Lloyds Bank Launches New Cashback Credit Card: Is It Any Good?

Lloyds Bank has launched a new credit card that enables customers to earn cash back every time they spend.

Customers earn 0.25 per cent on every pound spent up to £4,000 and 0.5 per cent for every £1 spent over that amount.

New customers will also get a £20 cashback incentive when they spend £1,000 within the first three months.

Any Cash Back earned over the course of the calendar year will be accumulated and paid directly into the customer’s credit card account each January as a lump sum.

Eileen Corfield, Managing Director, Lloyds Bank, said: “We are excited to launch our new cashback credit card, rewarding customers for every purchase they make.

“Whether it’s everyday spending on groceries, clothing or restaurants, our customers will be able to get a refund, which is then saved and paid into their account at the start of each year.”

How does it stack up?

Shoppers keen to put the past 18 months behind and start spending on activities and events they felt deeply deprived of might consider this simple cash-back offer.

However, the returns on offer are modest and although the £20 incentive to spend £1,000 in the first three months represents a 2 per cent return, 0.25 per cent interest on the first £4,000 each year will generate just £10 cashback .

For someone who spends £1,000 per month over 12 months, they can expect to earn a total of £70 in cash back due to the starting incentive and a 0.5 per cent return on expenses over £4,000.

For cashback enthusiasts, the new Lloyds credit card goes head to head with American Express cashback cards.

Lloyds’ announcement is timely given that Amex has slashed its prices.

Amex cardholders’ cashback rates will be reduced by up to 50 percent in some cases starting this week.

The cashback discounts relate to the free Daily Cashback Platinum Card and the Platinum Cashback Card which comes with an annual fee of £25.

Its free customers currently receive 1 per cent cashback when spending over £5,000 a year, but under the changes any spend of up to £10,000 will only earn 0.5 per cent.

Payment card holders will get 0.75 per cent cashback when spending up to £10,000, down from the current rate of 1 per cent.

“Unlike some of the Amex range, the Lloyds deal doesn’t come with an annual fee,” said Michelle Stevens, deputy editor at personal finance comparison site Finder.

“However, the annual fee can be worth incurring if the cash back value you will earn — plus any other perks — outweighs that fee.”

For those worried about having any fees associated with their card, the main contender is the Amex Free Daily Cashback Platinum Card.

Its interest of 0.5 per cent on all spending up to £10,000 and 1 per cent thereafter is more generous than what Lloyds offers.

New cardholders also get 5 per cent cash back on their purchases – up to a maximum of £100 – for the first three months after joining – much better than the £20 incentive offered by Lloyds.

It should also be noted that not all retailers accept American Express. It charges merchants more than Mastercard and Visa for every sale they make, which means some retailers are choosing to avoid Amex cards altogether.

There are now very few major chains that don’t accept this, but you are more likely to have a problem with smaller shops across the UK.

However, some notable organizations still do not accept Amex including Tile Giant, Dunelm, and Sky.

Another comparable cashback deal is offered by Santander, which comes with a £3 monthly fee or £36 a year, and has an annual interest rate of 23.7 per cent.

Its MasterCard all-in-one credit card pays 0.5 percent cash back on purchases, and offers a host of other benefits, such as no foreign transaction fees on purchases made abroad.

Meanwhile, Barclaycard, which made headlines in May for announcing drastic reductions in credit limits for borrowers, is offering a card that pays 0.25 percent cash back on all purchases.

It also comes with fee-free overseas spending and an annual interest rate of 22.9 percent.

By contrast, the Lloyds cash back credit card has an APR of 19.9 percent while Amex’s fee-free APR is 22.2 percent.

Rule?

Choosing the best credit card like many things boils down to whether the benefits on offer are the best fit for your circumstances.

It may be that you’re looking for a card to clear debt — in which case, a balance transfer credit card may work best.

This allows customers to pay off debt by transferring the entire debt to the new card, often with the promise of 0 percent interest for a set period of time.

Or similarly, you might be optimistic that with the vaccine rollout in full swing, you’ll soon be able to make up for lost time by vacationing abroad, and therefore need a credit card that’s more convenient for spending abroad.

But if you decide a cashback or rewards credit card is for you, then a lot depends on how much money you spend and how you spend it.

If you’re a big spender, you might want to consider a card that complements that like Amex’s Preferred Rewards Gold credit card.

Although it comes with an annual fee of £140 due after the first year, it offers card members an extra 20,000 points when they spend £3,000 in the first three months – enough to get you a £100 Amazon gift card and can also Convert them into Avios Points.

Cardmembers then earn 1 membership reward point for every £1 they spend and can now also redeem £5 twice each month by spending on Deliveroo.

For those who aren’t ready to commit to fees nor confident they’ll spend enough with this card, the free Amex cash back card or the new Lloyds credit card might be a good option.

You’ll be able to make a better return with this free Amex cash back credit card, but at least with Lloyds, you can be more confident that you can use your card everywhere you go.