My favourite credit card

Ed Bowsher has a new credit card for 2011.

As we start 2011, I’m delighted to say that I got through Christmas without running up any credit card debt. Hurrah! That means I don’t have to worry about paying extortionate interest rates and I don’t need to apply for a 0% balance transfer card.

But that doesn’t mean I should sit back and do nothing. I’m all too aware that I spend a fair bit on my card and I’m not getting any financial reward for it. Points and prizes are all very well but nothing beats cold, hard cash – I think it’s time I started getting a cash return on my spending.

So I went on the web after Christmas and had a look at the best cashback cards that are currently available. I took a quick look at the Halifax Rewards Clarity card which pays £5 a month as long as you spend £300. However, I rejected it because you have to have a Halifax current account.

I then focused on three attractive cashback cards. Here’s the lowdown on the three beauties:

Egg Money World MasterCard

The thing I like about the Egg Money World Mastercard is that it’s nice and simple. For every pound you spend, you get a penny back in cashback. That’s up to a maximum of £200 cashback over a year.

On top of the cashback, you also get access to some special offers as an Egg Money customer. These include discounts at the Cdwow! and Superbreak websites.

The downside is that you have to pay a monthly fee of £1. So you have to spend a minimum of £100 a month on the card to make a profit. Credit card fees annoy me and I worry that I wouldn’t make much profit in a low-spending month.

Capital One World MasterCard

The Capital One World Mastercard is similar to the Egg card with 1% cashback on all your spending.

The fee structure, however, is a bit more complicated. You’ll have to pay an annual fee of £18, but you’ll get some of that back every January when Capital One pays a £10 ‘bonus credit.’ It would be much simpler if Capital One just charged an £8 fee - I expect the marketing department couldn’t resist the opportunity to shout about ‘bonus credits.’

American Express Platinum Cashback Credit Card

The American Express Platinum Cashback Card doesn’t have a fee! And even better, it has a great introductory offer. For the first three months you have the card, you’ll get 5% cashback on all your spending – up to a limit of £100!

Then once the three months are over, you earn different rates of cashback depending on how much you spend:

The other big attraction is that this card has a six-month 0% on purchases offer too. So if you make a major purchase like a holiday or giant 3D TV, you can spread out your repayments over six months and not have to pay any interest on the debt.

On the downside, American Express isn’t accepted by all merchants. However, I’ve checked and it’s accepted by the places where I spend most of my money. These include Tesco, Waitrose and the restaurants I normally go to.

Which card is best?

Having looked at all three cards, I now needed to figure out which one would save me the most money. I’m not sure how much I’m going to spend on the card this year, so I did two example calculations:

Cashback on £6000 spend over the year

*£12 fee is deducted

**£18 fee is deducted, £10 ‘bonus credit’ added

Cashback on £12000 spend over the year

*£12 fee is deducted

**£18 fee is deducted, £10 ‘bonus credit’ added

I did calculations including Amex’s introductory 5% offer and excluding it. I did this because I wanted to get a feel for how the cards would perform over the long term as well as 2011.

The results are interesting. If you include the 5% offer, Amex is the clear winner for 2011. Without the offer, Amex isn’t such a strong performer although it still just wins if I spend £12,000 on the card over the year.

In the end I decided to go for the American Express card. The generous cashback was just too tempting and I’m also keen to support cards that don’t charge a fee. I have a new favourite credit card!

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