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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 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.

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Category

HSBC Premier Mastercard, IHG One Rewards, Virgin Atlantic and Flying Club, Virgin Atlantic Reward Mastercard

Comments (58)

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

  • hhibs says:
    3 Jun3 June 05:33

    mbna horizon card thrashes this offering !

    • Frenske says:
      3 Jun3 June 06:08

      I wonder how long it will last, especially since there is 0% commission on FOREX.

    • Mark2 says:
      3 Jun3 June 06:11

      Is it available to new customers?

      • Rob says:
        3 Jun3 June 09:22

        No

      • Layerden says:
        3 Jun3 June 13:05

        Not that too much different to the Aqua card!

      • guesswho2000 says:
        3 Jun3 June 15:15

        Nope, which makes it somewhat pointless as a comparison, as only those of us who have them already can benefit from it.

    • callum says:
      3 Jun3 June 07:34

      Not quite – it has exactly the same fees as the Tandem credit card but is a visa, so will often have a (very slightly) higher FX markup in the Visa rate.

      • Murray says:
        3 Jun3 June 23:42

        Our Horizon card expires in August – are they renewing and giving out new cards? We don’t use it at home but typically do when spending in the US or Europe and so it really comes in handy.

  • Jb says:
    3 Jun3 June 06:26

    Is there a way to see which MEPs voted for the original ruling (or even who proposed it)?

    • BlueHorizonuk says:
      3 Jun3 June 15:44

      Pretty sure this was a UK thing and they pushed it onto the rest of the EU

  • Simon says:
    3 Jun3 June 06:45

    Is this sustainable? I assume it’s the brand (be it IHG, Virgin or John Lewis) who lose money on this rather than the issuer. Rob – from your discussions with them, do you think they accept this as an acceptable/profitable use of marketing spend?

    • Lumma says:
      3 Jun3 June 07:52

      Just because you can get something around Rob’s valuations doesn’t mean that it’s costing Virgin or IHG those figures

      • Rob says:
        3 Jun3 June 09:20

        IHG pay between $25 (Holiday Inn) and $75 (IC) to the hotel for reward nights, unless hotel is full when they pay full rate. Works out very nicely for IHG because the cost per point to them is teeny.

  • David S says:
    3 Jun3 June 06:47

    Rob, the Tandem credit card is a MasterCard since I believe the MasterCard rates are better for foreign exchange. After Lloyds debacle, I looked at various cards for our trips abroad and Tandem for us was the winner. Only had it a few weeks but seems to be working ok.

    • Doug M says:
      3 Jun3 June 07:12

      Good to hear this. I’ve done the same and am waiting on the card to be delivered.

    • ysun92 says:
      3 Jun3 June 10:17

      Agreed. Based on my observations, Mastercard always has better exchange rate than Visa. Amex is normally good as well, at least better than Visa.

      • Frenske says:
        3 Jun3 June 10:44

        I think you need to explain this a bit more. None of AmEx I’ve held had 0% commission, usually a whopping 3%. I’ve both Visa (Nationwide) and Mastercard (Curve) with 0% commission and the differences are almost negligible (<0.1%)

        • Genghis says:
          3 Jun3 June 11:23

          But the core rate used is on the whole better than Visa. Just that on most cards (now all?) there’s a 3% non-sterling fee.

  • jamescg says:
    3 Jun3 June 07:16

    OT a little! I currently use my virgin credit card linked to my curve card to pay my VAT etc. I’m thinking of switching to the Capital Ontap card to earn some more avios. Can I connect the capital card to curve and still pay my tax that way, or do I have to use it direct and pay the higher corporate card %? Thanks!

    Secondly and more OT. I want to use my Lloyd’s credit card upgrade voucher. Normally, post avios closure do you have to call BA to use it? I have tried this and BA call handler said to phone Avios but whenever I phone avios a recorded message says they are not there but does not give any opening times! Any ideas gratefully received!

    • Mike Bickle says:
      3 Jun3 June 07:36

      Think COT is a MasterCard Debit so no extra charge? I’m thinking of exactlu the same so 100% clarification would be good.

      This is also yales that since vat change if you pay by card they still take the vat by direct debit (twice).

    • Jovanna says:
      3 Jun3 June 08:03

      Isn’t there a number at the very end of the message? I made the same mistake too and hung up before I got to that part.

    • Gerry says:
      3 Jun3 June 08:41

      I booked recently using Lloyd’s voucher. Try 08444933326. That was one of the numbers I used.

    • Nick_C says:
      3 Jun3 June 09:24

      My Avios.com account still works the way it always did. My Lloyd’s voucher is there and I can redeem it on line. I joined Aerclub before the changes.

      • Wally1976 says:
        3 Jun3 June 10:56

        I just tried this – seems to work fine if you select a return trip but if you try and do a one-way it throws an error (well it does for me anyway!). Thanks.

    • Mikeact says:
      3 Jun3 June 09:37

      I’ve just put the phone down after using my voucher…no problem getting through, and a few minutes wait.

    • fivebobbill says:
      3 Jun3 June 10:03

      You don’t say which number you are calling re your upgrade voucher, however I saved the T&C’s a while ago and the number to call on there is 03444933349

      • Anna says:
        3 Jun3 June 12:30

        You can also call BA to use it via your Executive Club account.

        • Lalit says:
          3 Jun3 June 16:52

          Really? I didn’t know that you could call BA to book these awards – would save me the 1 hour wait on that number when using my next voucher!

          Can you please confirm whether you’ve tried this and it works? Thanks!

          • Anna says:
            3 Jun3 June 19:49

            It’s the only way to do it if your avios account has been closed. I redeemed my most recent upgrade voucher via the BA call centre (which is apparently shared with the avios.com staff now), a couple of months ago.

        • Nick_C says:
          3 Jun3 June 23:49

          Does that come through on your CC account as charged to BA or Avios? If it gets charged to BA, then that will be a better option for most people. Extra Avios.

  • Alex says:
    3 Jun3 June 07:17

    HSBC do also say they offer x10 points on certain ‘national brands’ that are ‘updated frequently’. It would be interesting to know what sort of brands this included (ie. Tesco vs Subway)

  • Charlieface says:
    3 Jun3 June 09:25

    Not quite so. The original directive was pushed by the UK against Visa and Mastercard but due to bad drafting it included Amex cobranded cards. It was this last point that the Gov sided with Amex and lost.

    • Charlieface says:
      3 Jun3 June 09:27

      That was a reply to the earlier thread that’s now gone AWOL about the EU directive

  • Elliot says:
    3 Jun3 June 09:51

    O/T – with the HSBC World Elite Credit Card, at what annual spend is it worth holding on to the card as opposed to downgrading in the second year to the free version?

    When one downgrades to the free version do they retain their points?

    • David says:
      3 Jun3 June 10:16

      Depends what you value the lounge access at. But based purely on the points earning rate, you’d need to spend £19,500 per year to generate an additional 19,500 avios, worth £195 in my view.

      • Elliot says:
        3 Jun3 June 10:30

        Well £19,500 a year generates an extra 9,750 of Avios a year (19,500 Avios vs 9,750 Avios – paid vs free card). At £195 for the extra 9,750 you’re paying £0.02 per Avios.

        Just double checking my maths is correct on that?

        • Memesweeper says:
          3 Jun3 June 10:45

          I’d agree – you need to spend close to £40k for the paid HSBC prem card to make sense. I’m going to bail on all my Amexes and try and focus on this + IHG for the coming 12 months. HSBC prem points are also somewhat convertible making them a tad more useful than most single brand travel rewards, although not as good as Amex MR.

          • David says:
            3 Jun3 June 11:58

            Oops good point – that maths sounds better than mine. I’d ruled it out on the basis I wouldn’t put £20k through it, so definitely not going there for £40k! Either that or you’d have to be a big fan of Lounge Key…

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