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11 Jan 2020

Tandem reveals revamped cashback credit card - is it worth the new monthly fee?

New perks include a top-rate savings deal and fee-free cash withdrawals abroad

Tandem cashback credit card customers have just under two months to decide whether they want to sign up to a new membership scheme, which comes with a monthly subscription fee, or have their card cancelled.

The credit card provider initially unveiled its membership plans for new customers in December 2019, encouraging them to join a waiting list.

But on Wednesday, existing Tandem cashback card customers were given the first-look of the revamped deal and invited to sign up. For the fee members will get access to a top-rate savings account, fee-free cash withdrawals abroad and interest-free borrowing, from 9 March 2020.

Existing customers are being given two options: stay and sign up for the new Tandem membership scheme or opt-out, which will mean the closure of their Tandem account.

Here, Which? explains the upcoming changes, what they'll mean for you and look at how the new Tandem membership scheme compares to other credit cards on the market.

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How is the Tandem credit card changing?

The new membership features include:

  • 0% interest on purchases and foreign ATM withdrawals
  • No FX charges on foreign transactions
  • 0.5% cashback on all eligible purchases
  • 1.5% AER on Tandem instant-access savings account
  • Monthly £5.99 fee

To access the membership features, you'll need to sign up by 9 March 2020 and be prepared to pay the £5.99 monthly fee.

The card is pretty much the same apart from the access to a 1.5% AER savings account, interest-free purchases and free foreign ATM withdrawals.

Tandem currently charges 18.9% on cash advances, but even with the new fee-free option abroad, it's important to realise that cash withdrawals can be recorded on your credit report and can impact your credit score.

What are the new fees?

The new Tandem credit card membership will cost £5.99 a month.

This will be the price you pay to access the various rates and features, and it's also the maximum you pay for your borrowing each month.

Whereas most credit card providers will charge interest on the value of purchases, cash advances and balance transfers which compounds and increases over time, the monthly fee will be constant.

This could make it easier to manage your money - or cost you much more, depending on how you choose to pay off your credit card debt each month.

There are also a few additional charges to watch out for. Tandem says there's a late payment and a returned direct debit fee of £12 if customers miss their minimum monthly payment, or their direct debit fails. Plus, if you withdraw cash in the UK rather than abroad, there's a 2.5% fee (minimum £2.50).

Tandem told Which? the new monthly fee has come off the back of research on its existing customers and that it enables it to offer a 'well-balanced deal' for everyone.

What do the changes mean for your money?

Tandem currently has an APR of 18.9%.

Under the new membership, you'll pay £5.99 a month - £71.88 a year, which equates to an APR of 6.37%.

If you were to borrow £1,200 over the course of 12 months with the current card, with repayments of £50 a month, it would take two years and six months to clear, and the cost of debt would be £286.33.

Borrowing the same amount with the new Tandem membership would mean the cost of debt would be £71.88 and you'd pay back the loan in 24 months, with the same £50 monthly repayment.

The downside is that those who stay with Tandem will have to pay even if they clear their balance in full each month, whereas under the old scheme they didn't.

In this case, you'd be paying for the other features, which could be worth it if you're sure you'll use them all. If not, it's possible to get higher cashback rates, 0% on purchases and similar savings rates elsewhere - just not all in the same place.

You could also try to cancel out the fees through the card's 0.5% cashback - but you'd have to spend £14,376 a year.

Alternatively, if you had £4,800 saved in Tandem's instant-access savings account for a year, you could also earn back the fees in interest.

What should existing customers do?

Existing customers will need to act quickly depending on if they want to be part of the new scheme or if they want to opt-out.

If you want to become a member

If you think the new incarnation of Tandem would suit your spending and saving style, you'll need to take action and sign up. This will involve entering into a new credit agreement with Tandem.

If you don't want to become a member

If you don't want the new Tandem membership, you don't have to do anything.

By not actively signing up, your credit card will be disabled from 9 March 2020 - so you won't be able to spend on it any more.

If there's an outstanding balance on the card, that will also have to be paid back in full before the account can be closed.

Tandem told us there is no specific time limit on this - the minimum monthly repayments must be met, and the rate you pay back the balance 'will depend on your circumstances'.

If you need some help clearing the debt you have built up with Tandem, you may want to consider shifting it to a 0% balance transfer credit card.

How will Tandem's new card compare?

If you like the sound of the new Tandem credit card and aren't already a customer with the old deal, you'll have to join the waitlist.

Tandem told Which? there is no set date for when new customers will be admitted to the new membership, and said: 'We will base our decision on the demand we see on the waitlist and take up from current cashback customers'.

But if you don't want to subscribe to the new membership, there are other types of credit cards that can offer something cashback and travel perks.

Cashback credit cards

The best way to use a cashback credit card is to use it as a debit card; load all of your everyday spending to rack up the rewards, and then make sure you pay everything off each month.

Some of the best cards on the market have an introductory rate of up to 5% cashback - usually for the first three months - which is then reduced later. You can get cashback returns of up to £97.50 from spending £500 a month over a year - much more than the £30 you'd get from Tandem's 0.5% rate.

Travel credit cards

Specialist travel credit cards don't have fees most others add for taking out cash or making a credit or debit card transaction in a foreign country, making them popular with holidaymakers.

There are three different types of charges that can be added when using a credit card abroad:

  • Non-sterling transaction fee: this is a percentage of the value of each transaction; you'll typically pay up to 2.99% each time you use a credit card
  • Non-sterling cash fee: a fee of around 3% (minimum £3) can also be added when you take money out of an ATM abroad - in addition to a non-sterling transaction fee
  • Interest on cash withdrawals: many credit cards will charge interest on cash withdrawals straightaway until the date you pay off your balance.

Using the wrong card on holiday could mean you're hit with all three of these charges.

Some travel credit cards also have 0% on purchases or cashback rewards - but it seems that Tandem will be the only card to offer both. What's more, all of the cheapest cards in our tables charge for cash withdrawals, which Tandem will stop in its new guise.