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2 Jun 2019

Barclays to hike Blue Rewards fee: is it still worth going for?

The amount you could earn from cashback may fall by up to 25%

Barclays is increasing the fee on its Blue Rewards cashback scheme from £3 a month to £4 from 1 July, meaning your reward profits will fall by up to 25%.

Blue Rewards can be added to Barclays current accounts and pays £7 cashback a month if you meet the criteria. You can earn up to £10 a month if you hold certain Barclays products.

We take a look at what's changing, how much cashback you could earn and what you can do about it.

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What is Barclays Blue Rewards?

The Barclays Blue Reward scheme is an add-on available to new and existing current account customers who bank online or via the app.

Once you've opted in, you'll get £7 a month cashback as long as you deposit £800, pay the monthly fee and pay two direct debits. If you set up one direct debit, you'll only get £3.50.

If you have or take out other Barclays products, you can earn much more:

  • £5 a month extra if you're a Barclays mortgage customer.
  • Up to £3 a month for Barclays home insurance customers.
  • £1 a month for Barclayloan customers.
  • and £1 a month for Barclaycard credit card customers (for up to 24 months).

Blue Rewards also pays 1% cashback when you spend with certain retailers using your debit card.

How is Blue Rewards changing?

Barclays is increasing the monthly fee it charges for the Blue Rewards scheme from £3 to £4 a month from 1 July 2019.

As the scheme charges the fee in arrears, existing customers will see the increased payment taken from their account on 2 August 2019.

The change applies to new and existing customers. However, customers that took advantage of a November 2018 deal - offering double or triple rewards for a year - will receive a £1 refund each month for four months.

Is Blue Rewards still worth paying for?

You can see the impact the £12 a year fee hike will have on your annual profits, depending on how you use the account and what Barclays products you have, in the table below.

Barclays Blue Rewards combinationsAnnual profit after £3 monthly fee nowAnnual profit after £4 monthly fee from 1 JulyPercentage change
Blue Rewards with two direct debits£48£36-25%
Blue Rewards with two direct debits and Barclays mortgage£108£96-11%
Blue Rewards with two direct debits, Barclays mortgage and Barclaycard credit card£120£108-10%
Blue Rewards with two direct debits, Barclays mortgage, Barclaycard credit card and Barclayloan£132£120-9%
Blue Rewards with two direct debits, Barclays mortgage, Barclaycard credit card and Barclayloan and Barclays home insurance£168£156-7%

If you have the Barclays account, have two direct debits set up and pay in at least £800 a month, you'll still be able to make money through the scheme, but the profits will drop significantly by 25% - or £12 a year.

However, if you use the account and also have one or more Barclays products, the change will have less impact on your overall earning power.

If you have no other Barclays products, and just one direct debit, you could lose money.

As you would receive £3.50 a month in cashback, compared with the £4 fee, Blue Rewards would end up costing you £6 a year. Given that Blue Rewards provides no benefits beyond cashback, you should add another direct debit or turn off Blue Rewards altogether.

Why is Barclays hiking the fee?

Blue Rewards was launched to keep customers from leaving Barclays.

The bank lost 33,917 more customers then it gained in 2018, according to switching data from Bacs.

However, Barclays stood by its decision to increase the fee and suggested it could make the account more rewarding in future.

Barclays told Which?: 'Since we launched Blue Rewards four years ago, we've introduced new cash rewards for taking out more products with us, such as life insurance and more cashback retailers through which Blue Reward customers can get an additional 1%. And we have more benefits to come. In view of this, for the first time, we're increasing the price by £1 month.'

What can you do if you're not happy?

If you aren't happy with the increased monthly fee, you can avoid it by switching off Blue Rewards before 1 July. Just log into online banking or your mobile app.

You'll be able to carry on using your Barclays bank account without Blue Rewards but you may want to consider switching to another bank to get a better deal.

The best bank accounts for cashback

There are several bank accounts that pay more cashback, after fees, than Barclays Blue Rewards.

The highest-rated cashback bank account among Which? members is the Santander 123 Lite which pays between 1-3% cashback on household bills paid by direct debit.

In our typical cashback scenario you could earn £6.84 a month with this account (calculated from a spend of £33 (water), £94 (energy), £40 (mobile phone/data), £29 (landline/broadband), £18 (TV package), and £128 (council tax)). However, the 123 Lite charges a £1 monthly fee, which you should factor into your decision.

Alternatively, the Co-operative Bank Everyday Rewards pays £4 a month when you pay in £800 and pay out four direct debits, plus a further 5p per debit card transaction up to a maximum of £1.50. The account comes with no monthly fee so everything you earn is profit.