Card providers are slashing cashback rates on credit cards in an effort to increase their profit margins. But is cashback the only way to make money from your spending?
Users of cashback credit cards are beginning to find it harder to make money out of their spending these days with an increasing number of providers cutting the percentage of cash they give back to their customers.
From 1st November, Accucard and easyMoney will be reducing their standard cashback rates from 0.8% to 0.5%. A customer spending £5,000 over a year will now only receive £25 rather than £40.
And American Express Blue, which has been paying 2% for the first 3 months, and then 1%, will slash its rate to 0.5% on the first £2,000 and then 1%. American Express has also introduced a clause that any cashback is forfeited if it amounts to less than £5 per annum.
Halifax and Bank of Scotland have already slashed cashbacks in half, from 0.5% to 0.25%, and Egg now pays just 0.1%.
Cashback credit cards are only of use to people who always pay off their bills every month and sophisticated users have found an alternative way to make money from their cards using a method known as 'stoozing'.
Stoozers borrow a lump sum via a credit card charging an introductory rate of 0% and stick the money in the bank to earn interest or offset their mortgages. At the end of the introductory rate they either pay off the debt or switch the balance to another interest-free card - all the while earning rates of more than 5% on the money they've borrowed.
It's not a game for the faint-hearted or for those who may forget to meet the deadlines when introductory rates are up and most people will find it easier to make do with the poorer cashback rates.
If credit card companies are going to offer a cashback rate, it would be a crying shame not to take them up on the offer. But always make sure you pay off your bills in full to ensure that any cashback benefit is not swallowed up by interest payments.
More:Five Good Reasons To Use A Credit Card | Compare Credit Cards
