Get a cashback card and you can make some serious cash, simply by using your credit card regularly. But which is better - Egg or Amex?
Everybody loves to get something for nothing. Personally, I’ve developed a slight obsession with cashback websites, painstakingly searching for the best offers.
However, cashback credit cards are a far easier way to get a proper return on your spending – you get a percentage back of how much you spend on the card in cold, hard cash at the end of each year. These cards are only worth considering if you pay your bill off in full each month - otherwise the interest will eliminate your cashback - but if you do, they are a fantastic friend to have in you wallet.
Let's take a look at the two best cashback credit cards.
The Amex cashback card
The American Express Platinum cashback card is my personal favourite, and has been the market-leading deal for absolutely ages.
For the first three months that you have the Amex card, you benefit from a mammoth 5% cashback on all of your spending, up to a maximum of £100. That’s a simply unbelievable offer - nobody else even comes close to such an incredible return.
After that period, the cashback you receive depends on how much you spend. Spend up to £3,500 in the year and you’ll earn 0.5% cashback, spend £3,501 to £7,500 and you’ll get 1%, and spend any more than £7,501 and you’ll get a marvellous 1.25%.
All in all, a very nifty looking deal.
The Egg card
Last year, Egg relaunched its Egg Money card, a bit of plastic that had previously been very popular at lovemoney.com towers.
With the promise of 1% cashback on anything you buy, it’s no surprise that this cashback card looked such a good deal - it offers a far more consistent return than the Amex card, as the rate of cashback does not rely on your spending habits.
However, there was one change to the Egg Money proposition which was not too welcome – a new £1 monthly charge. Not much, you may think, but over the course of the year it means you will have to spend £1,250 just to break even!
The average spend
All that theory is great, but in practice, which cashback card is likely to earn you the best return? Let’s take a look at what the average household spends on bills, etc, and see what they could make if they put all of their bills onto the two cashback cards.
A terrific new credit card to rival Virgin
According to the National Office of Statistics, the average UK household spent £471 a week in 2008 (the most recent set of figures). That includes all types of expenditure, from transport (the biggest single spend area at £63 a week) to food and drink (£51 a week).
Obviously, it’s asking a lot to do all of that spending on a credit card, but it’s not impossible, particularly as both cards allow additional cardholders. With a
cashback card, I think it makes sense to ensure both you and your partner have a card, to maximise the possible return.
So if you spent that figure, and put all of your spending on your credit card, who would come out on top?
The first three months
Over the course of a month, that average spend comes to £1,884.
The first three months with the Amex card is when the return is at its greatest, and you will easily qualify for the maximum £100 cashback over this period. All you need to spend for the £100 cashback is £2000, though in this instance you will have forked out around £5652!
With Egg, and it’s 1% return, you will be looking at cashback of £53, once you have paid off the monthly fee.
The rest of the year
From there on, once again the Amex Platinum card comes out well on top. The final nine months of spending at £471 a week comes to a total of £16,956, easily enough to qualify for the maximum cashback of 1.25%.
By the end of the year you should be looking at a final cashback total of around £336.
By comparison, with the Egg card the cashback you can expect to make over that final nine months is £160.56, after the monthly fee, taking the annual total to £213.56. Not bad by any stretch, but more than £100 less than the Amex deal!
A smaller budget
I have no doubt that plenty of you will be thinking, “That’s all well and good but I don’t spend anywhere near that on my credit card.”
However, the case still stands that, for the first year at least, the Amex card is the best even for more budget spending. Even if you only spend an average of £750 a month, over the course of a year you will make about £166 back, compared to £78 from the Egg card.
What about year two?
Year two of course is where things get interesting, as that Amex bonus disappears.
However, so long as you spend more than £3,501 – that comes to a little under £300 a month - in the year you will get the same rate of cash back as the Egg card. In fact, you will actually get a better return as you won’t be shelling out £12 in card fees.
The only flaw I see with the Amex card is that it will not necessarily be accepted in all retailers. However, this situation is improving all the time, so I reckon it is a risk worth taking.
The third way?
There is a decent third option which you might like to consider - the Capital One World Mastercard.
Like the Egg card, this credit card offers 1% cashback on all of your spending over the year. However, it does charge a higher annual fee of £18, though this is in turn limited by a £10 bonus each January.
You will also be whacked with a 3% cash handling fee on your cashback, while the card is only available to those with a perfect credit rating, so it may be agonisingly out of reach for some borrowers.
If you are only likely to spend a hundred pounds here or there on a credit card, and perhaps do not have a completely squeeky clean credit rating, then I think the Egg Money card is best for you. With Egg operating a £5 minimum cashback, you’re more likely to get a few pounds than with the Amex, which demands a £12 minimum.
But if you really want to get a serious return on your spending, I think you’d be mad to ignore the American Express Platinum cashback card.