Solutions for rewards aficionados in a dwindling rewards state

By Benjamin Salisbury

Following an EU cap on interchange fees -- the fees credit card providers charge merchants to process credit card payments -- in March 2015, many experts predicted a decline in credit card rewards programmes as issuers look for ways to recoup revenue they used to get from interchange fees. Those predictions came true, and many programmes cut their rewards in the 12 months following the change.

Providers such as Tesco Bank, RBS, Capital One and M&S Bank have already cut back on the rewards available through cashback and loyalty point schemes. chase-rewards

For many, rewards are a nice perk, but likely not the reason they signed up for a particular card. But if you are a rewards aficionado, you may be sorely missing the more robust programmes. Can you still find value in the UK credit card rewards market or do you need to look elsewhere?

UK options that are still worthwhile
"American Express sidestepped [the interchange cap] because their payment system processes transactions in a slightly different way," Hannah Maundrell, editor-in-chief of Money.co.uk, said in an emailed response to questions. Therefore, rewards mavens will find some of the best remaining deals attached to American Express cards.

The American Express Platinum Everyday credit card offers 5% cashback for the first three months up to a maximum spend of £2,000 and then 0.5% on spending up to £3,500 a year, 1% on spending between £3,501 and £7,500, and 1.25% for spending above £7,501.

This is good but you need to spend a lot to make the cashback worthwhile for you. If you are already experienced at racking up rewards, though, you are likely accustomed to spending a hefty amount -- and paying it back -- on credit. There is no annual fee, but it's vital to repay the balance in full each month because the APR is high at 22.9%.

American Express also offers a Platinum Cashback card, which is similar to the Platinum Everyday card, but pays 1.25% cashback no matter what you spend. You still get 5% for the first three months. However, it comes with a £25 annual fee, reducing some of the benefit, and its APR is even higher than the Everyday card, at 28.2%.

For travel rewards, you can try the British Airways American Express card, which allows you to earn one Avios point for every £1 spent. If you spend £500 in the first three months, you qualify for a bonus of 3,000 Avios points. And if you spend £20,000 or more within an anniversary year, you earn a free companion ticket, a free ticket of the same class to the same destination as the cardholder, though you still need to pay taxes and any charges.

"A good option is a dual card -- you'll generally earn more miles by spending with AmEx but the Visa or MasterCard counterpart can be handy for places that don't accept AmEx," Maundrell said. For instance, the Virgin Atlantic White credit card account comes with an American Express and Visa card from MBNA. It has no annual fee and you earn one mile for every £1 spent on everyday purchases on the American Express, and one mile for every £2 spent on everyday purchases on the Visa. If you spend direct with Virgin Atlantic, you'll earn double the usual miles. Make a purchase within 90 days of opening the account, and you'll earn 3,000 bonus miles; spend £15,000 in a year and receive a companion ticket (minus taxes and charges).

Finally, Sainsbury's Nectar Dual credit card offers 21 months interest-free on purchases and 21 months interest-free on balance transfers, and has a lower APR than some other options, at 18.9%. You get two Nectar points for every £1 spent in Sainsbury's. And in the first three months, you'll earn four Nectar points for every £1 spent at Sainsbury's, and one point for every £5 spent elsewhere.

Try some rewards-boosting tactics
If you are already using a card that earns you maximum points, there are some tactics you can use to increase your earning potential.

You can try churning, which involves opening and closing multiple credit card accounts to take advantage of sign-up bonuses and rewards available to new customers and is a good option to boost credit card rewards. This method is common with airline reward cards, but a word of warning: churning can have a negative impact on your credit file and there are restrictions on how often you can open accounts.

You can also try "double-dipping", which allows you to earn two sets of rewards in one transaction by using a loyalty card and a rewards credit card. For instance, you can get up to 4% cashback on fuel with the AA FuelSave credit card, plus swipe your Tesco Clubcard to earn points if you fill up at a Tesco or Esso service station.

Juggling cards is another technique. You can hold more than one type of rewards credit card to take advantage of different types of benefits. Use a supermarket rewards card for grocery shopping, a cashback fuel card for petrol and an airline miles card for everything else. To keep track of which card is best to use in different situations, there are several credit card management apps that you can use. The apps can help you determine which card will earn you the most points at particular locations, or even suggest cards you should apply for based on your needs.

Extreme measures
A US credit card could help you bypass the cuts to UK credit card rewards caused by the new EU rules. However, because you are not a US citizen, you'll have to call a US bank and arrange a personal application, with no guarantee of being accepted.

"Because you're not a U.S. citizen, and there are limitations to rewards programs in Europe, you will want to call our Financial Sales Department to discuss whether we would be able to approve you for a credit account with us," a spokesman from US Bank said in an emailed response to questions.

Another US spokesman, Paul Hartwick SVP, chief communication officer-consumer at JPMorgan Chase, confirmed that Chase only offers credit cards to US citizens.

See related: Points chasing: manufactured spending risks, rewards, Enjoy the perks of your card without paying the annual fee

Published: 1 April 2016