Credit Card's Loyalty Stretched as Cash Back Rewards Culled

By: MoneyFacts

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.

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.”

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