Last days of the cashback credit cards
Companies are instead moving to cheaper points schemes. Chiara Cavaglieri reports
Sunday 31 January 2010
Cashback credit cards are being pulled off the shelves and could soon vanish altogether, according to new research. A study by financial data provider Defaqto shows that more than a quarter of credit cards offered cashback as a reward for spending five years ago, but today fewer than one in 20 cards carries this incentive.
Credit card rewards usually fall into one of four categories: cashback, shopping rewards, points schemes and Airmiles. The number of cashback reward cards has fallen dramatically, while the other categories remain relatively unscathed. A total of 28.2 per cent offered cash in January 2004 but this year that figure has collapsed to 4.8 per cent. The percentage of cards offering points schemes or Airmiles has marginally increased since then.
David Black, a banking expert at Defaqto, thinks the cashback numbers will decline even further. "The card providers will seek to recover lost income by a combination of increasing rates, introducing annual fees, less generous introductory offers and reining back on reward schemes," he says.
Some providers will set caps or offer enhanced cashback only on specified retailers. Barclaycard's One Pulse credit card, for example, offers 5 per cent cashback on Transport for London (TfL) spend, but sets a cap of £15 cashback per month (the equivalent of spending £300 on TfL). Other cards will have introductory periods and tiered rewards, or even a monthly fee. The Egg Money card, which pays 1 per cent cashback on spending up to £20,000, has a monthly fee of £1, meaning consumers would have to spend £100 each month just to cover the fee.
Much of the popularity of cashback credit cards is down to the fact that there are fewer stipulations about how rewards can be spent. American Express offers the most generous cashback card around; its platinum card pays the top rate of 5 per cent on spending in the first three months, up to a maximum of £100.
Unfortunately, providers are instead concentrating on cards that offer points which must be redeemed against specified goods or services. Cardholders may also be required to send off for vouchers, making it that bit more difficult to get their hands on the reward.
Towards the end of last year, American Express issued another reward credit card, this time offering a tiered points system. The Express Rewards card offers three points for every £1 spent at major UK supermarkets, two points for every £1 spent at major UK department stores and one point for every £1 spent elsewhere. Once cardholders earn 5,000 points (£25), they can redeem them for vouchers and gift cards at specific retailers including iTunes and Marks & Spencer.
American Express says that this does not mean the end of its popular cashback card. "We will continue to offer the cashback offer for the foreseeable future. Rewards are part of our brand DNA if you will, and part of what we want to be known for," says spokesman Doug Smith.
However, many reward cards will often be scaled back or even pulled altogether once the provider has enough customers. The Shell MasterCard from Citi was launched with an introductory offer of 6p cashback per litre of Shell fuel for the first 60 days, then had a standard rate of 3 per cent cashback on Shell fuel purchases. In spring 2009 it was withdrawn to new customers and in October the cashback rate was reduced to 1 per cent, then withdrawn completely last month.
There are ways that consumers can get the most out of lenders and play them at their own game. Those with a good credit rating can change their credit cards on a regular basis to take advantage of introductory offers.
It may even pay to use more than one card to maximise the potential benefits, such as the Barclaycard One Pulse for travel and a John Lewis MasterCard for shopping. One card can be used for a 0 per cent balance transfer, and another for a 0 per cent purchase period to avoid being stung by having to pay off the most expensive debts first.
"If you're suitably disciplined it may pay you to use different cards for different expenditure," says Mr Black.
- 1 The ‘Beverly Hills’ of Surrey pays more income tax than big cities of the North
- 2 Austerity has hardened the nation's heart
- 3 Tottenham to smash pay scale with £150,000-a-week contract in attempt to tie Gareth Bale to club
- 4 The moral case on tax avoidance is overwhelming - and we all know Google wants to do the right thing
- 5 Sam Wallace: The second coming of Jose Mourinho at Chelsea will be a reunion that can only end in tears
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Win anything from gadgets to five-star holidays on our competitions and offers page.
iJobs Money & Business
£500 per day: Orgtel: A top tier banking client urgently requires Finance Busi...
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...
£150 - £250 per day: Orgtel: KYC Analyst - London - Banking - £150-250/day C...
£500 per day: Orgtel: A top tier banking client urgently requires Finance Gove...
Day In a Page
A modern home of almost 1,000sq ft is close to Stoke Newington's high street. £499,950
A five-bedroom bungalow in Hoveton with riverside garden and mooring dock, £550,000
A refurbished one-bedroom flat with south-facing reception and high ceilings. £579,950
A four-bedroom Grade II-listed house in Nazeing with large gardens. £550,000
A modern four-bedroom house in a converted stable within walking distance to Peckham Rye. £695,000
Three-bedroom house in a quiet residential area within close distance to Battersea Park. £450,000
A three-bedroom cottage within commuting distance of London, Norwich and Cambridge. £250,000
A two-bedroom cottage with a sun room and gardens in South Chard. £350,000.
A three-bedroom semi-detached house with original features including fireplaces and wooden flooring. £399,950
A modern two-bedroom flat split across two floors and close to several public transport links. £595,000
A one-bedroom flat with an open-plan reception/kitchen and private balcony. £315,000.
A bright two-bedroom garden flat between South Acton and Chiswick Park. £499,950.
A listed four-bedroom farmhouse with stables, set in four acres. £500,000.
A three-storey family home with four bedrooms and an extended kitchen/diner. £995,000.
A three-bedroom Hamstone cottage in the rolling Somerset countryside. £430,000.
A luxury one-bedroom apartment on the first floor of a converted Victorian house. £425,000.