0.2% cashback is now normal for Mastercard and Visa credit cards – and why travel cards are better

HSBC launched a new rewards credit card last month called, erm, the HSBC Rewards Credit Card.  This does not give travel rewards, but I wanted to highlight it because:

it shows, very clearly, where all cashback credit cards in the UK are heading, and

it shows how surprisingly generous many non-Amex travel rewards cards still are

What does the HSBC Rewards Credit Card offer?

Take a look at the HSBC website here.

What you have is a Mastercard which:

has a £25 sign-up bonus

has no annual fee

earn 1p cashback for every £5 spent

gives you a £25 bonus if you spend £10,000 per year

The representative APR is 21.9% variable.

You are getting 0.2% back on your spending.  In reality, you may get a lot less.  It depends if you receive 1p per £5 transaction or 1p per £5 on your total monthly bill.

If it is the former, a £3.99 purchase earns nothing.  If it is the latter, a £3.99 purchase will earn you 0.8p when aggregated with your other transactions.

If you spend exactly £10,000 on the card per year, your cashback increases to 0.45%.  This, admittedly, is not bad.  However, this card is NOT available to everyone.  You must hold a HSBC current account and have paid in at least £1,750 per month for the past six months.  For someone in PAYE, this requires a salary of £25,700.

How does this compare with other cards on the market?

Keep the 0.2% cashback figure in mind.

Not coincidentally, many other leading cards now have the same return:

Amazon halved the earning rate of its Platinum Mastercard on 29th April and now gives 0.5p of Amazon vouchers per £2 spent outside Amazon (ie 0.25%)

ASDA cut the rate on its Cashback Credit Card from 0.5% to 0.2% cashback on non-ASDA spend in 2018 (you receive ASDA vouchers, not actual cash)

The Marks & Spencer credit cards offer 1 M&S point for every £5 you spend outside M&S, with 500 points getting you a £5 M&S shopping voucher for a return of 0.2%

Some cards are even worse.  The Sainsbury’s Bank credit cards give 1 Nectar point, worth 0.5p, for every £5 you spend – a return of just 0.1%!

Some cashback cards still beat this, of course

The main outlier at the moment is the John Lewis Partnership Card.  This gives you 1 point for every £2 you spend outside John Lewis / Waitrose.  As 500 points gets you a £5 shopping voucher, this is a return of 0.5%.

Tandem Bank, the small challenger bank, offers 0.5% cashback and 0% foreign exchange fees on its Visa card.

In general, however, the market is moving towards giving you 0.2% in cashback or vouchers on ‘no annual fee’ Mastercard or Visa reward cards.

The reason for this, of course, that interchange fees have been capped at 0.3% on Mastercard and Visa credit cards following legal changes 18 months ago.  This dramatically cut – by 75%+ – the amount that credit card processors could charge retailers for accepting cards.

How does this compare to free travel rewards cards?

What you can see from this is that the three free travel rewards Mastercard or Visa credit cards are still substantially better value than the main cashback cards. I am looking at Amazon, ASDA and Marks & Spencer, plus the new HSBC Rewards card. Even if you bring Tandem and John Lewis into the equation, two of three free travel cards do better.

You’ve got:

Virgin Atlantic Reward Mastercard 

This offers 0.75 Virgin Flying Club miles per £1 spent. If you can get 1p per mile by redeeming smartly, you are getting a 0.75% return on your spending.  Even if you get a little less than this, you are still head and shoulders above most of the cashback cards above.  Until 30th June, you will also receive a sign-up bonus of 12,000 Virgin Flying Club miles.  Our full review is here and you can apply here.  Representative APR 22.9% variable.

IHG Rewards Club Mastercard 

This offers 1 IHG Rewards Club point per £1 spent.  These are generally worth around 0.4p when used for Holiday Inn / Crowne Plaza / InterContinental etc hotel rooms, and at peak dates you can do a lot better.  The card also gets you Gold status in IHG Rewards Club for as long as you hold it.  Our full review is here and you can apply here.  Representative APR 18.9% variable.

HSBC Premier Mastercard  

This offers points which convert into 0.5 Avios, 0.5 Etihad Guest miles, 0.5 Asia Miles or 0.5 Singapore Airlines Krisflyer miles for every £1 you spent.  If you can get 1p per mile – and some of these schemes offer better value than Avios – then you are getting 0.5% back on your spending and potentially more.  Our full review is here.  Note that you need to be a HSBC Premier customer to get this card. Representative APR 18.9% variable.

We have only looked at free cards here because it is easier to compare the rewards.  There are also annual fee versions of the Virgin Atlantic, IHG and HSBC Premier cards as well as the Miles & More cards, but you would need to have a good idea of your annual Visa / Mastercard spending to calculate which works best.

We have ignored American Express cards entirely in this article due to their lack of universal acceptance, but the American Express Platinum Cashback cards are substantially more generous than their Visa / Mastercard rivals, as are the remaining American Express travel rewards cards.

In summary …. the screws continue to be tightened on ‘no annual fee’ Visa and Mastercard rewards cards.  The good news is that the travel rewards sector, where Head for Points readers focus, still offers returns far above the average.

Want to earn more points from credit cards? – December 2024 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

Barclaycard Avios Plus Mastercard

Get 25,000 Avios for signing up and an upgrade voucher at £10,000 Read our full review

Barclaycard Avios Mastercard

Get 5,000 Avios for signing up and an upgrade voucher at £20,000 Read our full review

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

SPECIAL OFFER: Until 14th January 2025, the sign-up bonus on ‘free for a year’ American Express Preferred Rewards Gold is increased to 30,000 Membership Rewards points. This converts into 30,000 Avios. Click here to apply.

SPECIAL OFFER: Until 14th January 2025, the sign-up bonus on The Platinum Card from American Express is increased to 80,000 Membership Rewards points. This converts into 80,000 Avios! The spend requirement is changed to £10,000 in six months for this offer. Click here to apply.

American Express Preferred Rewards Gold

Your best beginner’s card – 30,000 points, FREE for a year & four airport lounge passes Read our full review

British Airways American Express Premium Plus

30,000 Avios and the famous annual 2-4-1 voucher Read our full review

The Platinum Card from American Express

Huge 80,000 bonus points and great travel benefits – for a large fee Read our full review

Virgin Atlantic Reward+ Mastercard

18,000 bonus points and 1.5 points for every £1 you spend Read our full review

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers:

SPECIAL OFFER: Until 9th December 2024, there are EXCLUSIVE sign-up offers for our readers on the two Capital on Tap small business Visa cards. You can earn 20,000 points on the Business Rewards card and 30,000 points on the new Pro card. Click here to apply.

American Express Business Platinum

50,000 points when you sign-up and an annual £200 Amex Travel credit Read our full review

American Express Business Gold

20,000 points sign-up bonus and FREE for a year Read our full review

Capital on Tap Pro Visa

30,000 points (TO 9TH DECEMBER) plus good benefits Read our full review

Capital on Tap Business Rewards Visa

20,000 points (ONLY TO 9TH DECEMBER) Read our full review

British Airways American Express Accelerating Business

30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback when you spend at least £2,000 per month.

Barclaycard Select Cashback Business Credit Card

Get 1% cashback when you spend at least £2,000 per month* Read our full review