Don't ignore the cash back potential of credit cards

A bizarre piece of research shows that more people would take part in a medical experiment or lick the pavement than have ever taken out a cashback credit card.

Markets

Other markets

Market Data Notice

More market charts

by Lorna Bourke on Aug 22, 2010 at 00:01

Tough times require tough measures and it is surprising to see just how far some people would go to save money. According to Moneysupermarket, one in four of us would lick the ground, if asked, for £400. ‘Men are far more willing to perform crazy tasks for cash than women,’ it says.

The research revealed that half of Brits have never used any financial products which give rewards for spending - even though 57% would be willing to wait for four hours in a queue for £400. Perhaps more startling is that more people would take part in a medical experiment (24%), or lick the pavement (25%) than have ever taken out a cashback credit card (23%).

Part of the problem could be people’s perception that they would be turned down for the card so it isn’t worth applying. It’s true that credit card issuers are now being much more picky about whom they will accept. But it is easy to check your credit rating online or to discover if there are any nasty black marks on your file before you apply.

Probably the easiest of the cashback cards to understand is the Capital One World Mastercard which offers a flat 1% cashback on all spending on the card. There is however an £18 a year annual fee.

American Express also offers a good cashback card which is particularly useful if you spend a lot on travel, hotels and restaurants where the bills are likely to be large. Amex is not always accepted at supermarkets and other retail outlets.

The cashback structure is more complicated and offers 5% cashback for the first three months up to a maximum of £100 cashback. After three months the cashback drops to 0.5% for spending under £3,500, 1% between £3,501 and £7,500 and 1.25% above £7,501.

Moneysupermarket.com calculates that someone spending £2,500 per month on the American Express Platinum Cashback card would earn an extra £424 per year in cash back without changing their habits at all.

But with both cards the cashback discounts only make sense if you can afford to pay off your bill in full each month. If you use the credit facility the high charges will cancel out all the benefit from the cashback. To ensure you don’t miss a payment set up a direct debit.

Email a friend

Email me when someone comments on this article Print

6 comments so far. Why not have your say?

Cashback is the only thing worth going for.

I have used an Amex card for several years, it's accepted at all supermarkets, and most garages and covers most of our household spending. Recently however B&Q have stopped taking it. I guess that the charges to retailers are high.

I don't bother with loyalty points like Nectar since they are so difficult to use unless you happen to want to take up one of their special offers (we have over 30K nectar points and can't find anything we want to use them for).

I once had 57K airmiles but then had them taken away because I hadn't flown for three years (it's in the small print)

For me it's cashback first.

report this

Cashback and loyalty cards are all a waste of time.

The loyaly card small print gives the retailer the right to track your purchases and to target you with offers.

Cahback cards are not accepted everywhere and limit your choice of retailers: you can often buy cheaper elsewhere with a normal card or with cash.

Bank cards with points once gave reasonable goods in exchange for points, but these days tmost just give you a pathetic discount on a meal at a pub chain or a day out at Alton Towers.

What I really hate is having to respond to supermarket checkout staff: "Do you have a Nectar [etc] card sir? I do but I deliberately gave up using it a long time ago!

report this

I disagree with Peter Thoresen's sweeping dismissal: I use my Barclaycard for virtually everything I purchase and receive between £10-20 cashback each month. Barclaycard VISA is accepted by all retailers. As Lorna Bourke emphasises in her article, as long as you're disciplined and play off the bill in full every month, you will get hundreds back each year.

report this

I find the simplest and most useful card is the PARTNERSHIP mastercard by John Lewis Waitrose offering 1% on purchases from John Lewis and Waitrose and 1/2% on all other purchases. Certainly not a waste of time - if paid on time! YOui can probably use another card with slight better rates at other times, as long as you pay promtly.

report this

Well I've used cash back credit cards for several years now and as its been stated, as long as you pay it off each month it really is money for nothing,

My annual cash back varies between £500 to £700 as I literally put every item that I buy on the cards.

report this

Aug 23, 2010 at 10:33

I also disagree with Peter Thoresen. I use a Tesco credit card for all my food shopping and other ad hoc bills, and you earn Clubcard points on every purchase.

Although, like Peter mentions, Tesco's track your orders and build a very good idea of your spending habits and subsequently target you for promotions - but that's a positive thing in my opinion! You get offers on products you'd buy anyway, and you can always ignore them if you want to.

Tesco send us quarterly vouchers of around £30, which you can spend directly in store, but we often choose to spend them with Tesco 'partners', where we get 4 times the value.

report this

Please sign in here or register here to comment. It is free to register and only takes a minute or two.