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Consumers choosing cashback cards over points schemes

The number of cashback credit cards available to UK consumers has doubled in the last two years – that’s according to research by Defaqto. Nobody could argue that there hasn’t been demand for the cards, and Brian Brown, the author of Defaqto’s report agrees: “Demand from consumers for cashback cards is strong as these cards give a guaranteed benefit with no additional effort, unlike points schemes where the customer has to build up value and then take further action to redeem the points.”

According to Brown there were 11 cashback credit cards on the market in October 2010, and 13 of the 22 cards now available pay less than £100 in a year to consumers spending over £1,000 each month – some of the cards offer a meagre 0.5pc.

It's no surprise that the cards are becoming more popular than store cards, as more and more consumers are embracing the idea of shopping around for the best deals. Brown said: “Cashback can be earned no matter where you shop while points schemes are heavily dependent on where you shop."

Defaqto’s report suggests that consumers earn more on average with a points scheme, but the flexibility is a major factor for more people plumping for cashback cards, with as many as a third saying that cashback is the third most important thing they look for when choosing a credit card.

Will Becker from TotallyMoney.com said: “We love cashback cards at TotallyMoney.com. With the average UK household putting over £20,000 on plastic, our research shows that an average household could be making over £800 a year in cashback. Alongside cashback, users are benefitting from useful statutory protection versus paying with a debit card. We agree with Defaqto’s main conclusion but question whether it’s possible to do materially better with some rewards points schemes. Our research shows that the best points schemes only just ahead of the best cashback cards.  And the majority of points based schemes offer very poor value compared to the best cashback cards. Given the level of effort to receive good value and the difficulty of using points rewards, we think that for most people, cashback is king. Of course, for all rewards cards it’s vital to follow the golden rule of spending normally and repaying in full. Paying interest would more than swallow up all that cash or rewards benefit."