Luma credit builder card paying 4% cashback
New Luma credit repair card pays decent rate of cashback on supermarket shopping and petrol.
Capital One has launched a new Luma credit builder card that pays 4% cashback.
It's an unusual offer as credit builder cards tend to offer no frills. That's because they are designed to help those with little or poor credit history establish or re-establish a good reputation as a borrower, rather than encourage overspending to bag rewards.
So let's take a look at how the new Luma card balances responsible borrowing with the pursuit of cashback.
Luma Cashback Credit Card
With the new Luma credit card you will be able to earn 4% cashback at petrol stations and supermarkets.
The cashback rate applies on the first £225 you spend at these places each month. That means you can earn £9 a month or £108 in a year.
So the temptation to spend more in order to make more is limited to a manageable level and for things you are likely to need like food and fuel rather than for things you want.
Applicants will be able to get a credit limit from £200 up to a maximum of £1,500 depending on their circumstances, so everyone that gets the card has the potential to earn near enough the full amount of cashback on offer.
And unlike some cashback credit cards the Luma card doesn’t come with an annual fee, meaning if you pay your bill each month you will make £108 profit from being a responsible borrower.
However, if you don't pay off your balance each month you will be hit with a steep APR of 35.9%. And this advertised rate only has to be offered to 51% of successful applicants. So you could be offered an even worse rate.
Cashback is paid each January. But if you default at the time the payment is due to be made you won’t receive anything. Other defaults over the year will cost £12 plus interest on your outstanding balance, depleting the value of the cashback.
Other rewarding credit builder cards
Credit builder cards tend to be no-frills. But that’s not the story across the board and there are other cards available that reward borrowers on the path to good credit.
The Capital One Classic Extra for example pays 0.5% unlimited cashback on all your purchases and you get a £10 annual bonus for paying on time each month. You can get a credit limit of between £200 and £1,500 and you won’t have to pay an annual fee. It’s available to those with at least some credit history and you need to be on the electoral roll. This card comes with a 34.9% APR.
Elsewhere the Vanquis Bank Aquis Visa is another credit builder card that comes with a reward, although it’s only a one-off. You can get a £10 Amazon gift voucher if your application is successful and you start using your card. This card comes with a 29.8% APR.
For a more in depth review of the entire credit builder card range check out our article Top credit cards for poor credit.
How Luma compares to the mainstream
So how does the Luma card compare to mainstream cashback credit cards?
Well the Santander 123 Credit Card offers a similar supermarket and fuel cashback scheme. You can earn 1% cashback at supermarkets, 2% at department stores and 3% at petrol stations, TFL travel and National Rail (capped at £9 a month). However, Santander will pay cashback at the end of each month rather than at the end of each year, has a lower APR at 22.8% and doesn't come with any caps on cashback apart from on travel. That said the 123 Credit Card comes with an annual fee of £24 whereas the Luma card is free to use.
Elsewhere other cashback cards are offering 5% on all purchases for a limited period.
The American Express Platinum Cashback Everyday Credit Card pays 5% on purchases for the first three months, capped on spends up to £2,000. So you have the chance to earn £100 in just three months rather than a year compared to Luma. Thereafter the card pays up to 1.25% cashback. It doesn’t come with an annual fee and has an APR of 19.9%.
You can also get 5% cashback on the American Express Platinum Cashback Card in the first three months on purchases up to £2,500, giving you the potential to bag £125. You get a flat 1.25% cashback rate after that and a 2.5% bonus cashback rate in your anniversary month if you have managed to spend £10,000 on the card. However, this card comes with an annual fee of £25 and an APR of 18.7%.
Another top cashback card is the Capital One Aspire Elite. It pays 5% cashback for the first three months capped at £200. It pays up to 2% cashback thereafter and includes a concierge service. However this generous rate of cashback comes with an annual fee of £120 and an APR of 19.9%.
All in all the Luma card is pretty competitive as it pays a high rate of 4% that isn't just for an introductory period and comes with no annual fee for the privilege.
More on credit cards:
The best cashback credit cards
The best 0% purchase credit cards
The best 0% balance transfer credit cards
The best credit cards to use on your travels
Barclaycard launches 30-month 0% balance transfer card!
Santander 123 credit card to pay unlimited cashback on Amazon spends this Christmas
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