Cashback is king for credit card spenders

Customers spending £500 a month on their plastic can earn up to £131 a year by playing their cards right as cashback rewards grow, analysis from financial research company Defaqto for Capital One shows.

But customers have to play their cards right, as the lowest-paying cards in the market would only earn £30 a year for the same spend. Defaqto’s analysis rated Capital One’s Aspire World MasterCard and Aspire Elite MasterCard as well as American Express’s Platinum as the best cards on the market.

The independent report forecasts continuing strong growth in the cashback market which has seen the number of cards available double in the past two years, driven by strong consumer demand. Currently 22 cashback cards are currently available compared with 11 in October 2010.

Research for Defaqto found cashback was ranked as the third most important feature for customers behind no annual fees and long interest-free periods.  Among the over-55s cashback is the second most important feature behind no annual fee.

Report author Brian Brown, Defaqto’s Head of Consulting, wrote: “Demand from consumers for cashback cards is strong as these cards give a guaranteed benefit with no additional effort, unlike points schemes where the customer has to build up value and then take further action to redeem the points.  Cashback can be earned no matter where you shop while points schemes are heavily dependent on where you shop.

“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.”

Michael Woodburn, Chief Marketing Officer, Capital One said: “It’s no surprise that the cashback market is growing as the cards offer fantastic ongoing value and meet a real consumer demand. We know that people want to be rewarded for using their credit card regardless of where they use it so with the chance to earn cashback on all your spending, why would you use any other kind of card?” 

The Defaqto report says the maximum that can be earned with points schemes can be as high as £180 a year for a £500 monthly spend but it cites Which? research showing that one in two card customers never redeem their points.

Capital One has recently expanded its cashback offer with the launch of its Aspire range of cards. The new Aspire Elite card rewards high spenders with 5% cashback for the first three months, capped at £200, and up to 2% unlimited cashback thereafter. Customers of this premium credit card will also benefit from a 24 hour concierge service to arrange anything from hard to find gifts and hotel bookings to restaurants and flights. The card also comes with purchase protection, extended warranty and best price protection. There is an annual fee of £120.

Alternatively, the Aspire World MasterCard pays 5% cashback capped at £100 for the first three months and up to 1.25% unlimited cashback thereafter. It offers an Identity Alert service provided by Equifax and there is no annual fee.

Applicants can choose which card suits them with a calculator on its website capitalone.co.uk/aspire  showing how much cashback they can earn based on their estimated monthly spend.

The Defaqto report – Customer Rewards in Credit Card Products – shows the most common rewards benefits are points schemes and shopping rewards offered on 20% of cards followed by AirMiles on 10% and cashback on 9%.

The report found that for 13 out of the 22 cashback cards available to customers spending £1,000 a month on their card would earn £100 or less in cashback over a year, with some of the lower paying cards only offering 0.5%. The lowest paying card would generate just £30.  Customers spending £1,000 a month in the first year would earn £250 on Aspire Elite and £157 on Aspire World.