8 elsewhere)

5.9%

*Points earned do not include introductory offers/points.

Source: moneyfacts.co.uk

Rachel Springall, Finance Expert at moneyfacts.co.uk, said:

“The EU interchange fee cap ruling was supposed to set a positive change in the credit card market in motion, but it has been a bit of a double-edged sword. Card providers have been pulling back their generosity for offering rewards or cashback to recoup costs, so now there are very few deals around.

“Some good changes have been introduced since January 2018; the ban on online surcharges when using a credit card or debit card means, for example, the removal of what would have been a 2% fee to book a flight. However, this ban may inflate the cost of a holiday overall, as companies will need to recoup this loss.

“If consumers are using a credit card to earn some rewards or cashback, then they should ensure that they repay their balance each month to avoid incurring interest. American Express offers a fee-free card that pays 5% for three months on its Platinum Cashback Everyday Card, which caps the cashback available at £100 over that period. Customers also need to spend £3,000 each year to qualify for cashback. It’s also important to clear any balance each month too, as the card charges 22.9% APR.

“Loyalty doesn’t seem to be paying off in many cases, as it would take consumers a while to earn enough points on a reward card to make it worth their while. Debenhams and House of Fraser might pay three points to every £1 spent in store, but elsewhere they only pay one point on every £2. Therefore, customers would need to spend £1,000 to qualify for 500 points to get a £5 voucher.

“One free way for shoppers to build up points to spend in their favourite stores would be to sign up for a loyalty points card. It is worth the effort to sign up for these cards, particularly for stores or coffee shops they visit frequently. If customers don’t like the idea of holding multiple cards, then they could download the Stocard app - it’s completely free and can easily be scanned at the point of purchase.

“Clearly, consumers need to keep their eyes peeled for any new offers, and be quick if they want to take advantage of rewards and cashback.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

MoneyFacts Archive

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