May 24, 2006

By Peter Kenny

The money savings website, moneysavingexpert.com, has claimed that the much heralded reward schemes of many are actually ripping off UK consumers.

Moneysavingexpert analysed more than 80 that came with a rewards scheme package and found some paid as little as 0.54p for every £1 you spend.

Reward schemes are a popular way for credit card companies to make their look more attractive to consumers. It is known that over half of UK credit card holders do not take advantage of their cards reward scheme. Rewards can come in many shapes and sizes, from straight cash back on all purchases to elaborate reward points for every £1 that is spent.

Surprisingly, the best paying reward scheme comes from the BAA Worldcard that boasts of paying back £7.95 of every £100 you spend, however, the limitations of use for the BAA Worldcard means that this rewards credit card may not be for everyone. If you used the GM credit card you would earn £3 for every £100 spent, this “cashback” would be redeemed against the purchase of a new Vauxhall or Saab car.

The Tesco credit card is also an attractive proposition with the ability to earn up to £2 for every £100 spent. It should be noted that new Tesco credit card holders will not be able to earn as much because Tesco halved their cash back offer to new applicants from April onwards.

Martin Lewis, the owner of www.moneysavingexpert.com said that offer a straight cash back should always be considered first before reward schemes as cash back can be used anywhere.

One note of caution, under no circumstances must a cash back or rewards credit card be used if a consumer is having to pay interest on their monthly credit card balance. The cost of the interest quickly wipes out any gain achieved on the cash back or rewards deal.