Save on utility bills with reward schemes
MOST of us know that it's possible to earn rewards for the money we spend on everyday essentials like utility bills, mobile phones and petrol through current accounts, credit cards and loyalty cards.
As the cost of these essentials increases the prospect of rewards is appealing, especially when they can be redeemed and spent across a wide range of shops, restaurants and attractions.
This guide aims to take readers through the different ways that consumers can earn rewards on bills and other essentials. Credit cards are popular but there are other options available too.
We'll also look at the potential value of these reward schemes and some pitfalls to watch out for.
The guide also takes a quick look at some utility bill reward schemes that have recently been revoked.
One of the best ways to get rewarded for spending on household bills is through reward current accounts. Here's a run down of some of the options currently available.
The Santander 123 Current Account
The Santander 123 Current Account pays cash back on the essentials listed above.
The catch is that this is a packaged account - there's a £5 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.
It's also important to note that account holders will only receive the cash back rewards listed above if they pay their bills by direct debit.
But the conditions aren't too onerous considering the rewards available.
A household spending £100 on council tax, £20 on water, £50 on gas and electricity and £25 on broadband and calls would earn £35.40 a year in cash back, and could earn far more overall including the interest available.
Natwest Reward current accounts
The Natwest Reward, Reward Silver and Reward Platinum accounts all offer 2% cash back on household bills.
However, again any rewards come at the expense of a monthly account fee. The basic Reward account has a £2 monthly fee, which rises to £12 for the Silver account and £19 for the Platinum account, so beware of these. Also, to get the rewards all bills must again be paid by direct debit.
Natwest calculates that based on an average outgoing of £345 per month on household bills, the average account holder could earn £83 each year - although there is no limit to the value of rewards that can be earned.
So potentially, despite the monthly fees this account could actually make money.
Once an account holder has £5 of rewards they can be exchanged for cash to be deposited in a Natwest account, turned into gift cards for a number of retailers, or donated to charity.
Finally, as Natwest is owned by the Royal Bank of Scotland Group, the RBS Reward current account offers a similar reward structure to those detailed above.
TSB Classic Plus Account
Although the rewards attached to this account aren't specific to utility bills, account holders can still benefit from paying their bills by direct debit.
This account, which is fee-free, offers £5 cash back per month if an account holder sets up two direct debits to be taken from the account. It's likely that these two direct debits will be for household bills, so the account essentially pays people for paying their bills.
It also offers an extra £5 cash back each month if an account holder uses their debit card at least 20 times each month.
So if someone did make a one-off bill payment or paid for petrol using their debit card they would also benefit from this, provided they reached the minimum of 20 debit card uses in a given month.
Note that these offers only apply to accounts opened after March 2017. To be eligible the account holder must pay at least £500 each month into the account and register for online banking and paperless statements and correspondence.
Aside from current accounts, there are other ways to gain rewards for essential spending, including money spent on bills and other basics like food and petrol.
For those of us who tend to do our weekly shop with one supermarket, taking out a loyalty card to earn points on spending is a popular choice.
The Sainsbury's Nectar card and the Tesco Clubcard are the most popular free loyalty cards currently on the market. Find more general information on both of these cards here.
Aside from collecting points with these free loyalty cards, another option is to earn points by taking out credit cards which are linked to Nectar and Clubcard.
So if any spending on bills or other household essentials is done using these cards, then the Nectar or Clubcard points accrued as a result can be a useful reward.
Although the points earned with these loyalty and credit cards cannot be turned into cash back, they can be spent in-store or online with the retailer, or redeemed at a large number of shops, restaurants and attractions.
It's also worth pointing out that for those who regularly shop at Tesco and have a Tesco Clubcard, taking out a mobile phone with Tesco Mobile can provide good rewards.
Clubcard holders can get one point for every £1 spent on Tesco Mobile contracts and pay-as-you-go top ups.
It used to be the case that people with Tesco Broadband - reviewed here could also benefit from a similar deal, but the provider was bought by TalkTalk in January 2015 and sales to new customers were stopped a month later.
As the cost of petrol is a major expense for most people, gaining rewards for filling up are a much welcomed benefit. Below are a few examples of the ways people can earn rewards on petrol:
- Tesco credit cards offer five Clubcard points for every £4 spent on Tesco Fuel (except for the Premium card which offers two points for every £1 spent) and Clubcard points can also be collected when filling up at Esso garages.
- For those collecting Nectar points, filling up at a Sainsbury's or BP petrol station earns Nectar cardholders one Nectar point for every litre of fuel purchased.
- The Barclaycard Freedom Rewards card gives two points for every £1 spent on petrol (as well as in UK supermarkets).
We've written in more detail about the different rewards available for filling up here.
Revoked reward schemes
It's worth noting at this point that a number of popular schemes that gave rewards for spending on bills have lately been revoked by providers, as detailed below.
Santander 123 credit card
Although the popular Santander 123 Current Account is still offered by the bank, in October 2016 it pulled the 123 Credit Card from the market.
We've covered this development in detail in our guide here.
It was replaced with the All in One credit card, which has a 0.5% cap on spending rewards. Although there's no limit on the value of rewards that can be earned, because the card has a £36 annual fee cardholders would have to gain more than this value in rewards to make it worthwhile.
Another popular scheme was E.On Rewards. To be eligible customers just had to take out a dual-fuel or electricity only tariff and the reward points were automatically earned each day.
So for those for whom E.On was the best choice of energy supplier anyway, the free points were an added bonus. But the rewards gained didn't really match the possibility of saving up to £200 on energy bills by shopping around.
In January 2017 E.On announced that they were closing their rewards scheme at the end of March. Depending on the tariff, many, but not all, customers had a deadline of June 2017 to exchange their points into Clubcard points or vouchers.
Nectar points for British Gas and Sainsbury's Energy
Nectar and British Gas (which provides Sainsbury's Energy) offered a pleasingly broad reward scheme, but from July of this year customers could no longer collect Nectar points for either supplier.
Although no announcement has been made on the specifics, British Gas has said it will be establishing its own British Gas Rewards scheme to replace the Nectar scheme.
Customers of British Gas and Sainsbury's Energy who have collected Nectar points with them will still be able to spend these points at participating Nectar retailers.
Barclaycard Freedom and Npower
Also, it's worth noting that not all reward schemes have always been that rewarding.
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 possible problems to look out for when assessing a rewards scheme.
Npower used to limit rewards to their standard variable tariff deals, which cost more than most other tariffs. Customers who were tempted therefore ended up spending more for their energy, and with few rewards to show for it, compared to those who saved money by taking the cheaper Npower SignOnline tariff that was available at the time.
Another problem was the fact that the Barclaycard and Npower scheme advertised a £15 direct debit bonus per fuel type, 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 was in fact available to all new customers.
Payment without rewards
Finally, with any loyalty scheme it's vital to check that the rewards offered, especially those connected to a credit card, are worth it. The last thing anyone wants is to be spending more money just for the sake of collecting reward points.
With energy and utility suppliers the cheapest option is usually to find the right tariff and to pay by direct debit, which guarantees a discount, and not to get hooked into a more expensive tariff for paltry rewards.
For people earning rewards on a credit card it's important to make sure that the amount placed on the card can be paid off in full each month. Otherwise interest rates will kick in and the repayment costs will quickly dwarf any earnings from rewards.
However, if the credit card can easily be paid off in full each month then this is a decent option for those who want to earn rewards for everyday spending.
As most people these days pay their bills by direct debit, the safest option is to choose a current account that offers rewards on direct debit bill payments specifically, or direct debits generally. This way, account holders really can earn rewards with no extra effort or risk.