Around 700,000 customers will be moved onto a more ‘straightforward’ cashback deal but tens of thousands could be worse off as a result.
Barclaycard is going to close five credit cards from its old cashback credit card range.
The changes will impact 700,000 customers and around 80,000 could see the cashback they earn drop as a result.
Existing customers will be moved onto a new card: the Barclaycard Cashback Credit Card Account. This is also likely to become available to new customers later in the year.
The changes
The cards that are affected are: the Barclaycard Choice card; Barclaycard Visa Cashback card; Barclaycard MasterCard World card (formerly the Egg cashback card); Barclaycard MasterCard Cashback card; and the Barclaycard High 5 Cashback card.
The new Barclaycard Cashback Credit Card account will come with two cards: an American Express card, which will offer 1% cashback on all spending; and a Visa card, which will pay 0.5% cashback.
The new cashback cards won't come with any tiered rates (where you have to spend a certain amount to earn a higher cashback rate), annual fees and caps on how much cashback you can earn.
As well as removing these trappings customers will also be able to get monthly cashback instead of having to wait until the end of the year.
Barclaycard says that it's currently writing to customers about the changes and that they should receive their new cards in May.
A spokesperson told us that any unpaid cashback from an old card will be credited to the new account.
Winners and losers
Barclaycard says that most customers will benefit from the changes and will see their cashback earnings improve.
However, the firm concedes those that use existing cashback tiers to maximum effect will see see a drop.
And around 80,000 former Egg customers which have the Barclaycard MasterCard World Card could suffer as a result of the changes.
[SPOTLIGHT]These customers are currently receiving 1% cashback – a rate which was protected when Barclaycard took over the business from Citigroup in 2011.
In order to achieve the same rate under the new account these customers will need to make sure they do all their spending on the American Express card. However, as Amex is less widely accepted the Visa card paying a lower rate of cashback may sometimes have to be used instead.
But Barclaycard says it's not that black and white as 15,000 of these former Egg accounts are considered dormant, some had to pay an annual fee of £12 and cashback was capped at £200.
The new Barclaycard Cashback Credit Card Account will be free of these caveats.
Why is this happening?
Barclaycard says it’s making the changes after research showed customers felt cashback offers were too confusing.
Tiered rates, introductory ‘teaser’ rates, caps and annual fees make it hard for people to spot the best deals as most of the time the best card depends on your spending habits.
The firm’s last cashback offering perhaps is the perfect example of this.
The Barclaycard High 5 Cashback card was described as "convoluted" by one lovemoney journalist when it came out as it offered top rates of cashback on your five most expensive purchases each month and another rate for everything else. There were also limits on the amount of cashback you could earn as well as an annual fee of £24.
The changes mean Barclaycard customers will be able to benefit from the top rate of cashback as soon as they start spending. However, with two cards to use, this is still quite a complicated way of earning cashback.
Alternative cashback credit cards
If you’re not happy with the upcoming changes at Barclaycard here are some of the top alternatives on the market right now.
First up is the American Express Platinum Cashback Card. It pays 5% cashback on purchases for three months, though this is capped on spending of up to £2,500, which means you can earn a maximum of £125. After the introductory period you can earn an unlimited 1.25% on all purchases. The card comes with a £25 annual fee, but if you apply before 19th March 2014 you can get £25 bonus cashback to cover this charge. The representative APR on the card is 18.7%.
The American Express Platinum Cashback Everyday Card is the fee-free alternative. It also offers 5% cashback on purchases for three months, but this time the cashback is limited on spending of up to £2,000, meaning the maximum you can earn in this period is £100. Thereafter you can earn tiered rates of cashback. You can earn 0.5% on annual spending up to £3,500, spending between £3,501-£7,500 gets a rate of 1% while spending over £7500 earns 1.25%. This card has a representative APR of 19.9%.
The Capital One Aspire Elite is another cashback credit card that is paying 5% cashback for the first three months but is limited on spending of up to £4,000, which can earn you a maximum of £200. Thereafter you can earn tiered rates of cashback: 1% is paid on spending up to £15,000 and 2% on spending between £15,001 and £50,000. This card has a fee of £120 a year, so is only suitable for heavy card spenders, and has a representative APR of 19.9%.
If you're not planning many big purchases and want a card to help with everyday spending the Santander 123 card could be a better option. You can earn 1% cashback at supermarkets, 2% at department stores and 3% at petrol stations and on TFL or national rail travel (up to £300). The card attracts a £24 fee though, but you can get this waived for the first year if you have or open a Santander 123 Current Account.
Normally in order to earn the most from a cashback credit card you need to clear your balance each month as if you don’t you’ll end up paying interest on your purchases, which will erode whatever you manage to earn. However two fee-free cashback credit cards are offering 0% purchase periods, which means you can spread the cost of big purchases and still earn cashback.
The American Express Platinum Express Platinum Cashback Card Exclusive comes with 16 months 0% on purchases and offers to pay cashback at a rate of 1.25% on anything you buy. It has an APR of 18.7%.
Meanwhile the Nationwide Select card pays 0.5% cashback on all purchases and comes with 15 months interest-free on purchases. It also comes with 26 months 0% on balance transfers, which until 31st March has a reduced balance transfer fee of 0.75% – making it the cheapest long-term balance transfer credit card around. It also has a low representative APR of 15.9%. However, you will need to have or open a Nationwide FlexAccount, FlexDirect or FlexPlus account to be eligible to apply for this card.
Finally cashback credit cards normally require you to have a perfect credit history but the Capital One Classic Extra is available to those with bad credit. The fee-free card offers a flat 0.5% cashback on all purchases and you can earn a £10 annual bonus if you pay your balance off each month over the year. You will need to make sure you clear your balance every month to avoid the hefty 34.9% APR.
For more read The best cashback credit cards.