A closer look at the new Barclaycard Cashback card

By Emma Lunn

The already competitive world of cash-back credit cards is hotting up, with Barclaycard throwing its new Barclaycard Cashback product into the ring. Its marketing materials sport promises of 6% cash back -- the highest rate on the market.

While this new card is quite rewarding, there are some catches behind the headlines.

Do I really get 6% cash back?
The 6% cash-back rate applies only for the first three months -- and applies only to your five biggest purchases. Once the initial three-month period is over, the card pays 2% on the five biggest transactions each month and 0.5% on all other purchases.

The 2% rate doubles to 4% for one month each year, to mark your anniversary with the card. closer-look

Although these terms may not be as rewarding as they seemed after a cursory reading of the headlines, they are at least upfront and easy to understand, points out Andrew Hagger, money commentator and founder of MoneyComms.

"Barclaycard Cashback is much more straightforward than cards on offer from some of its rivals," says Hagger. "There are no confusing tiers whereby you earn greater rewards the more you spend, and there are no restrictive caps on the amount of cashback you can earn either."

However, there is some small print that cardholders should take note of. First, the 6% cash back in the first three months is capped at £120. Second, you have to make at least 15 purchases in a month to qualify for the 2% rate.

Extra costs
The card comes with a £24 annual fee, so do some number crunching before deciding if you'll earn enough rewards to cancel it out.

The £24 fee means that, although the purchase APR on the card is 19.9%, the representative APR (the APR that takes into account all costs) is above average at 24.6%.

"The [representative] APR of 24.6% takes into account the £24 fee -- something that consumers need to bear in mind," Hagger says. "In effect, this means the first £2 of cashback you earn each month will be swallowed up by your fee."

Another thing to remember: If you are planning to use the card for big purchases (like bills or plane tickets) to really reap that 6% reward, bear in mind that some firms, such as energy companies and airlines, will charge you to use a credit card, wiping out some of your profits.

How it stacks up
So how does the Barclaycard Cashback card compare to other cards on offer?

Other popular cash-back cards in the market include the AmEx Platinum Cashback Card (£25 annual fee), the Capital One Aspire World Card (no fee), the Aqua Reward MasterCard (no fee) and the Santander 123 Credit Card (£24 annual fee). Each card has its own rewards structure, which can make it tricky to work out which comes out on top.

For example, the Santander card offers 3% back on petrol spend, 2% in department stores and 1% in supermarkets. But if you were going to book flights or pay off a big holiday balance, you'd get no reward.

"That's where the Barclaycard deal comes out on top, as there are no restrictions on where you spend, plus 2 per cent on your five biggest transactions," Hagger says.

The Aqua Reward MasterCard doesn't charge an annual fee and pays an impressive 3% cash-back rate. However, cash-back earnings are capped at £100 a year, which is lower than that of the other cards.

Capital One's Aspire World Card doesn't have a spending limit, and you get 5% cash back for the first three months you have the card. But once the three months is up, you'll get tiered cash-back rewards up to a maximum of 1.25%.

The Sainsbury's Cashback credit card also pays 5% in the first three months -- but only on spending at Sainsbury's, and this is capped at £50 per month. However, an advantage of this card is that it pays a monthly £5 cash reward if you spend at least £250 at Sainsbury's and £250 elsewhere -- so it's a good deal if you do all your grocery shopping at Sainsbury's.

Whatever cash-back card you choose, the golden rule is to pay your statement balance every month. Otherwise, your interest costs will soon wipe out the cash you receive.

See related: Football affinity cards are fun for fans, but not the best deal, Is the Asda cash-back card a good deal?

Published: 12 October 2012