Cashback cards look like they are staging a return. Abbey is the latest company to join the fray, with a 5% offer on supermarket spending.
A few years ago we seemed to be awash with good offers for cashback credit cards. But then they seemed to fall out of favour, and it became rare to see any deals that offered more than 0.5% for any significant length of time.
Capital One recently upped the stakes with a card that offers 4% cashback in the first three months and 1% thereafter. Now Abbey has launched a new deal, offering 5% on supermarket purchases. This deal applies to its current credit card; Abbey isn't launching a new cashback credit card.
How the deal works
So what's the catch I hear you cry? The cashback offer runs from 3 September to 31 January 2008 (just under five months) and is limited to the first £1,000 of purchases you make. The supermarkets included in this offer are Asda, Co-op, Kwik Save, Morrisons, Sainsbury's, Somerfield, Tesco and Waitrose. Unfortunately, it doesn't apply to any petrol bought from these stores.
Abbey reckons that the average household spends £190 in supermarkets each month, so many people will be able to get the maximum £50 cashback.
Perhaps the most pleasing aspect of this deal is that existing customers will get it too, and without having to do anything. However, their cashback period is slighter shorter as it does not start until 1 October.
Abbey says we can 'expect to see many more initiatives which offer similarly valuable benefits.' This offer is worth up to £10 a month, so it will be interesting to see how if they can maintain this level. The move comes after Abbey moved its credit card business back in house, having outsourced it for the last six years to MBNA. It's a shame they didn't move it back sooner!
The balance transfer trap
Abbey's credit card also offers 0% on balance transfers for 12 months and 0% on purchases for 3 months. This is where you have to be a little careful. If you use the balance transfer facility and then spend on the card to get the cashback, you'll end up getting charged interest on your purchases. That's because any payments you make to Abbey will go towards offsetting your interest-free balance transfer first.
The interest rate on this credit card is 15.9% APR. Although that's not particularly high compared with many cards, it still won't be long before any interest you get charged offsets the cashback you earn. In other words, don't use this card for both balance transfers and cashback.
How does this credit card compare?
Comparing this credit card to other cashback offers is tricky at the moment because we don't know what the subsequent offers will be. Personally speaking, around 40% of my credit card spending goes on food shopping, so I reckon Capital One's offer of 4% cashback for three months and 1% thereafter is still a better deal, especially if you're already planning to make some large purchases in the near future.
High spenders should also check American Express's Platinum credit card. This offers 3% for the first three months and then 0.5% to 1.5% thereafter. The 1.5% cashback applies on spending over £10,000 a year.
Most other cashback credit cards offer a measly 0.5% at the moment, although Barclaycard Platinum does supplement this by also offering 2% on petrol and supermarket shopping.
Let's hope more credit card companies follow Abbey's lead and rejoin the cashback battle! You can apply for Capital One, American Express, and Barclaycard via our credit card centre.
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