Credit cards to save on bills - is it worth it?
MOST energy prices are much higher than they were a few years ago, and while they're comparatively cheaper than they were back then, the cost of essentials such as broadband, line rental and mobile phone use seems to have gone up too.
So we're cheered that utility companies have teamed up with credit card providers and retail reward schemes to offer discounts on bills. Or, at least, we'd like to be cheered.
In reality, these schemes can be a decidedly mixed bag.
Although many are great, some are misleading or likely to result in costs that far outweigh any potential savings.
Read on to find out which deals that could actually save you money on the basics, and which offers are best avoided.
The best deals for bills
Here are the best three ways to get rewarded for day to day spending.
1. Cash back with Santander
The Santander 123 Current Account (more details) pays cash back on the essentials.
- 1% on water, council tax and Santander mortgage payments (up to £1,000 payment).
- 2% on gas and electricity bills.
- 3% on mobile, home phone, broadband and paid for TV packages.
The account also pays interest when the balance is over £1,000 at rates that compare well to other current accounts.
The catch is that this is a packaged account - there's a £2 monthly fee - and it must be used as a main account, with at least £500 a month coming in and at least two direct debits going out.
Those conditions aren't too onerous, however, considering the rewards available.
A household spending £100 on council tax, £20 on water, £50 on gas and electric and £25 on broadband and calls would earn £35.40 a year just in cash back, and could earn far more overall including the interest available.
2. E.On reward points
E.On offer 1,500 E.On Reward Points for customers who sign up to their rewards scheme.
The 1,500 points can be exchanged for 1,500 in Clubcard points or a £15 shopping voucher.
It used to be the case that reward points couldn't be collected on E.On's cheapest tariffs including Age UK (including Age UK prepayment). But since December 2013, people with any of the supplier's tariffs, including Age UK and their prepayment tariffs, have been able to sign up too.
Earning £15 in vouchers pales in comparison to saving up to £200 on energy bills by shopping around.
But for those for whom E.On is the best choice of energy supplier, free points are not to be sniffed at.
Find out more about the scheme here.
3. Nectar points for British Gas and Sainsbury's Energy
Nectar and British Gas offer a pleasingly broad little reward scheme, giving customers 200 Nectar points per fuel each year, 200 points every year on the anniversary of signing up, and 480 points a year for submitting a quarterly meter reading.
That adds up to 1,560 points each year just for being a dual fuel customer and submitting quarterly meter reads.
There are also 800 points available for signing up to direct debit payments online, and between 200 and 600 points for signing up to service programmes and booking annual services online.
Nectar card registration is here; people can use their free Nectar card or, if they have one, a Nectar credit card.
Find more general information on Nectar here.
Note, however, that as 500 Nectar points are worth from just £2.50, doing the minimum outlined above could be worth as little as £7.50 over the course of the year.
That's far from good enough to justify staying with British Gas if there's a cheaper energy deal elsewhere. Switching provider will save far more than the points will make.
4. Tesco Clubcard points for Tesco Mobile
Tesco Clubcard holders can get one point for every £1 spent on Tesco Mobile contracts and pay as you go top ups: simply enter a Clubcard number into the account page to benefit.
Points can be collected with a normal, free Tesco Clubcard or with a Tesco Clubcard credit card (cost of credit):
- Tesco Clubcard: 1 point to £1 in Tesco
- Tesco Clubcard Credit Card: 1 point to £1 in Tesco, 2 points to £1 on Tesco fuel, 1 point to £4 everywhere else
It used to be the case that people with Tesco Broadband - reviewed here - could also benefit from a similar one point per £1 spent deal.
But the provider was bought by TalkTalk in January 2015 and sales to new customers were stopped a month later.
Existing customers who hadn't already linked their broadband to their Clubcard are out of luck - and as the others are moved across to TalkTalk during 2015, they'll also lose the ability to earn Clubcard points.
Other essentials: petrol, LPG and shopping
As mentioned above, the Tesco Clubcard credit card, reviewed in more detail here, offers double points on Tesco Fuel.
It's not the only card to offer incentives for spending on petrol - and in fact cards that do reward specific fuel spending offer some of the best ways to save on everyday expenses.
While it's not a utility bill as such, keeping the car running does often amount to a hefty chunk of the household budget.
Also, the "petrol" description is a bit misleading, as these cards generally offer rewards on purchases at petrol stations - such as LPG gas, for example.
That said, any regular LPG purchaser probably knows that petrol stations are by far the most expensive places to buy home heating fuel, and larger discounts are much more likely to be found by shopping around for cheaper suppliers.
But for those of us who are more concerned with the cost of filling the car, there are a few deals worth considering. We've written specifically about such credit cards here.
Additionally, it's worth noting that some of these deals, particularly Santander's 123 Cashback credit card and Barclaycard's Freedom scheme also offer rewards for supermarket shopping, in the form of cash back or loyalty points - another way to help put a dent in most budgets.
Where to watch out
Not all reward schemes are rewarding.
Barclaycard Freedom and npower
Since we first wrote this guide, Barclaycard Freedom has radically changed and no longer offers Npower rewards.
However, we've preserved their old scheme here as an example of what to look out for.
Npower used to limit rewards to their standard variable tariff deals. Customers who were tempted ended up spending more for their energy with not much in the way of rewards to show for it, compared to those who saved money by taking the cheaper Npower SignOnline tariff available at the time.
Another problem was the fact that the scheme advertised a £15 per fuel direct debit bonus, with a further £100 cash back after the customer had paid by direct debit for a year.
But that was disingenuous: the offer wasn't exclusive to Barclaycard but available to all new customers.
Paying bills with a non-rewarding credit card
Finally, just as with any other loyalty scheme, it's vital to check that the rewards offered for paying by credit card will be worth it, and won't end up costing more.
The only energy and utility suppliers we could find who don't offer substantial discounts for paying by direct debit are those who don't accept payment any other way.
So, while putting the necessary purchases on a cash back or rewards credit card can be a good way for very savvy cardholders to get something back, it's still rarely worth it when it comes to bills.
Most people would save more by simply switching to direct debit and finding the cheapest online tariff.