LONDON, November 6th, 2013.
With just six weeks left until Christmas, new research released today from TotallyMoney.com, the credit comparison experts, reveals that UK credit card holders could lose up to £323 million by not using cash back or reward credit cards for their festive spending. With individual Christmas spend estimated to hit £488 per person, this could earn consumers up to £20.50 in cashback or rewards. In a year, this reward could be as high as £227 per household if all spending is carried out on a cashback credit card. However, 15.7 million people are completely missing out as they are using credit cards that don’t offer these benefits.
In total, just 14% of consumers are currently using cashback credit cards and 34% reward cards. These 14.6 million savvy shoppers are set up to earn themselves a whopping £300 million on their Christmas spending.
£5 billion available in rewards and cashback every year
This is not just a problem at Christmas, throughout the year consumers spend a total of £501.6 billon on credit, debit and charge cards. Assuming an average return of 1% across reward and cashback deals, this spend alone could earn consumers £5 billion a year. With credit card spending predicted to grow by 1.5% in the next year, this figure is only going to get bigger. 17.9 million (59%) credit card holders pay their balance off in full every month which means they are the perfect customers to earn rewards or cashback on their spending. However these cards are not suitable for everyone, people that are paying interest should focus on reducing their credit card balance first as this will save more money.
Will Becker, CEO and co-founder of TotallyMoney.com comments: “Very few people are using the best reward and cashback credit card deals, often due to a lack of understanding of how much they could earn over the course of the year. We have also discovered a misplaced belief amongst consumers that these products are a luxury for high net worth individuals. This simply isn’t true as these cards are designed for a wide range of budgets and credit histories, right through to deals which pay up to 4% cashback for those with less than perfect credit.
“We would really like to see a significant growth in consumer appetite for reward and cashback card usage. It’s free money that consumers are missing out on every time they spend, an annual payment that could soften the blow of rising costs of everyday essentials such as energy, food and fuel and reduce the cost of Christmas shopping. In fact, if the average household uses the American Express Platinum Cashback card for all monthly spending they will earn up to £227 a year which is almost enough to pay the average energy bill increase.”
Becker’s Best Buys and product analysis
There have been some interesting new additions to the reward card sector in recent weeks.
This week Lloyds has launched the Bank Choice Rewards and Lloyds Bank Avios Rewards credit cards to new customers instead of the Duo Avios Credit Card.
Becker comments: “The Lloyds Bank Avios Rewards Card seems to have improved their premium offering with 1.25 Avios points for every £5 of balance transfers from other cards as well as a lower annual fee. Overall, customers on the existing Avios card with Lloyds could be better off if they switched to the new deal. However, consumers should also look across the market to see if there are cards offering a better reward for their typical level of spend. Based on a monthly spend of £1,600, TotallyMoney.com’s rewards calculator reveals the top reward card to be the American Express Preferred Rewards Gold Charge Card with a first year return of £314. The card is fee free for the first year, £125 thereafter.”
Last week, Sainsburys launched the Nectar Credit card which offers 0% for 15 months on both purchases and balance transfers alongside Nectar rewards and a pretty standard 3% balance transfer fee. The rewards include double Nectar points on shopping in-store, online and on petrol for two years.
Becker comments: “This is not quite a top of the table offer, but not a bad deal for those who already shop in Sainsburys. Based on a £500 a month spend across shopping, general spending and fuel consumers would earn 11,856 points a year, worth an estimated £59.28. However, based on the same spend our rewards calculator shows that an American Express Platinum Cashback card pays £68.66 a year, after taking into account the £25 annual fee. This card also offers consumers the freedom to shop where they choose to earn rewards.”
In recent months several providers have changed their offering in this market. In September, Barclaycard pulled its High 5 credit card which paid out up to 6% cashback on certain items. Lloyds TSB also withdrew its bonus offer of up to 20,000 Avios points for new Duo Avios card customers. American Express informed customers that as of March 2014, in order to earn cashback on the Platinum Cashback Everyday card, they will need to spend a minimum of £4,250 a year to qualify for an annual payment. Capital One also withdrew their Aspire World MasterCard.
To research the best credit card deals available, visit TotallyMoney.com. The website enables consumers to see exactly how much money they will earn or save by switching to the best reward or cashback deals based on annual spend, borrowing and repayments. It also identifies which of these deals consumers are actually eligible for – currently a major inefficiency with rejection rates hitting 70%.
TotallyMoney.com, launched in 2007, is the UK’s leading credit-focussed comparison website which sets out to make it simpler for consumers to compare credit cards, loans and mortgages. With a revolutionary approach to credit comparison, TotallyMoney.com uses exceptional comparison tools to empower people to make better financial choices.
As part of the Media Ingenuity Group, TotallyMoney.com sits alongside affinity credit card brands. Fluid is a portfolio of market leading ‘prime’ products issued in partnership with MBNA, Luma a ‘sub-prime’ credit card partnership with Capital One and Granite card with Vanquis Bank. Being both a credit comparison service and a marketer of credit card brands gives the business a unique and in-depth perspective of the industry.
All calculations are based on research carried out through OnePoll during Q3 2013 amongst 2,000 credit card holders. In addition, 1,103 credit card holders were asked what type of credit card is their main card.
 14.4% of consumers own a cashback credit card, 33.85% have a reward card totalling 48%.
 UK Plastics 2013. 59% of consumers pay their credit card off in full every month. 59% of 30.3 million = 17,877,000.
 Based on the average household spend £1,397 (ONS 2013, minus household bills such as fuel and power, health and communications) being carried out on a cashback credit card (American Express Platinum Cashback card).
 1% is the average return on all cashback credit cards, TotallyMoney.com analysis based on Defaqto data.
 The Ernst and Young ITEM Club.