American Express cuts top cashback credit card deals
American Express has cut the rates on its two best-buy cashback cards for new customers, while existing customers will see the changes take force over the next 18 months, in a move that squeezes shoppers who seek rewards for regular spending.
The Platinum Cashback Everyday card now pays 0.5% cashback on purchases up to £5,000, and 1% cashback on spending over £5,000 a year.
Previously these customers got 0.5% cashback on spending up to £3,500, 1% on spending bewteen £3,500 to £7,500, and a 1.25% rate on spending over £7,500.
See This week’s top cashback and reward credit card deals. This means someone who spends £1,000 each month on their card will lose £25 cashback a year. Under the old terms they would earn £120, while now they’ll get £95.
Cashback is also being scaled back on the Platinum Cashback Credit Card, though the £25 annual fee remains unchanged.
This card now pays 1% cashback on the first £10,000 worth of spending each year, and 1.25% cashback on everything else.
Previously the 1.25% rate applied to all spending. This will cost someone spending more than £10,000 a year £25 in lost interest.
Both cards will keep paying an introductory 5% rate for the first three months, and the total amount of cashback that can be earned is unlimited.
If you’ve taken out a card in the last year - between 22 August 2015 and 8 August 2016 - your terms won’t change until the second half of 2017. If you took out an American Express card before 22 August 2015, your terms will change on 8 November 2016.
What’s happening to cashback card deals?
The best cashback card deals were expected to dry up from 9 December 2015 when an EU regulation came into force that capped the amount most credit card companies could charge retailers toprocess card transactions, as it was these fees that funded cashback schemes for most card companies.
However, while a number of high profile providers have scaled back or axed cashback reward schemes, the number of cashback deals on the market has actually increased over the last year.In January 2015, before the interchange fee cap was introduced, there were 19 cashback cards available on the market, but now there are 25.
The average cashback rates have fallen, but only slightly. In January 2015 the average rate paid on cashback cards was 0.7%, but now it is 0.68%, hardly a big difference.
However, while cashback rates haven’t changed a great amount, annual fees for cashback cards are now common. In January 2015, just four cashback cards charged fees, but now seven cards do. The most expensive of these is NatWest’s Black Rewards Card, which costs £84 a year for just 0.5% cashback.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.