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12 November 2007
As the festive season approaches it seems that a cash back war has broken out amongst credit card providers in the UK, with a number of lenders vying for the custom of those planning to put Christmas on plastic by offering high cash back rates, if only for a limited period.
Many lenders are offering a three month period of higher level cash back, which means that over the Christmas and New Year period, when spending is at its highest for most people, card users can earn more cash back.
Last week American Express decided to increase the cash back level on its platinum card up to five percent for a three month period, hoping to attract customers that are planning to spend heavily on their cards over the Christmas and New Year periods and could therefore benefit from these increased cash back levels.
Previously the best deal had been a 4% cash back deal from Capital One, which was also for a three month period.
Although the cash back periods are short on these credit cards the cards could help those that do plan to spend a lot over the festive period, as they could earn back impressive cash back levels on the amount that they spend.
However, experts are urging consumers to remember that the cards will only benefit those that repay the balance in full within the interest free period, as otherwise any cash back earned will be counteracted by the high levels of interest that are charged on the outstanding balance.
Following the three month period the American Express card will change to a tiered cash back system based on the amount that you spend. With the Capital One card the cash back rate falls to one percent following the initial three month period. However, some experts state that many may not qualify for these cards because of their 'harsh' credit scoring procedures.
One industry official stated that the American Express card was the better deal for most consumers, stating: "If you assume that a person spends an average of £1,000 a month on the card, then the Capital One card would yield £210 a year, compared with £247.50 with American Express. This is an impressive return for just going about your day-today spending. And as neither card imposes a maximum cashback limit your earnings potential is almost limitless, only restricted by the credit limit imposed by the card provider."
Anyone looking to earn a little back on their Christmas and New Year spend should compare cash back credit cards first to make sure they are getting the best deal available.
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