Nobody can be too surprised that consumers are intrigued by the prospect of a credit card that offers them cashback on their purchases; what is a little more unexpected is that it seems more and more customers are abandoning points schemes in favour of the cards.
Suppliers have responded to the demand – a report by Defaqto found that there are twice as many cards are on the market today as two years ago in October 2012.
According to the report just over half of these cards pay a meagre £100 per year or less for people spending £1,000 on them, with some of the less attractive cards only offering 0.5pc on purchases.
The report’s author Brian Brown said: “Card users most likely to benefit from cashback cards are mid and high net worth individuals whose monthly spend would be at a level that would generate an amount of cashback with a significantly tangible annual value. Someone spending £1,000 a month could earn £250 a year in cashback.”
Consumers should choose their card carefully though, as some cards will only reward their owners with a few notes for the same £1,000 per month – as little as £30 in some cases. It’s extremely important that people look through all the options available to ensure they’re getting the best rate.
Will Becker from the comparison site TotallyMoney.com >said: “We love cashback cards at TotallyMoney.com. With the average UK household putting over £20,000 on plastic, our research shows that an average household could be making over £800 a year in cashback. Alongside cashback, users are benefitting from useful statutory protection versus paying with a debit card. We agree with Defaqto’s main conclusion but question whether it’s possible to do materially better with some rewards points schemes. Our research shows that the best points schemes only just ahead of the best cashback cards. And the majority of points based schemes offer very poor value compared to the best cashback cards. Given the level of effort to receive good value and the difficulty of using points rewards, we think that for most people, cashback is king. Of course, for all rewards cards it’s vital to follow the golden rule of spending normally and repaying in full. Paying interest would more than swallow up all that cash or rewards benefit”