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Make cash back as you spend
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Cash Back Credit Cards
Compare cash back credit cards >>
Banks make millions of pounds every year from the interest that people pay on their credit card debts, but if you play your cards right, you can actually earn money every time you spend.
But with the deluge of credit cards offers around, how do you know which one is right for you?
Some cards are obviously more attractive than others, with a lower APR and a better return, but the way you use your card will also depend on which one you go for.
Cashback credit cards only work for people who are already debt free - if you’ve got a big balance that needs clearing then look for an card which offers 0% balance transfers or a Lifetime balance transfer card instead, that will help you become debt-free for as little as possible.
What are cash back credit cards?
Cashback credit cards do exactly what they say on the tin - they give you cash back on your spending. Most have a promotional period where you can earn a higher rate of return - as much as five per cent, so the more you spend, the more you’ll get back.
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Are they better than other reward cards?
Other types of reward credit cards give you a return in points or money off a product offered by your lender - like the Tesco ClubCard Credit Card (www.tesco.com) or an Airmiles credit cards. These points schemes can be difficult to understand, and often have low returns - you’ll need to collect a lot of points before you can get anything for free. But with a cashback card you know exactly how much you’ll get back, and because its cash, you can spend it wherever and on whatever you want.
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What cash back cards are available?
Different cards offer different returns depending on where you shop, so you should consider the amount of money you spend at the supermarket each month or on petrol for your car as this could determine which card is best for you.
Amex Platinum Cashback Credit Card
This Amex (www.americanexpress.com) has the highest return of any cashback card, earning you five per cent for the first three months (up to a maximum of £200) and up to 1.5 per cent thereafter. High spenders could earn over £400 a year by using this card.
However, it is quite a complicated card, with tiered cashback and a high APR of 18.9 per cent. And you won’t earn any cashback on any month where your minimum payment isn’t received on time.
Once your promotional period has ended, you’ll earn 0.5 per cent on spending up to £3,500, one per cent on spending from £3,501 to £10,000 and 1.5 per cent on any spending over £10,001 - and unlike the three month promotional period, there’s no limit on the amount of cashback that you can earn.
Abbey credit card
The Abbey credit card is excellent for families with big supermarket bills as it offers five per cent on the first £1,000 of supermarket shopping until 31 July 2008 - working out at £50 - at supermarkets.
It also offers zero per cent on purchases for the first three months, and interest-free balance transfers for 13 months (with a 2.5 per cent handling fee). It has an APR of 15.9 per cent.
Supermarkets included in the promotion are Asda, Co-op, Morrisons, Sainsbury’s, Somerfield, Tesco and Waitrose. Marks & Spencer, supermarket petrol purchases and convenience stores attached to supermarket petrol outlets are not included.
Barclaycard Cashback Credit Card
This card doesn’t have a promotional period, offering a consistent two per cent on all supermarket and petrol spending (with a return of up to £15 a month) and 0.5 per cent on all other spending (up to £15 a month).
It also offers interest-free balance transfers for 12 months (a 2.5 per cent handling fee applies), with a low standard APR of 14.9 per cent.
Shell credit card
If your local petrol station is a Shell, you can earn a rebate on your fuel costs with the Shell credit card from Citi. You can earn three per cent on everything you spend at Shell, and then another one per cent anywhere else, to be redeemed against petrol costs at Shell.
You can also take advantage of a nine month interest-free balance transfer (a three per cent handling fee applies), as well as a host of other benefits such as free travel accident insurance, up to £50,000 motor legal protection and motoring discounts from the RAC.
This card has a 16.9 per cent APR.
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But which cash back card is best for you?
Even when you’ve got all the rates set out on paper, it can still be difficult to work out which is the right cashback card for you. Use our case studies as a guide to help you choose:
Work out how much you can earn with our cash back credit card calculator.
Case Study 1: Rufus
- Supermarket: £2,500
- Petrol: £1,000
- Other: £5,500
- Total: £9,000
This is what Rufus would earn using each of our featured credit cards:
Case Study 2: Martha
- Supermarket: £5,000
- Petrol: £1,500
- Other: £8,500
- Total: £15,000
This is what Martha would earn using each of our featured credit cards:
Case Study 3: Peter
- Supermarket: £7,000
- Petrol: £2,500
- Other: £10,000
- Total: £20,000
This is what Peter would earn using each of our featured credit cards:
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Our recommendation to the best cash back card
Although the Amex Cashback card offers the best introductory rate, and is the best card for big spenders, it does get complicated with its tiered rates of return and it also has a high APR at 18.9 per cent.
You would have to consistently spend over £3,501 to reach the one per cent return offered to all Capital One cashback customers.
For general consumers, the Capital One cashback card is definitely the best choice. Although you need to have a strong credit rating to be approved, once you have this card, you’ll be able to earn a very good four per cent for three months and then an uncomplicated, competitive return of one per cent thereafter, no matter where you shop.
Read our guide for more information on fixing you credit rating
No matter which card you go for though, make sure that you absolutely always clear your balance at the end of each month. Set up a regular payment for the full amount, otherwise you’ll end up paying far more in interest than you would ever earn in cashback.
Compare the best cash back credit cards
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