There’s no such thing as a free lunch, right? Well, cashback credit cards might just be the next best thing. They’re potentially one of the best ways to get your hands on money – or a few other things – for very little, providing you use them properly.
With a cashback credit card you can earn freebies like Avios points (formerly known as Airmiles), supermarket vouchers or even cash from your daily spending. All it takes is a bit of discipline and understanding.
Bivin Matthew, a 30-year-old accountant from Cardiff, has a Tesco credit card which he uses to get Clubcard points. These can be traded in for Avios points, which in turn can be used for flights, hotels and more.
“Last November, I went to Brussels on the Eurostar using the points I got throughout the year,” said Bivin. “Now, I’m looking to fly to Amsterdam in September with them.”
The key to getting maximum value from a credit card is to use it as much as you can, then pay off the balance in full at the end of every month. Rewards cards can have relatively high interest rates, so for your freebies to be worth it you’ll need to pay off your entire balance every month. You also need to make sure that you’re not spending more on your card than you have coming in on pay day.
Rewards and cashback cards sometimes also have an annual fee to pay, so make sure that this doesn’t outweigh the benefits.
To get the most out of his card, Bivin does the majority of his spending with the Tesco credit card and has a direct debit set up to pay off its balance in full at the end of the month. “I only really go to my current account when I need to withdraw money,” he said.
Gocompare.com’s resident credit card expert, Matt Sanders, said: “Credit cards that offer rewards can be handy as long as they’re used properly and managed well. However, compare the different cards available carefully so you get the type of rewards you want, and look out for things like annual fees as these can eat into your cashback and rewards if you’re not a big spender on credit cards.
“Also, bear in mind that there’s usually a cap on the amount of cashback you earn, so it’s important to assess your spending habits and choose a card that gives you maximum return. Some rewards are also limited to certain transactions or outlets, so it’s important to read the card’s terms and conditions to check the stores you frequent most often are included in the scheme. As with any credit card, it’s important to find out the interest-free grace period and any interest rates that may be applicable to your spend as these can rapidly outweigh any rewards you’ve gained.”
Four everyday spends which could maximise your credit card rewards
According to the Office of National Statistics (ONS), we spent an average of nearly £60 a week on food in 2013, so what better way to bolster your rewards than using your weekly shop to rack up the points?
2. Getting around
Transport – be it buying train tickets, topping up your Oyster card in London or keeping your car fuelled and on the road – accounted for just over £64.10 of our weekly spends last year, reckons the ONS. So, if you’re looking at racking up Avios points, your daily commute could end up taking you further than you ever thought possible.
Energy, council tax, car insurance – all easy ways you can rack up rewards or cashback. Just make sure there aren’t any extra costs incurred from paying with a credit card and, if there are, that they are cancelled out by what you stand to gain.
4. Holidays and leisure
To maximise your spend, make sure you’re using your card to pay for everything from going to the cinema and eating out, to your holidays. If you book your holiday with a credit card, you’ll also be afforded extra protection under the Consumer Credit Act.