Cashback cards making a comeback

An increasing number of credit cards are offering cashback incentives in the fierce battle for customer loyalty.

As many as one in ten cards now offer cashback on purchases, however, research for MoneyExpert.com found the average cashback offered was only 0.72 per cent.

However, there are some impressive deals out there for savvy consumers.

Abbey last week launched a card with five per cent cashback, but only on the first £1000 spend in major supermarkets.

American Express and Capital One also have good deals, offering three and four per cent cash-back on purchases respectively.

But, removing the Abbey card from calculations lowers the average cash-back offered on credit cards to 0.5 per cent.

This means those spending £2,000 on their credit card will receive £14.50 in cash-back.

"Cashback sounds great and is a genuine way for credit card companies to reward loyal customers," commented Sean Gardner, chief executive of MoneyExpert.

"However, average rates of 0.72 per cent are pretty feeble and anyone who picks a card purely for its cashback is making a mistake if they don’t pay off their balance every month. It’s almost certain the cashback you get will be wiped out by the interest you pay."

There are also other catches.

The Abbey deal only lasts until January 31st 2008 and the Capital One and American Express offers only stand for the first three months before falling to rates of between 0.5 and 1.5 per cent depending on spending.