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Credit Cards & Loans

Credit card cashback becoming scarce

Paloma Kubiak
Written By:
Paloma Kubiak

Shoppers hoping to be rewarded for spending on their credit cards have found the cashback is being scaled back, so it may be necessary to review the product.

The number of card providers offering a standard cashback deal has fallen over the past five years, while many that do offer the rewards have cut their rates significantly.

Research from data site Moneyfacts revealed that in 2012, six providers all had at least one credit card offering a cashback deal, but they’ve since vanished (Bank of Ireland UK, Capital One, Creation Financial Services, Halifax, Leeds Building Society and Sainsbury’s Bank).

And just last week, MBNA joined the ranks of providers pulling cashback deals for existing customers.

Rachel Springall, finance expert at Moneyfacts said the cashback credit card market is becoming a “progressively shrinking market” with the most common cashback return today being 0.50% for everyday spending, which equates to just 50p for every £100 spent.

“While there are still some introductory deals around, customers would be wise to check the terms. For example, American Express offers 5% for three months on its Platinum Cashback Everyday Card, but this is a short-term offer and customers will find that it caps the cashback available at £100 over that period. They’d also need to spend £3,000 each year to qualify for cashback,” she said.

She noted there are other cards available that may seem appealing, like the ASDA cashback card, but the maximum returns are only available on eligible spends and any gains would need to be converted into supermarket vouchers.

“Another alternative could be the NatWest Reward Credit Card where up to 1% can be gained, but again, this return is only for spends in supermarkets, plus the card costs £24 each year for non-current account customers. Other alternatives include TSB, with its current account customers eligible for a credit card that pays 1% cashback, capped at £5 per month.”

Springall added that since the 2015 EU interchange fee cap ruling, cards offering cashback have dwindled, as providers assessed how they could possibly recoup their costs. She suggested that one of the ways they could still offer a cashback deal would be to introduce a card fee, but instead they either pulled the offers or limited the rewards.

She said: “It’s also becoming more common for shoppers to find that any gains from their spending is shoehorned into vouchers with specific brands. This limits their appeal and customers could well forget to spend the vouchers, which is why straightforward cashback is much more desirable.

“Customers will need to work harder to earn something for nothing on a cashback credit card, and one of the ways to maximise returns could be to use the plastic for everyday spending and then pay off the balance each week. This way, customers can avoid being hit by interest charges that will eat into any accrued cashback.”