Cashback and reward cards proving less rewarding

Compared to a few years ago, shoppers using cashback or rewards to get something in return for their spending will be disappointed to find that they are now receiving very little for their troubles. They may therefore have to work a bit harder to find the best available deals.

Savvy consumers may have noticed recent news coverage talking about big names slashing their rewards. The decline has been ongoing for a while, however, as Rachel Springall, finance expert at moneyfacts.co.uk, pointed to the interchange fee cap implemented in 2015 as one of the causes.

It was supposed to be a positive move, helping consumers save money at the tills by capping the card transaction fee, but it's been a bit of a double-edged sword as "card providers have been pulling back on their generosity to recoup costs," Rachel explained. As a result, there are now fewer deals around, and those that remain are less generous.

In fact, 0.50% seems to be the most cashback shoppers will currently be able to get as standard without paying a fee, so 50p per £100 spent. The table below shows the top five cashback credit cards currently on offer, which at least offer the chance to get more than this from your spending, though you may want to consider paying an annual fee to get the best deal.

Then there are the reward cards to consider. Rachel said: "Loyalty doesn't seem to be paying off in many cases, as it would take consumers some time to earn enough points to make it worth their while. Debenhams and House of Fraser might pay three points to every £1 spent in store, but elsewhere they only pay one point on every £2. Therefore, customers would need to spend £1,000 to qualify for 500 points to get a £5 voucher."

Unless you're a frequent customer at a certain grocery store, it may be more beneficial to opt for cold hard cash as your reward. If you still want something back from your loyalty, there are always loyalty cards to consider, which don't require you to have a credit card to earn points in your favourite shops.

Rachel pointed out that there have been some good changes introduced to the credit card market of late. For instance, the ban on online surcharges when using a debit or credit card has removed a 2% fee on flight bookings, among other things. "However, this ban may inflate the cost of a holiday overall, as companies will need to recoup this loss," Rachel added.

Overall, it's clearly important to keep your eyes peeled for any new offers, as they may just blow the current competition out of the water. If you do see a deal you like, act fast or it might disappear. And always remember to pay off the balance on your cashback or rewards card every single month, otherwise the interest charged on it could very well outstrip any gains.