Let the cashback battle commence

American Express has raised the bar in the cashback market, offering an impressive offer to challenge the current market leaders Capital One.

Michelle Slade, analyst at Moneyfacts.co.uk, comments: “This is a hotly contested market, and with Christmas just around the corner it’s an ideal time to make full use of these introductory offers.

“Capital One offers 4% cashback for three months, followed by an impressive 1% thereafter, whereas the enhanced American Express deal provides 5% for the first three months, followed by a tiered reverts to rate ranging from 0.5% to 1.5%, dependent on your annual spend. If you are looking for a longer term deal, it is vital to look beyond the introductory offer.

“Taking a constant average monthly spend of £1K, Capital One would yield a £210 return in year one, compared with £247.50 with American Express. This is an impressive return for just going about your day to day spending. And with neither card imposing a maximum cashback, your earnings potential is almost limitless, only restricted by your credit limit and spending power.

“With the cashback paid annually, take out one of these deals now and not will you only benefit from the introductory offer at a time when your spending will be at its highest, but just before next Christmas you will reap a healthy return too.

“Be extra savvy and make the best possible return, simply by using your card for all of your purchases, rather than using your debit card or paying with cash. Then transfer this into a separate savings account, ready to repay your balance in full each month. Not only will your cashback return rise, it’s a double bonus as you will be earning interest for the month too. With rates topping 6% easily found, your money will be working extra hard.

“Cashback deals are perfect if you repay your balance in full. By just going about your day to day spending, there is no easier way to earn money.

“If you carry over a balance each month and thereby pay interest, a cashback incentive should be low down on your list of priorities from a credit card. With rates averaging 14.9%, any interest paid will soon outweigh the cashback return. American Express, while increasing its incentive has also raised interest rates by 3% on purchases to a hefty 18.9%. A perfect example of giving with one hand, and taking straight back with the other.”