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Does your favourite retailer repay your loyalty?

We’ve been analysing reward credit cards ready for Christmas and have uncovered some real turkeys hidden inside the credit crackers. Have you been disappointed with your reward credit card?

In the run-up to Christmas, many of us will be spending a small fortune in supermarkets. And with so much money going out, a reward credit card from your favourite store sounds like a great way to get a bit of money back. Unfortunately, though, the loyalty you show is unlikely to be reciprocated.

We wish you an unrewarding Christmas

On the plus side, Tesco’s card offers the joint-longest 0% period on new purchases, allowing you to spread the cost of Christmas without paying any interest. And yet, if it’s rewards you’re after, you might be surprised to learn that Tesco’s reward scheme offers just 0.25% – the worst overall deal if you redeem your points in-store.

The others aren’t much better. Sainsbury’s Nectar MasterCard might offer a respectable 1% in-store, but you’ll earn an execrable 0.1% reward elsewhere. The Asda Reward credit card pays 0.5% in-store and just 0.25% elsewhere and, while it offers double rewards for the first three months, maximum annual cashback is just £50.

Even the best reward cards have terms and conditions that could easily trip you up. For example, BHS and House of Fraser rule the high street when it comes to credit card reward rates. And yet, once they’ve sent you your vouchers, you only have three months to use them before they expire.

As several card providers send out vouchers every three months or so, it’s unlikely that you’ll build up massive rewards in any period. Indeed, instead of only spending your £5 voucher, you’ll probably put it towards a more expensive item in-store. The retailer wins every which way.

And an unhappy New Year

And if you don’t pay off your credit card bill every month, get ready for a hefty interest charge. For example, you’ll be paying an interest rate of 19.9% if you take out the reward credit card from BHS, Debenhams or House of Fraser and don’t pay it all off when your bill arrives. After a few months, the interest you’re charged soon wipes out any rewards you’ve earned.

If retailers are going to give with one hand and take with the other, you might be better off with an old-fashioned cashback card instead. Or go old-school and just pay in cash.

How are you paying for Christmas? Have you lost out on rewards due to the way your favourite store’s credit card works?

Sophie Gilbert says:
16 November 2011

I’ve got two reward credit cards, one with John Lewis and one with House of Fraser and I love getting the vouchers when they come in the post. I also appreciate the fact that John Lewis’ vouchers now don’t have an expiry date, whereas House of Fraser’s still do. I can always find something to buy at John Lewis especially, and at Jenners’ (House of Fraser) in Edinburgh, so it’s not as if the vouchers were going to lie in a drawer unused, and in the first place it’s not as if I wasn’t going to spend the money on my credit cards either as I use them for all my shopping, including online purchases, and I always pay my bills in full.

I know what follows isn’t about credit cards, but it is relevant to the concept of rewards.

I can’t say that I am impressed by my Nectar card (not a credit card, just a points gathering device). I don’t think the rewards are great and it seems you can’t redeem point just in any Sainsbury supermarket. It’s got to be the one your card is affiliated with apparently, as I found out recently. Not practical.

Boots and Tesco aren’t fantastic either, but on principle I have reward cards with them because I shop there regularly and why not get back some of the money they rip off me in the first place? What I find irritating with Tesco is that they do send you money off vouchers, but they also send you these little vouchers where if you buy eg £1 worth of cheese you’ll get extra points on your reward card. Forget that, just give me more money off what I want.

I was quite surprised that your list of Reward Credit Cards did not include the one which I’ve held for a number of years, namely the PayPal Mastercard.

I regularly get vouchers on line which I can use to offset any purchases made with companies which accept Payment by PayPal.

The Halifax Reward credit card gives a flat £5 every month you spend £300 on the card. If you spend more than the £300, use another card that gives a decent rate for the surplus; if you aren’t going to spend that much, you can use the other card for the whole month. MBNA give 1.5% for petrol and supermarket, and 0.5% for the rest.

paul harrison says:
4 December 2012

i am looking for a comparrison for loyalty cashback cards
i have just signed to lyoness from austria which can be used all over the world do you do a campare
it has to be recommended to memebers

The Aqua card gives 3% cashback, but limits you to a £500 a month credit limit for the first six months. If you exceed this (even by a small amount) you have a penalty of £12, and you not only lose all moneyback earned in the current year, you get no more until the anniversary of opening the account. If you take one of these cards, be very careful to keep close track on what you have spent on it. Another restriction is that you can only earn no more than £100 cashback in a year, equivalent to a spend of under £3500. So spend about £300 a month on it and you should be OK.

toni m p says:
1 April 2014