The 123 Cashback Credit Card, which is launched on Monday 5 September, will reward customers with cashback of between 1% and 3% when they make purchases using their credit card.
Santander estimates that the average household will earn £176 a year in cashback - not something to be sniffed at. But there are some drawbacks which may put some people off: a £24 annual fee and the fact that cashback isn’t available on all spending.
Let’s take a look at the card in more detail so you can decide whether the positives will outweigh the negatives and how the 123 card stacks up against other cashback cards available – it’ll all depend on your shopping habits.
What’s the deal?
Santander’s 123 Cashback Credit Card pays three different rates of cashback depending on where the card is used. You’ll earn 1% on any spending done at supermarkets – in store or online – 2% on purchases made in department stores and 3% on fuel spend.
The maximum you can earn on fuel spend is £9 a 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.
The cashback you earn is credited to your account each month. This differs from most other cashback cards which credit it annually.
It’s important to pay your bill off in full each month – if you don’t you will attract interest at an annual rate of 18.9% which means the interest you’ll be charged will outweigh the value of the cashback you’ve earned.
The annual fee means the representative annual percentage rate is pushed up to 22.8% (variable). The 123 Cashback card is available to new and existing Santander customers.
MoneySupermarket is the only comparison site offering this card.
It’s interesting that Santander has chosen to charge an annual fee of £24 for this credit card. It is the second provider within a month to launch a cashback card with a fee – the new American Express Platinum Cashback card has a £25 annual charge.
Some people will probably be immediately put off by the presence of a fee but the generosity of the cashback offers of both the Santander 123 and Amex Platinum Cashback cards means it will be quickly wiped out and represents better value than other cashback cards that don’t levy a fee.
The other main drawback of the 123 Cashback card is the fact you don’t earn cashback on all purchases.
Santander claims supermarkets, department stores and petrol stations are where the bulk of most people’s monthly spending is done but many people use their credit cards for occasional high value purchases such as holidays, furniture, electrical items and white goods as well as things such as eating out and rail tickets.
While you may be able to buy some of these things from a department store or supermarket, many of them you won’t which means you could be missing out on some valuable cashback.
What are the alternatives?
The main alternative to the 123 card is the American Express Platinum Cashback card which pays 2.5% cashback for the first three months (up to a maximum of £100) and 1.25% thereafter.
You earn cashback on all spending with this card so it’s a great all-rounder. The representative APR is 18.9% (variable). However, a minimum household income of £30,000 is required for you to be eligible so it won’t be an option for everyone. For more information about this card, read our review.
The Capital One World Mastercard offers 5% cashback for the first three months (up to a maximum of £100) and then up to 1.25% thereafter.
You earn 0.5% on the first £5,999.99 spent on the card, 1% on spending between £6,000 and £9,999.99 and 1.25% on spending above £10,000. The representative APR on this card is 19.94% (variable).
Another option if the bulk of your credit card spending is on fuel and groceries is MBNA's American Express card with cashback. This offers 1.5% cashback on fuel and supermarket spend and 0.75% on other spending.
Santander’s new 123 Cashback Card it the best value cashback credit card for the bulk of your everyday spending.
Many people are reluctant to put their supermarket shop and fuel costs on their credit card, preferring instead to use cash or a debit card so they know where they’re up to with their finances.
However, as long as you clear your balance each month, there’s nothing wrong with using a credit card in this way – in fact with a card such as the 123 card, it’s worth doing because of the cashback you earn.
And 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).
It’s a shame that the Santander card doesn’t offer cashback everywhere though and if you are the type of person who uses their credit card for everything, then the American Express card will probably be a better option.
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