The days of bumper cashback earnings from credit cards are drawing to a close after American Express became the latest credit-card provider to slash its cashback rates. For years, Amex’s Platinum Cashback and Platinum Cashback Everyday cards have consistently been the most generous cashback cards: if you were willing to put up with the hassle of your main credit card not being accepted everywhere, the American Express cards offered more than double the cashback offered elsewhere. But that’s changing. New applicants will still get 5% cashback for the first three months, as before, but after that the deal gets a lot less generous.
The most you can earn now on the Everyday card is 1%, down from 1.25% previously. To get 1% you’ll have to spend at least £5,000 per year. Spend less than that and you’ll only get 0.5% cashback. The Platinum card now requires you to spend more than £10,000 a year to get its top rate of 1.25% cashback and the anniversary rate (when your cashback was doubled for one month in the year) has been scrapped. The reduced rates apply to new applicants immediately and to existing cards from 8 November.
So, is Amex still worth bothering with? If you already have an Amex cashback card and use it sensibly, it’s unlikely to make sense to cancel it. The Amex cashback rates still beat what you’ll get on other credit cards. However, you must make sure you pay your balance in full each month. The Everyday and Platinum cards have a whopping APR of 22.9% and 28.2% respectively. Accrue interest on these cards and you’ll quickly pay American Express far more than it is paying you in cashback.
If you’re applying for a new card, you need to assess how you’ll use it. For big spenders who clear their card monthly, Amex will usually still be the best deal. But if you spend less than £5,000 a year on your credit card, or know you won’t always clear your balance, consider Nationwide’s Select credit card. This pays 0.5% cashback on all sterling purchases and has a 12-month interest-free period on purchases and balance transfers.
Alternatively, Santander’s 123 credit card pays 1% cashback on supermarket shopping, 2% in department stores and 3% on petrol and train fares. But your maximum cashback is capped at £9 a month and there is a £36 annual fee.
Two alternatives to cashback cards
Cashback credit cards are attractive because you are being rewarded with hard cash that can be used anywhere. Rewards cards – where you accrue points or discounts – are much less flexible. However, if you are especially loyal to a brand or airline you could make a rewards card work well for you.
For example, if you do all your supermarket shopping at Tesco then the Tesco Clubcard could be worth a look. You earn one clubcard point per £4 spent in Tesco on the credit card (on top of the one point per £1 you earn just for having a standard Clubcard) and one point per £8 spent elsewhere. Each point is worth 1p when spent in the store, but you can use Clubcards Rewards vouchers to boost a point’s value up to 4p. So if you use the card widely, you could earn a lot more than you can with a cashback card.
When it comes to choosing an air miles credit card the choice really comes down to who you fly with most regularly, because the fastest way to build up big rewards is through frequent flying on the same airline. The British Airways American Express card rewards you with one Avios point per £1 spent on the card, and if you spend £20,000 a year on the card you’ll earn a free “companion ticket”. Virgin Atlantic’s White card offers one mile per £1 spent and a companion ticket if you spend £15,000 a year.
The drawback with rewards credit cards is that you are accruing your rewards in the provider’s “currency” and your earnings can be devalued at any time. In recent years, both Tesco and British Airways have fiddled with their rewards systems, resulting in points being worth less than before.