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Every week Clare Francis, financial journalist and editor of comparison site moneysupermarket.com will offer tips and advice on all things money-related to help iVillagers make the most of their hard-earned cash. From energy bills to car insurance; credit cards to children’s savings accounts; mortgages to discount vouchers Clare will show you how to make sure you’re getting the best deal
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I wouldn’t ordinarily write a blog focused on a single product, but Santander has launched a new credit card which could be worth taking out if you’re feeling the pinch because of rising food and fuel bills.
It’s called the 123 Cashback Card and you earn cashback when you use the card in a supermarket, department store or at a petrol station.
Santander estimates that the average household will earn £176 a year in cashback - not something to be sniffed at.
If you have a credit card that pays cashback or some other type of reward (such as Airmiles or loyalty points) you earn something back each time you spend on the card.
With the new Santander card you earn 1% cashback on any supermarket spend, 2% if you spend on the card in a department store and 3% cashback on fuel. With sky-high petrol and diesel prices this is a nice perk. That said, the maximum you can earn on fuel spend is £9 per month, which means you’ll stop accruing cashback for that month if you spend more than £300. There’s no upper cap on the amount you can earn on supermarket or department store spend though.
The cashback you earn is credited to your account each month.
It’s important to note that this card comes with a £24 annual fee, one of the few credit cards to levy an annual charge. However, don’t let this put you off as the generous cashback rates mean that over the course of a year, you’ll probably still earn more with this card than many others.
Also, the golden rule with any cashback or reward card is to make sure you pay your credit card bill in full each month. If you don’t, you’ll be charged interest on the outstanding balance and that will outweigh the value of the benefit you’ve earned.
You’ll be charged an annual rate of 18.9% interest on purchases if you don’t pay your bill off in full. And once you factor in the fee, the representative annual percentage rate (APR) is 22.8%.
With most cashback cards you earn money back whenever you spend on your credit card. The Santander 123 card obviously only pays cashback on certain purchases, making it more restrictive, but it has been designed to cover the bulk of most households' weekly expenditure.
However, the advice is often not to use a credit card to pay for your every day spending. The main reason for this is the fear that people could get themselves into debt by failing to pay off their essential purchases each month. And it is understandable why many people are reluctant to put the cost of their supermarket shopping or petrol onto a credit card, preferring instead to use cash or a debit card so they know where they’re up to with their finances. But if you clear your balance each month, there’s nothing wrong with using a credit card in this way.
If you set up a direct debit to pay your bill in full, not only do you earn cashback on your spending but the money can stay in your current account for a bit longer earning interest (assuming you have a current account that pays interest, of course!).
With household bills on the up, a card such as the Santander 123 card is a great way of reducing the impact of rising living costs.
The main drawback with the Santander card is that it doesn’t offer cashback everywhere – if you tend to spend a lot on your credit card on other things such as travel and eating out, the American Express Platinum Cashback Card may be a better option. It pays 2.5% cashback for the first three months (up to a maximum of £10) and 1.25% thereafter.
You earn cashback on all spending with this card so it’s a great all-rounder. However, you need a household income of at least £30,000 to qualify and there is a £25 annual fee.
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