Credit Cards serve lots of purposes, be it to help you out of a short term cash flow crisis or to save money, the convenience of credit cards is unrivalled. However more and more credit cards can now help you actually make money. You do this by taking advantage of a cashback credit card. Thus every time you spend on it you make money, as it gives you back a percentage of what you spend on it. Therefore providing you pay off your full balance every month, you are effectively getting money for free!!
According to American Express however, more than half of all credit card holders (51%) in the UK do not own a reward card. With so many of us looking to cut back on Christmas spending, now is the best time to get a card which gives you cash for spending.
A word of warning however. These types of cards should only be considered if you intend to pay off the balance each month and avoid interest charges. Also, these types of cards have diminished a lot in the current UK financial market, but there are still some good deals to be had. According to Fool.co.uk Credit Cards Team who featured on Yahoo today the two best deals around are, and JSTFinancila.co.uk agree;
The American Express Platinum Cashback credit card
The Egg Money MasterCard.
The American Express Platinum Cashback credit card comes with an introductory rate of 5% cashback for the first three months (up to a maximum spend of £4,000 so you can get a maximum of £200 cashback). After that, you'll get 0.5% on up to £3,500 of annual spend, 1% on amounts from £3,501 to £10,000, and 1.5% cashback on amounts above that.
So, really after the three month period it isn’t as competitive as it was, however it’s still an excellent deal over the festive period.
With The Egg Money MasterCard there is no introductory rate, it offers a flat rate of 1% cashback throughout the year, every year. See the table below for comparison.*
Monthly Spend Egg Money cashback (over one year) American Express cashback with initial bonus American Express cashback excluding bonus
£100 £12 £19.50 n/a
£200 £24 £39 £12
£300 £36 £59 £18.50
£400 £48 £84.50 £30.50
£500 £60 £110 £42.50
£600 £72 £135.50 £54.50
In conclusion therefore, the credit card which gives you the best returns depends not only on how much you spend each month, but when you spend it.
If you take into account bonus rewards, during the first year the American Express Platinum Cashback credit card is significantly better, with more cashback earned than the Egg Money card on all amounts.
However, from the second year and beyond, the Egg card overtakes the Amex as a better deal. If you're not a big spender, the Egg card will prove to be better in the long run (although average cashback values over two years still leaves the Amex in top spot).
It’s worth noting that these figures are based on the assumption that you spend the same amount each month, but in reality most of our spending patterns do not work like that. Therefore be aware of any exclusions or terms and conditions.
As an example, the AMEX card won’t pay anything unless you accrue at least £12 cashback each year, thus meaning you have to spend at least £2400 in order to qualify at all.
When all said and done its important to remember that you need to make the card work for you and your current financial circumstances. Cashback credit cards are designed to reward you for everyday, consistent spending. Used wisely, they can help you pocket some extra cash for doing very little, apart from what you were going to do already, spend!!
*Source-Fool.co.uk Credit Cards Team-Yahoo.co.uk November 2008