The cashback war: Egg Money vs. Amex

Egg Money and American Express are the two biggest players in the cashback credit cards market. But which is better? Which gives you the most cashback? Szu Ping Chan investigates.

When it comes to financial products, Egg has always thought outside the box. Innovative where others have followed the crowd, the bank has launched several great products over the years.

So when it relaunched one of its most successful credit cards earlier this year, the Egg Money World MasterCard, we couldn't wait to see what it had to offer.

When the Egg Money card first launched, it caused quite a stir. Not only did it offer a fair interest rate of 7.9% APR on purchases, but every time you used your card to buy something, you earned 1% cashback (plus extra cashback when you shopped at selected retailers).

And the benefits didn't end there. You could also use the card afs a savings account, earning 4% interest on any positive balances.

However, the bank has been a pretty bad egg recently (sorry, I couldn't resist), and has introduced a number of changes, affecting thousands of borrowers and savers alike.

Back in May, it withdrew the 4% credit interest rate on Egg Money, while simultaneously increasing cash withdrawal charges on its sister card, the Egg Visa.

To add insult on injury, earlier this year, Egg raised interest rates for up to 500,000 cardholders by as much as 7%.

So, like the Abbey Zero card which re-launched at the start of the summer, is Egg Money's return just another credit card phoenix that has come back with a catch?

Hey big spender!

On the plus side, you'll still earn 1% cashback on all your purchases. This is a decent offer in what is quickly becoming a barren cashback market.

If, on the other hand, you're looking for a balance transfer, you can take advantage of the 8.9% lifetime balance transfer rate.

Though this is not the market leading rate, there's no fee to pay, and the card could provide a much needed break from those escalating credit card interest payments.

In addition, Egg Rewards continues to offer up to 25% off a range of deals, plus discounts at 15 selected retailers, which you get simply by being an Egg customer.

Credit card fees are back

The massive downside to this card is Egg now charges £1 per month to all new customers who take one out. This could pave the way for other credit cards to follow suit. After all, they will be looking for ways to claw back the money they'll lose out on, following the government's consumer white paper last week.

The fee also means that if you intend to use your card to earn cashback, you'll need to spend at least £1,200 a year, or an average of £100 a month on your credit card just to break even.

And, as the minimum payout is £5, you have to spend £500 a year to even qualify for cashback. Anything less, and you won't earn a penny.

Egg also lauds a number of other benefits that come with Egg money, such as Purchase Protection (where items costing more than £75 bought with your Egg Money MasterCard are covered against theft, loss or damage for 90 days after you've purchased your item). But many credit card companies offer these benefits as standard.

One benefit I like is Price Promise, where if you buy an item with your card costing more than £50, then find it cheaper within a 30 mile radius inside 30 days, they'll refund the difference.

Many of Britain's biggest lenders including Barclaycard have withdrawn similar benefits to the Price Promise, which makes Egg's offer stand out.

You can claim up to £375 per item and up to four items per year. Although in order to qualify, the items must be bought from a shop, as internet purchases aren't covered.

Hatching a plan

Overall, I think the new Egg Money MasterCard does have its benefits - but only for some people. So if you're interested, there are two things you need to bear in mind.

Firstly, if you're going to get this card for spending, you should remember that the more you spend, the quicker you'll offset the fees and start earning to line your own pocket instead of Egg's.

But Egg isn't the only provider to offer cashback, and one burning question that you should be asking before you apply is: is it the best?

Which is better: Egg Money or American Express?

Egg Money's  closest rival, the American Express Platinum cashback card pays up to 1.5% cashback, and also offers 5% bonus cashback in the first three months of use.

I looked at the two main cashback players - Egg Money  and Amex last year. Though American Express was the clear winner during the first twelve months of use - when the 5% cashback bonus rate expires, Egg Money proved the better option for most people.

With the revised terms, Egg is still the winner in the second year, even when you take into consideration the £12 fee. So, if you already have an American Express Platinum cashback card and spend more than £200 a month, you're probably better off using the Egg card.

For example, if you spent an average of £500 a month for a year outside any promotional period, you'd earn £48 cashback with Egg, while you'd only earn £42.50 with the Amex card.

But what if you're a big spender? If you manage to spend on average £1,000 a month on your card, then the American Express card always comes out on top - even outside the promotional period of the first year. (You'd get £108 cashback with Egg, after fees, and £112.50 cashback with Amex.) So it's a keeper for big spenders.

Bear in mind, however, that on either card you must be able to pay off your card in full or the interest you pay will far outweight the benefits of the cashback. (One trick to up your spending while ensuring you can still afford your bills is to share a credit card account with someone you trust, such as your spouse. As long as you are happy for him or her to spend in your name, you could potentially double your cashback that way. Just be aware you alone will be legally responsible for paying the combined bill.)

There is also the issue of acceptance. Although Amex is becoming more widely accepted, big retailers like Play.com, Vue Cinemas and H&M still won't take it, while Mastercard is much more widely accepted.

Finally, you should only use your Egg Money card for one purpose - either spending or balance transfers. if you attempt to use it for both, you will be caught out by the trap of negative payment hierarchy. 

Happy spending!

More: 0% balance transfers could be doomed! | Compare cashback credit cards