Cashback credit cards
What is a cashback credit card?
Cashback credit cards do exactly what they say on the tin – give you cashback on the money you spend on your credit card.
Most cashback credit cards pay somewhere around 1%, and others have an introductory offer of a better rate of interest, reverting to a lower rate after that period.
Cashback credit cards work best for people who are able to repay the balance in full each month, as they will never pay any interest but will benefit from the cashback rate.
Will I benefit from such a card?
You can benefit from a cashback credit card if you can afford to pay off your credit balance in full each month. The best way to make the most of the card is to set up a direct debit to fully repay the balance on a monthly basis.
Using the cashback credit card for everyday purchases instead of your debit card will give you money back on what you spend, although it’s worth noting that some cards only allow you to receive cashback on a certain amount of money.
Who would not benefit from these cards?
People who use credit cards but can’t afford to pay off the full balance each month won’t benefit from these cards, as the higher rates of interest charged will outweigh any cashback received.
Those who already have a big credit card balance and want to transfer their balance won’t benefit either, as these cards don’t offer any 0% balance transfers, and those credit card holders would be better off going for a 0% balance transfer card.
Is everyone eligible for these cards?
No – usually credit card providers require their users to have an extremely good credit rating. American Express offer a card that requires both an immaculate credit rating and over £30,000 annual household income, and will only start paying cashback on spends over a certain value.
Capital One also offer a card which requires an extremely good credit rating, so unless you have an excellent record, don’t expect to get accepted for one.