Best for: Cashback on household spending

You don’t have to be in debt or in the market for a major new purchase to benefit from the best credit card. Some offer rewards just for paying the household bills.

Take Santander’s recently-revamped 123 card. It pays up to 3% cashback on everyday spending such as energy costs and your food shopping.

What’s the deal?

As its name suggests, the Santander 123 credit card pays cashback rates of either1%, 2% or 3% depending on what you use it for. You’ll earn:

  • 1% back on any supermarket spending. Supermarkets include Tesco, Asda, Sainsbury’s, Morrisons, The Co-op, Waitrose, Marks & Spencer and Somerfield.
  • 2% back on any department store spending. This includes BHS, John Lewis, Debenhams, House of Fraser and Harvey Nichols. 
  • 3% back on any fuel and travel spending. This includes National Rail travel, and Transport for London tube, bus and train travel. Cashback is capped at a collective £9 a month.

So what could you earn?  If you spent £300 a month on supermarket shopping, £250 a month in department stores, £100 a month at petrol stations and £150 on National Rail or TFL over the year, you’d earn a total of £186 in cashback. Not to be sniffed at.

The card comes with an annual fee of £24, but if you have or open a 123 current account with the bank, the first year will be refunded. (You must set up a Direct Debit to pay your card within 30 days of opening to get the refund).

But everyday cashback isn’t ALL this card offers. It also comes with a 0% introductory rate on both balance transfers and any new purchases you make for a market-busting 23 months.

If you are transferring a balance across from another card, there is no balance transfer fee to pay. When the respective introductory periods end, the 123 card charges a representative annual percentage rate (APR) of 16.5% (variable).

And if you are accepted for the card, this is the exact rate you will be charged – some other credit cards offer different rates depending on your individual circumstances.

Who’s it good for?

If you are responsible for your household’s everyday spend, putting it on this card is a no-brainer – so long as you pay it off at the end of the month, else the interest will outweigh the benefit. If you share the day-to-day shopping with your partner you can have two cards on the same account and both earn cashback – but the single limits will still apply.

The lengthy 0% introductory windows are also a bonus too if you need them but even as a cashback card alone, the Santander 123 is a winner.

Any catches?

You’ll have to factor in the £24 annual fee into the cash you earn back. But as we demonstrate in our above example, with a potential £186 earned over the year, it’s easy to still wind up quids-in.

Note also that, at the highest 3% cashback rate (on petrol and some travel) you will only be able to earn a maximum £9 a month.

Cashback is not offered on spending outside supermarkets, department stores or travel. So, if you paid for a restaurant meal using the card, you wouldn’t benefit. But a press officer at Santander also reminded us that you can buy a lot in supermarkets these days other than food - such as TVs, clothes and home and gardenware.

If you want a card which offers a top rate of cashback on ALL your spending rather than just household bills, it’s worth looking at the American Express Platinum Everyday Cashback Credit Card which we explain more about here – although the 5% only applies for the first three months and on the first £2,000 of spend.

“You could earn around £186 cashback in a year - not to be sniffed at..”

What’s the verdict?

The Santander 123 credit card is one of the very best cashback cards available, especially as the cashback offered is ongoing and applied to really tangible spend. So if you are looking for long-term rewards, Santander’s card is a tough one to beat.

If you are going heavy on the shopping just for the first few months of this year however, there's a new alternative on the block worth knowing about - RBS and NatWest have improved their Cashback Credit Card for a limited time.

Between January 1 and March 31, you will now earn 5% on all department store spending (excluding food which you'll get 1% back on) and 1% on all supermarket spend (excluding petrol). You'll also earn 1% at the bank's Cashback Plus retailers (visit their websites for a list of these). Or you earn a 0.5% rate on every other purchase you make whether at home or abroad. And if you use contactless, you'll get an additional 1% on that spend too until March 31.

Top tip!

For any of these cashback cards, you'll need shipshape credit score to be accepted. If you are unsure of yours, you can apply for a copy of your report via our credit monitoring channel.

And using our Eligibility Checker tool will give you an indication if you will be accepted or not for the 123 card without leaving a footprint on your credit file. When you get to our balance transfer tables, simply click on the button that says: 'Will I get this card?'

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.


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