Skip to main content

Getting the best cashback credit card for you

getting a cashback credit card image

Are you looking for a new credit card? If you are used to spending frequently on a credit or debit card already and have a healthy credit score, you might want to think about earning some money back with a cashback credit card.

Read more to find out everything you need to know about cashback credit cards, including how cashback works, the best way to use your cashback card and how they compare with other rewards cards. The Guru has always been a big believer in getting rewards for frequent spending, mostly because he has an uncontrollable habit of buying shiny things that he doesn’t really need.

What is a cashback card?

Cashback credit cards reward you by giving you a percentage of the money you’ve spent on purchases using that card. The percentage you receive varies from card to card and only applies to qualifying purchases.

With a bit of strategic spending, a cashback credit card can provide a nice reward for those who would already be spending anyway. However, if you don’t make the most of spending or make purchases that don’t qualify for a cashback amount, there might be other rewards credit cards that would suit you more.

How does cashback work?

While some cards promise a fixed sum back, providing you transfer a balance or use a card within a particular period after opening, this isn’t quite the same as a cashback card where you get back an agreed percentage on the money you spend. With this type of card, potentially, the more you spend, the more you can earn.

Cashback is usually paid annually although there are some cards that offer the cashback on a monthly basis. Most providers credit the amount you have earned to your statement, so if you had earned £100 and your bill was £1000, your bill would be reduced to £900.

Some cards offer a higher percentage back over the first few months before the rate you receive back levels out a little. Other cards operate on a tiered system whereby you can access a higher percentage of cashback the more you spend. Some providers even offer different cashback percentage rates based on what you’re buying and from who.

You might also have cashback opportunities if you have rewards as part of a current account, but these are usually only with specific retailers, rather than earning a percentage of any purchases you make. With this in mind, it’s always worth looking at the summary box document, as well as any other terms to find out exactly how you can earn cashback with your particular choice of card.

Cashback credit card example

As an example, if you had a three-month introductory period rate of 3% cashback and did a weekly supermarket shop of £100, you could earn £36 on just that spending alone. If you use your card to pay for things like petrol, travel, gifts, your lunch and even your coffee on your morning commute, you’ve got the potential to earn much more.

Comparing cashback credit cards

Whenever you’re on the hunt for a new financial product, it pays to do some research and planning first and that’s most definitely the case with a cashback credit card. Try to look out for the following things when searching for a cashback credit card:

  • Cashback offer – you should be able to see how much cashback you will be able to earn on purchases, along with the agreed time you will receive that rate
  • APR – this will indicate how much interest you will pay on top of any purchases on a monthly basis
  • Annual fee – many cashback cards come with an annual fee
  • Representative example – this example will give you an idea of how much interest you might pay on top of any purchases you make
  • Summary box – you will find any additional information within the summary box document, allowing you to see any other potential benefits or pitfalls of owning the card

Cashback rates vary between providers, but after a high introductory rate you could expect your percentage to drop considerably, perhaps to around 1% or 0.5%, the latter of which represents 50p for every £100 spent. This is why you have to be very savvy when it comes to cashback card use.

Using your cashback credit card

Before applying for a cashback credit card, it’s important you understand these rules to get the most out of your card and maximise your earnings:

·Pay in full every month with a direct debit

Providers make their money from credit cards on the interest you pay. With a cashback credit card, the interest you pay could be more than the cashback you earn, wiping out your potential reward.

Therefore, the savvy way to use cashback cards is to make sure you don’t pay any interest. That way, your earnings from cashback are all profit. The easiest way to do this is to set up a direct debit to pay off your balance in full every month, and keep a close eye on your spending so you aren’t left having to pay exorbitant amounts of interest.

·No late payments

Not only will late payments and going over your limit potentially damage your credit score, but it could also break the terms and conditions of your reward scheme and reduce your cashback deal too.

·Use your card to pay for work expenses

To maximise your earnings, you could use your cashback card to pay for work expenses, provided it’s within workplace regulations and you can afford to shoulder the cost of making your card payment while you wait for reimbursement.  

·Use it for expensive items you’ve already saved for

If you’re planning to make a significant purchase such as a holiday or new sofa that you’ve been smart enough to save up for, you can use your cashback card to pay for that too then use your savings to clear the balance later.

That way, you’ll net a cashback reward, and have consumer protection in case anything goes wrong with your purchase, and all for something you’d be buying anyway. Of course, do be sure to check that any charges levied for paying by card don’t wipe out your cashback earnings. If this is the case, you may still want to pay a small deposit on your card to activate Section 75 protection on purchases between £100 and £30,000.

·Use it for your regular spending

Just because you get cashback doesn’t mean you should go mad and purchase items you otherwise wouldn’t. But, by using your cashback card for normal purchases that you would otherwise use cash/debit cards for, you can maximise your earnings.

The key to this is discipline. Don’t be tempted to buy things just because of the allure of cashback. If you wouldn’t normally purchase it, then don’t. Like any good Guru, it pays to be wise with your spending decisions.  

·Don’t borrow money or withdraw cash

Withdrawing cash on cashback cards can often result in you being charged a fee. You can even be charged interest if you then pay off the cards in full.

If you need to borrow money, it’s unlikely that a cashback card is for you. In this case, you’d be better looking either to balance transfer cards or 0% purchase credit cards, also known as interest free cards.

How do they compare with other rewards cards?

Cashback credit cards are ideal if you’re a frequent spender who simply wants to earn a cash reward for their spending habits. While this will work for some, if you specifically want to save money on your food shopping, you might also want to consider a rewards card that gives you membership points.

Whether you collect Tesco Clubcard points, Nectar points or Sparks at M&S, if you’re a regular spender you might prefer to get the points instead. Depending on your supermarket of choice, points will translate into money off your bill and shopping vouchers that will save you money on a regular basis.

You could also opt for an air miles credit card. Accumulating air miles will save you money on frequent air travel and perhaps give you further benefits to flying, such as access to an airport lounge.

Ultimately, choose the reward that suits your lifestyle the best, and remember that you will only be able to take advantage of the perks if you are a frequent spender. If you start spending less, expect your rewards to dry up too.

Start searching for the right credit card

The information included in this guide should have given you some idea of how you can find the best cashback credit card for you, or if there is an alternative that might suit you a little better instead.

Finding out your eligibility before directly applying is the best way to safeguard your credit score, along with finding out the credit cards that are the most suitable for your specific circumstances. Try our free online comparison tool moneymatcher to find out your eligibility today.

Robert Bester - Content Writer

Updated on 20th June 2019