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Cashback – Earn while you spend

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Cashback - Earn while you spend

One of the most popular types of reward credit cards is a cashback card. As the name hints, with this type of credit card you get money paid back to you whenever you use it to buy goods or services.

This is usually a percentage of the amount you spend on the card in cash and most of the providers will pay this money every 12 months, although there are exceptions. It’s nice to know that you’ll be getting something back whether you’re using your card for essential purchases such as groceries, fuel and other everyday spending or luxuries like holidays and the latest must-have gadgets.

The amount of cashback offered varies between credit card deals and providers. The first three months after you take out the card are usually the most generous, but these introductory deals are often capped to prevent you from earning more than a certain amount such as £100.

Maximise your rewards

After the introductory period, the amount of cashback drops back. So before applying for one, work out exactly how you are going to maximise your rewards, then choose your card based on your planned expenditure.

If you are planning a big purchase, such as paying for a dream holiday or buying new furniture then a card offering a high cashback introductory rate could be your best choice. But if you just want to get money back whenever you spend, then one with a lower ongoing and uncapped cashback rate could be best.

Some cashback credit cards also pay different amounts depending on what you spend your money on. For example, you might get 1% on supermarket spending, 2% at department stores and 3% at petrol stations.

However, cashback credit cards are only suitable for those of you who can pay back your balance every single month. Remember that as soon as you start to pay interest on your cashback credit card, the perk will be more than wiped out. You should also watch out because some cashback cards will charge you an annual fee. This is often around £25 so you need to factor this in when working out whether the amount you spend on the card will be enough to see you earn sufficient cashback.

The more you can spend on a cashback credit card, the greater the returns. Providing you will always pay back your monthly balance in full, you can use these cards to pay for everything from your petrol costs to your supermarket shopping.

The more you can spend on a cashback credit card, the greater the returns.

What’s more, you can get double the rewards for using a cashback website such as Quidco or Topcashback as well as your cashback credit card. If you sign up to a cashback website and then do some shopping online, simply click through to the retailer’s website via the cashback site and make your purchase as normal. You then earn a percentage of your spend as cashback.

Good for: Freedom of choice. Cash back is great if you like the idea of spending your rewards as you wish and where you wish.

Bad for: Limiting your rewards. You usually only receive your cash once a year on the card’s anniversary. If you don’t pay off your bill in full, these aren’t the cards for you’.

Before you sign up for any cashback card, check:

1. How does the cashback system work?

2. How much do you actually have to spend on the card each month to get a meaningful reward?

3. Is there an introductory offer – such as a higher cashback rate for three months?

4. Do you earn points on all purchases or just in selected retailers?

5. Can you earn more cashback by shopping in ‘partner’ stores rather than other retailers?

6. Is there a cap on the amount of cashback you can earn each month or year?

7. Are there opportunities to earn extra money through special promotions throughout the year?

8. Is the cashback automatically sent to you or do you actively have to ring up or email to get your reward?

9. What is the interest rate if you don’t repay in full each month?

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