Credit card Guides

Cash back credit cards

If you’re financially disciplined and fancy being rewarded every time you spend, a cashback credit card could suit you... (Updated 4/12/09)

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. Cashback credit cards pay the cardholder back a percentage of any spend on the card, sometimes for a set period of time or up to a certain limit.

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You need to check the details carefully before you sign up for a cashback card. 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.

Also, it’s important to remember that cashback cards are only a good idea if you can repay your bill in full each month. If you fail to do this the interest cost will massively dwarf the cashback you’ll earn and you’d be substantially better off choosing a card that minimises the interest rather than maximises cashback.

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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 5% - so the more you spend, the more you’ll get back.

Are they better than other reward cards?

Other types of reward credit card give you a return in points or money off a product offered by your lender - like the Tesco ClubCard Credit Card or 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.

Advantages of cashback cards

If you use a cashback card for all your day to day spending you can rack up a decent amount of cashback each year.

Some cashback cards – such as the Egg Money credit card - have other benefits too such as discounts at selected retailers.

Disadvantages of cashback cards

Cashback cards tend to have higher than average APRs. Therefore it’s vital to pay off your bill in full each month – otherwise the cashback you receive will be outweighed by the interest you’ll pay. Some cards also have strict rules and if you break them you won’t get your cashback. For example, with the AMEX card if you don’t make at least your minimum payment in any particular month then you won’t get any cashback for that month’s spend.

Furthermore, you might not get cashback on all your spending on the card. Cash withdrawals, for example, are normally excluded.

What cash back cards are available?

Cashback card offers change fairly often with new cards usually offering a higher cashback rate for a set promotional period. Some cards also offer more cashback on supermarket or fuel spend.

Here are three of the best cashback credit cards available at the time of writing:

Amex Platinum Cashback Credit Card

The AMEX Platinum card is quite a complicated tiered card. It offers 5% cashback in the first three months (up to a maximum of £100 cashback or £2,000 spend).

Once the promotional period has ended, you’ll earn 0.5% on spending up to £3,500, 1% on spending from £3,501 to £7,500 and 1.25% on any spending over £7,501 - and unlike the three month promotional period, there’s no limit on the amount of cashback that you can earn.

The Amex card has a typical APR of 19.9%.

More information on the AMEX Platinum Cashback Credit Card

Barclaycard OnePulse credit card with cashback

This card is good for Londoners who travel regularly. It offers 5% cashback on Transport for London (tfl) spend until December 2010 up to a maximum of £15 per month. It also doubles as an Oyster card – London’s contactless travel payment system – and can also be used for contactless payments under £10 at participating retailers.

So someone spending £300 on travel each month could save £15 a month or £180 a year.

The card has an APR of 14.9% and if you don’t want to use the cashback offer, you can choose between 0% on balance transfers for 12 months (with a 2.5% fee) or 0% on purchases for six months.

Egg Money credit card

Egg Money offers 1% cashback on spend between £500 and £20,000 a year. It also offers a range of other benefits and discounts such as extended warranty cover on electrical goods costing more than £50, 5% cashback on purchases at lastminute.com, and money off at Virgin Wines.

However the card has an APR of 17.8%, which includes a £1 monthly fee.

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.

The best thing to do is look at where you spend your money. The Amex card offers the highest cashback for general spending but Londoners using Oyster will benefit more from the Barclaycard OnePulse card.

The Egg Money card offers a decent rate of cashback alongside a raft of other benefits. However the card comes with a £1 monthly fee so it’s only worth going for if you’re going to use the benefits on offer and spend regularly on the card. If you only spend £100 a month on the card the fee will cancel out the cashback you receive.

In the past some credit card providers have offered cards which offer higher cashback on supermarket or fuel spend so look out for these offers if you spend a lot on food or petrol.

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