The best cashback credit cards
We all like the idea of something for nothing, and one of the best ways to rack up some free cash is by paying for your purchases using a cashback credit card.
But in case you hadn’t noticed, we’re in the middle of a recession, and as the credit squeeze filters down, cashback deals are becoming harder to come by.
Just last year, Egg withdrew its popular Egg Money card to new customers, while Co-op spin-off Smile recently reduced its cashback from 0.5% to just 0.25%.
So, with companies cutting cashback left, right and centre, where’s the best place to look?
Back in the game
Thankfully, The good news is Halifax has thrown its hat back into the cashback ring.
The new and improved Halifax Cashback card offers 1% cashback on grocery and petrol spend, together with 0.5% on everything else.
If you’re a regular reader, you’ll know we’ve talked a lot about the American Express Platinum Cashback card, which has topped the best buy tables for some time.
So do we have a new pretender to the throne?
Here’s how the two cards compare:
* Assumes spend of £2.5K food/fuel & £2.5K on other purchases
* Compare credit cards
*
# Does not take into consideration any bonus cashback accrued during the first three months
You’d be forgiven for thinking there wasn’t much between the two cards. After all, an extra £5 cashback isn’t exactly life changing.
But depending on where you spend the your cash, the differences can be significant.
For example, the higher 1% cashback rate for the Halifax card only applies to supermarket and fuel spend. So, if none of your £5,000 was spent on groceries, you’d only accrue £25 cashback, while if all of it was, you’d earn £50 – double the amount of cashback, and far superior to the Amex offer.
One other advantage of the Halifax credit card is it is more widely accepted. As Alison Hunt explains in Credit card freebies, many smaller retailers and some bigger players such as Play.com and H&M do not accept Amex, as it charges merchants a higher fee than Visa or MasterCard.
Hey big spender…
However, for big spenders who want to make the most of all purchases, American Express proves the better option.
Unlike Halifax, there is no maximum limit on the cashback you can earn (except during the first three months, when the maximum is £100). In addition, as the Amex rate is tiered, the more you spend, the better the returns.
For example, if you spent £10,000 a year, even with half of it going on food and fuel, you’d earn £82.50 with Amex, compared to £75 with Halifax – and that’s not including any bonus cashback you get during the first three months.
There is also the subject of APRs. You might argue that Halifax, at 15.9% APR, has a much better rate than Amex.
But in the world of cashback, APRs go out the window, and you should only take out a cashback credit card if you pay off your balance in full each month. If you don’t, the interest you’ll pay will far outweigh any cashback you earn.
On the upside, Halifax offers an extra generous 59 days interest-free credit, which is one of the longest interest-free periods on the market. It could also come in handy for those big purchases.
Remember, a cashback card is designed to maximise the benefits of spending, and is not just an excuse to just splash that cash. Keep an eye on those receipts to ensure you’re not using your flexible friend for the sake of it.
Otherwise, cashback cards are a great way of earning money as you spend. And, as deals start to disappear fast, it’s time to make your money work harder for you.
After all, if someone offered you something for nothing, wouldn’t you take it?
By Szu Ping Chan
