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Warning. Tandem to end fee-free cashback credit card in March – should you pay £6/month to keep it?

Warning. Tandem to end fee-free cashback credit card in March – should you pay £6/month to keep it?

Challenger bank Tandem has announced it is to start charging for its popular cashback credit card, with existing customers unable to use their cards from 9 March unless they pay a £5.99/month membership fee.

The Tandem Cashback credit card, which launched in February 2018, was previously one of our top picks for overseas spending and for cashback, until it was closed to new customers at the end of last year. It offers fee-free spending and cash withdrawals overseas, as well as 0.5% cashback on purchases worldwide. Yet for most, a £5.99/mth fee will mean it's time to look at other options, as there are free or much cheaper alternatives out there.

See our Travel Credit Cards guide for more info on specialist cards for overseas spending and our Credit Card Rewards guide for the top cashback cards.

'This isn't a popular move – there are better options out there'

Helen Saxon, banking editor at MoneySavingExpert.com, said: "Early feedback from Tandem cardholders suggests this isn't a popular move. Customers are already emailing us saying they won't opt in to the new membership scheme and will ditch their card from the March cut-off.

"While the perks on the face of it look good – free overseas transactions, a best-buy savings rate, cashback on credit purchases and no interest on those same purchases if you don't pay them off – there's little in there that would justify paying £6 a month. There are free or much cheaper alternatives which are as good or almost as good out there.

"Sadly, this seems to be the latest case of a 'fintech' company coming in with a market-leading product and then whittling away the benefits."

What's changing?

Here's how the Tandem Cashback credit card is changing for existing customers from 9 March 2020:

  • There's a £5.99/mth fee. You'll no longer be able to use the card unless you opt to pay this monthly 'membership' fee, which will ensure you get the following perks...

  • Access to a linked easy-access savings account paying 1.5% AER variable. This is a new account which will only be open to those signed up to Tandem's membership scheme, for the time being at least. The 1.5% interest rate is market-leading for an easy-access account. However, the membership fee means that only those with large savings would see a benefit from the higher rate – you'd need £4,800 in savings to earn enough interest to cover the fee, and £48,000 before you'd be better off compared to the next best easy-access account.

  • No interest charged on purchases and cash withdrawals. The standard interest rate will drop from the current 18.9% to 29.9% APR charged on purchases and cash withdrawals, to 0% APR. There's no limited length to this interest-free period – it's 0% APR on an ongoing basis.

  • No fees on overseas spending and cash withdrawals. As is the case currently. Other cards offer this too though, and for free – see our Travel Credit Cards guide for full info.

  • 0.5% cashback on all purchases over £1 worldwide. Again, this is already offered. You can get a better rate with a different free cashback credit card though – see our Credit Card Rewards guide for full info.

If you choose not to sign up for the membership, your card will stop working after 9 March 2020 and your credit agreement will end when your balance is repaid in full.

Tandem has confirmed on Twitter that the changes only affect its cashback credit card. Tandem Journey credit card customers are not affected, and its existing savings accounts will also stay as they are.

'I'm not going to waste £5.99/month... bye bye'

A number of Tandem customers have already taken to social media to voice their concerns about the changes. Here are a few of the tweets we've seen:

I want to ditch Tandem – what are the best alternatives?

Most who have the Tandem cashback credit card will have it to use either for cheap overseas spending or as a cashback card.

If you're unwilling to pay the £5.99/mth membership fee, here are the top alternatives:

  • Get near-perfect exchange rates, and fee-free spending and cash withdrawals overseas. Our long-term top pick travel credit card is the Halifax Clarity – it gives near-perfect rates and doesn't charge exchange fees on spending or withdrawing cash abroad, though you'll be charged interest on cash withdrawals (5p-ish per £100 per day), even if you pay it off in full. See full details and more options in our Travel Credit Cards guide.

  • Get up to 5% cashback for three months. If you're looking for a new cashback credit card, the highest payer is the American Express Platinum Everyday card, which offers up to 5% cashback for the first three months (up to a max £100), then 0.5% cashback on up to £5,000/year and 1% above this. You need to spend at least £3,000/yr to earn any cashback though. See full details and more options in our Credit Card Rewards guide.

  • Get fee-free overseas spending AND cashback. The Aqua Reward card gives near-perfect rates on overseas spending, with no exchange fees. It's a Mastercard, so it's accepted everywhere, plus it pays 0.5% cashback on spending worldwide (up to max £100/yr), making it the closest free alternative to the Tandem card. But it charges high fees and interest on cash withdrawals, and credit limits are low, from £250 to £1,200.

What does Tandem say?

Tandem's co-founder and chief executive Ricky Knox said: "We want to continue to offer products and services that make a real difference to our customers, but we also need that offer to be sustainable. That's why we're taking the opportunity to test a membership model that preserves all of the benefits of the cashback card and more."