Cashback credit cards

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What is a cashback credit card?

With a cashback credit card, you earn back a percentage of what you spend on it.

Cashback rates vary from card to card. Typically, they offer from 0.25% and even up to 5% as an introductory offer.

They work like this: if your card offers a cashback rate of 1% and you spend £400 on it, you’d receive £4 cashback.

At the moment, cashback cards are harder to come by than ever, and rates aren’t as good as they were a few years ago. But there’s still the chance to make a little money back from spending on them.

The key is to always pay back in full what you owe every month so you never get charged interest.

Rates can be higher compared to other credit cards, so could quickly wipe out any cashback you earn.

credit card

How does a cashback credit card work?

Every time you use your card to spend on eligible purchases, you’ll earn a percentage of every pound back.

But these types of cards are all slightly different, so you need to read the small print carefully and look out for caveats.

Although there are fee-free options, many come with an annual fee. So you’ll need to factor that in and feel confident you'd earn enough from the cashback to make it worthwhile.

For example, if a card has a £3 annual fee and pays cashback at 0.5% you would need to spend more than £600 annually to get any money back.

Some cards may also have a minimum yearly spend requirement to get any cashback at all.

Why get a cashback credit card?

  1. Earn cashback on your transactions

    If you use your credit card for everyday spending and big purchases - plus if you pay off your balance in full every month - then a cashback credit card could pay you back a good amount of money.

  2. Consumer protected

    Like all credit cards, purchases on cashback credit cards for items over £100 and under £30,000 come with Section 75 protection, meaning you can claim a refund from your card issuer if things go wrong.

  3. Linked to selected retailers

    Look for a card that best suits your shopping habits - for example, a card that pays a higher cashback percentage at a retailer you use a lot.

  4. Build your credit rating

    If you use the card responsibly and make all your payments on time, you can build up your credit score.

How to choose a card that’s right for you

  1. Minimum spend

    Be aware that some cards impose a minimum spend to get any cashback at all. If you don’t think you’ll spend the minimum amount, look for an alternative card that doesn’t come with such requirements.

  2. Fees

    If a card charges a monthly or annual fee, you’ll need to estimate how much you expect to spend on the card, then calculate that you’ll earn enough cashback rewards to make up for this fee. For example, if a card offering 0.5% cashback charges a £2 monthly fee you’ll need to spend £400 a month to break even.

  3. Cashback caps

    Some cards offering a sign-up bonus of 5% cashback on purchases for the first three months might limit the amount you can earn. There are cards available that place no limit on their cashback rewards, but they might come with lower cashback rates.

  4. 0% interest periods

    Some cashback cards offer introductory 0% interest periods for purchases, balance transfers or both, so search for these if that benefit is important to you.

How do I earn cashback rewards with my card?

You can earn cashback from all your everyday spending; like the weekly shop, a meal out, or for filling up with petrol. Online transactions count too, and bigger purchases you make on the card like a new TV or a holiday can boost the amount of cashback you earn.

Though not strictly cashback cards, there are similar cards that offer reward points as you spend on them, which translates as money off flights, hotels or shopping.

Retailers like Tesco, M&S and Sainsbury’s offer credit cards where you build up points that are converted into vouchers to redeem in their stores.

You get points for all your spending on the card, wherever you shop, but you get a higher rate of points for spending in their particular stores.

The M&S Bank Shopping Plus Offer credit card gives you one point for every £1 you spend in M&S and one point for every £5 you spend elsewhere. And the Tesco Bank Purchases Card gets you five Clubcard points for every £4 you spend in Tesco and one Clubcard point for every £8 you spend elsewhere.

Cashback card FAQs

Cashback rates are typically between 1% and 5% of what you spend, though this top rate will usually only apply for an introductory period. So, if your card offers 1% cashback and you spend £200 in a store, you'll get £2 back. Some cards play a flat percentage rate, but others stagger their rates, depending on how much you spend on the card. For example, a card could pay you 0.25% cashback on the first £4,000 you spend per year, which could then rise to 0.5% for everything over that amount. Also, some cards offer a flat rate for regular spending and a higher rate on purchases made at certain retailers. If you use your card for everyday spending and/or big purchases, your cashback could be sizeable. Do be aware, though, that some cards come with a maximum annual cashback limit.

  1. Use your cashback card for as much of your normal spending as you can. But don’t use the card as an excuse to overspend.
  2. Always clear the debt at the end of the month, so you’re never charged interest. Set up a Direct Debit to ensure you do this.
  3. If you’re a big spender, look for cashback cards that offer a higher percentage of cashback the more you spend. Some cashback cards might offer a standard rate of 0.5%, but will bump that up to 1% for those that spend more than £10,000 a year, for example.
  4. Some cards offer a higher percentage of cashback for an introductory period. For example, 5% cashback over the first three months and 0.75% cashback after that. So if you’ve got some big purchases coming up, this sort of card could give good returns.

If you tend to leave an unpaid balance each month, then a cashback card isn't the best way to manage your money.

As soon as you leave a balance on the card, you risk wiping out your cashback, and quite probably spending more in interest than you earn.

Instead, it might be worth considering a purchase credit card offering a 0% period on new spending.

To be accepted for a cashback card, you’ll usually need a healthy credit score. Use our online credit card eligibility checker to assess your chances of being accepted before you apply. It uses a ‘soft’ credit search that lenders won’t be able to view on your credit report, no matter what the result is. It won’t negatively impact your credit rating.

Cashback cards normally have a higher representative APR than standard cards, often more than 20%, so they can be an expensive way to borrow. That’s why you need to be confident that you can clear your balance in full each month, or the interest you pay will soon outstrip the money you earn.

Yes, but it’s best to do this only in an emergency because hefty fees will usually apply. You’ll also pay interest on the money from the day you withdraw it until you pay off the balance.

Rewards cards work in a similar way to cashback cards, except they earn you points for specific rewards such as AirMiles or supermarket vouchers.

The rewards aren’t as flexible as cashback, because you’re tied to certain retailers, but they’re often more generous.

Cashback credit cards typically come with a high interest rate, so they’re not a good option when you’re looking to clear debt.

Instead, you could look at moving existing debt onto a 0% balance transfer credit card with a long interest-free period.

Cashback cards aren’t easy to be accepted for. Only customers with very good credit histories are likely to qualify.

Failed applications impact negatively on your credit history. However, you can use our smart search tool to show you the cards you're more likely to be accepted for before proceeding with an official application.

This kind of soft search won't impact your credit file.

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