Why credit card customers may be in line for bigger rewards

Lenders have been less than generous with credit card rewards. But, says James Daley, that could soon change

Credit-card reward schemes have been getting ever skimpier over the past year, as increasing numbers of lenders have trimmed back their benefits or even axed them altogether. Last year alone, Royal Bank of Scotland, Halifax and Egg all withdrew their cash-back credit cards, while Barclaycard severed its tie with the Nectar points plan towards the end of last summer.

The cutback in reward schemes has been driven by the increased demand for interest-free offers. With 0 per cent cards now attracting the largest numbers of new customers, lenders have been competing to offer ever-longer interest-free periods - often at the cost of all other types of rewards. But for the diligent credit-card user, who pays off their balance in full each month, credit-card reward schemes are still in demand.

"You end up with people having four or five cards in their wallets, which they are transferring their balance across," says Patrick Muir, of Morgan Stanley's consumer banking group. "But the card at the front of the wallet tends to be the one that gives something back."

Although there are still a handful of reward cards left on the market, new research from Morgan Stanley reveals that there is now an increasing gap between the value of rewards available. Its survey of 4,000 cardholders found that the average reward claimed over the past three months by customers of its cash-back card had a monetary value of £72, while the average value of rewards redeemed by American Express Nectar Card holders over the same period was just £45.

Most cards now provide a very small level of reward when converted into monetary terms. Although the best cash-back cards pay as much as 2 per cent back on purchases, borrowers may need to spend thousands of pounds on their card before they will benefit from this kind of handout. Such is the case with American Express's Platinum Card, which pays 2 per cent on all transactions for the rest of the year, once you have spent more than £7,500 on your card. If you spend less than £3,000 on your card in a year, you will get just 0.5 per cent cash-back.

The Platinum card has a typical APR of 8.9 per cent and works well for big spenders. Most other cash-back cards pay 1 or 2 per cent on purchases for a limited period, before dropping back to 0.5 per cent. Morgan Stanley's offers 2 per cent until August, then drops back to 1 per cent. With the exception of Amex, interest rates on cash-back cards are usually not that competitive.

If it's a points card you're after, it becomes harder to compare the monetary value of the rewards. Amex's Nectar Card gives four points for every pound spent in a shop that participates in the Nectar programme. Elsewhere, you will just earn one point per pound spent. Around 200 Nectar points roughly equates to £1 -worth of rewards, which works out the same level of benefit as a 0.5 per cent cash-back card.

The best card for you depends on your spending habits. If you're a regular M&S or John Lewis customer, both of these stores offer excellent combined credit and reward cards. Both pay one point for every pound spent in store, and one point for every £2 spent elsewhere. Every 500 points is worth £5 back in vouchers. Egg-card users get big discounts at certain internet shops, while Airmiles card holders get one airmile for every £20 spent. Ten airmiles is roughly equivalent to £1.

Robert Kenny, of moneysupermarket.com, the comparison website, concludes: "Unless you spend an enormous amount, the value of most existing loyalty programmes is not very good."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate
    Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

    'The economic collapse has happened. What is at risk now is democracy...'

    If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
    The science of swearing: What lies behind the use of four-letter words?

    The science of swearing

    What lies behind the use of four-letter words?
    The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

    The Real Stories of Migrant Britain

    Clive fled from Zimbabwe - now it won’t have him back
    Africa on the menu: Three foodie friends want to popularise dishes from the continent

    Africa on the menu

    Three foodie friends want to popularise dishes from the hot new continent
    Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

    Who will fill Donna Karan's boots?

    The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'