Maximise your Avios, air miles and hotel points

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

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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.

HSBC Rewards credit card

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.

Virgin Atlantic Mastercard

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 milesOur full review is here and you can apply hereRepresentative 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 hereRepresentative 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? – February 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 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 card

Barclaycard Avios Mastercard

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.

Virgin Money is offering double points on spending until 14th April (£5,000 cap) to new customers when you apply for the Virgin Atlantic Reward+ Mastercard. Click here to learn more.

British Airways American Express Premium Plus

25,000 Avios and the famous annual 2-4-1 voucher Read our full review

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & four airport lounge passes Read our full review

The Platinum Card from American Express

40,000 bonus points and a huge range of valuable benefits – for a fee Read our full review

Virgin Atlantic Reward+ Mastercard

15,000 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:

British Airways Accelerating Business American Express

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

American Express Business Platinum

Crazy 120,000 points bonus (to 9th April) and an annual £200 Amex Travel credit Read our full review

American Express Business Gold

Huge 60,000 points sign-up bonus (until 9th April) and free for a year Read our full review

Capital On Tap Business Rewards Visa

Get a 10,000 points bonus plus an extra 500 points for our readers 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 on your spending.

Barclaycard Select Cashback credit card

2% cashback on all your business spend for 3 months (1% thereafter) and no annual fee Read our full review

Comments (58)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • The Lord says:

    This is what I have gone for as my Lloyds Avios replacement. Others may argue that Revolut, Monzo etc are better but I don’t see how this card can be beaten?

    • Lev441 says:

      Aqua reward MasterCard is 0.5% and fee free abroad.

      • David says:

        Same as MBNA Horizon and a legacy Cap1 Platinum (although neither of those are open to new applicants).

  • Lev441 says:

    Pre interchange cap, what were the average rates for visa/MasterCard products?

    • Peter K says:

      I had a 1% card for a long time that also gave £10 a year just for having it.

  • Bootlace says:

    O/T 40% bonus on buying virgin points just popped up.

  • Luke says:

    As a replacement for the Lloyds duo Avios I went with Amex gold + Santander All In One MC as the non-Amex back up

    Santander all in one MC has 0.5% cash back, no Forex and 0% purchases and balance transfers for 26 months. £36 annual fee.

  • ADS says:

    but the article doesn’t address WHY the travel credit cards are (currently) offering above average returns !

    is it because travel brands are prepared to subsidise the returns for getting their brand in front of you on a daily basis ?
    is it because card holders don’t actually cash in all their points ?
    is it because card holders cash in their points for much less than the 1p per point level ?
    is it because the companies just haven’t got around to slashing rewards yet ?
    or some other reason ?

    • lev441 says:

      Probably a mixture of all the above!

    • guesswho2000 says:

      All of the above and then some.
      Rewards points create an illusion of value, so people collect them, the majority (I suspect) seemingly blindly. Rewards programmes are also inherently confusing, and ‘easy’ rewards are of low value (such as BA’s part-pay with Avios).
      Some people collect points and, even with some understanding of airline programmes, will redeem for any saving because cash is king.
      There’ll be a percentage who let their points expire, too.

      I also suspect that existing contracts tie the issuer’s hands somewhat – they’re contracted to offer x points per £, and will also be buying a certain number of points likely at a discount. My theory behind the Hilton Barclaycard revolves around this – I suspect Barclaycard are contracted to keep the cards around for however long, and have committed to buying million of HH points from Hilton. They’ll keep the cards until they’ve exhausted them, then bye-bye. Or I might be completely wrong.

  • layerden says:

    hear hear, seems to be a lot of stigma on this site about Aqua, but it is a fantastic product!

  • Paul says:

    Sounds good doesn’t it. Unfortunately, got denied, no reason given, just a little line ‘we”ll be in touch to let you know why, meanwhile your credit rating has not been affected and this application will not be recorded.’ Cryptic…

  • Andrew says:

    Because it’s an Aqua Card…

    Although they (and one of their competitors) have paid me compensation to apologise for inappropriately sending me direct marketing emails promoting “bad debt” cards on a number of occasions. One of the “joys” of LSOA targetted marketing failing to adapt to modern mixed social and home-owner housing developments.

    • Rob says:

      They used to send me junk mail asking if I wanted a ‘bad debt’ Aqua card. And we have a house in SW3 🙂 You’d think, somewhere, the software would say ‘you really are wasting £1 sending this out’ ….

      • Nick_C says:

        Have all the poor people been evicted from SW3 then Rob?

        Its nearly 20 years since I worked for RBKC, but one of the fascinating things about the Royal Borough was the way the rich and poor lived cheek by jowel.

        All of Central London used to be like that of course in my parents’ time.

        • Rob says:

          The house my son wants us to buy round the corner is on at £18m … think he’ll be disappointed.

    • blah says:

      Out of interest, why would you be due compensation for simply receiving a junk email?

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