Cashback credit cards can help you make money every time you spend. Some pay as much as 5%, which could earn you hundreds of pounds a year. Find out if this type of reward card is right for you.
What is a cashback credit card?
A cashback credit card is a type of reward credit card that pays you a percentage of what you spend back as a credit on your bill or in some cases straight into your bank account; monthly, quarterly or annually.
In the past, there were plenty of cashback credit cards to pick from. But in 2015, a new rule was introduced which capped the interchange fee merchants could be charged for accepting card transactions. This fee helped fund cashback perks, which means the cap has led to a number of UK cashback credit card deals being scaled back or pulled.
So, if you are trying to be savvy with your money and earn extra cash for your everyday spending there are fewer options available compared with other types of credit cards.
This guide will help you understand how a cashback credit card works, reveal the best cashback credit card deals on the market and provide tips for using a cashback credit card effectively.
How do cashback credit cards work?
Cashback credit cards pay a rate of cashback that determines how much you can earn each time you spend. So, for example, a cashback rate of 5% means you would earn £5 on a £100 spend.
Some deals come with introductory rates that may be capped followed by an ongoing rate while others pay a flat unlimited rate for as long as you have the card.
The trick with a cashback credit card is to use it as a debit card and load all of your everyday spending onto it to rack up the rewards.
Many of these cards charge an annual fee, but if you regularly spend on your card and repay the balance in full each month, you could earn hundreds of pounds a year.
What are the best cashback credit card deals?
Below we’ve set out the best cashback credit card deals available right now paying the highest rates of cashback.
Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a credit card provider before committing to any financial products.
American Express Platinum Cashback Credit Card
- 5% cashback for the first three months of card membership capped at £125.
- After the first three months, you get 0.75% cashback on all purchases when you spend up to £10,000, or 1.25% cashback when you spend over £10,000 in a year.
- You could earn £108.75 cashback if you spent £500 each month for a year.
- £25 annual fee.
- Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 24.5% (variable), with a £25 annual fee, representative 29.8% APR (variable). Credit available subject to status and terms apply.
American Express Platinum Cashback Everyday Credit Card
- 5% cashback on purchases for the first three months of card membership capped at £100.
- After the first three months, you get 0.5% cashback on all purchases when you spend up to £10,000, or 1% cashback when you spend over £10,000 in a year.
- You need to spend a minimum of £3,000 in a year to ensure every £1 you spend qualifies for cashback
- You could earn £97.50 cashback if you spent £500 each month for a year.
- No annual fee.
- Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 24.5% (variable), representative 24.5% APR (variable). Credit available subject to status and terms apply.
Santander All in One Credit Card
- Pays 0.5% unlimited cashback on spending
- Up to 15% cashback with Retailer Offers
- £36 annual fee
- Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 17.9% (variable), with a £36 annual fee, representative 23.7% APR (variable). Credit available subject to status and terms apply.
Who are the best cashback credit card providers?
As well as finding a cashback credit card which is the most rewarding for you based on your spending habits you should also consider the quality of a provider’s customer service. But that’s pretty hard to do unless you’ve been a customer before.
Fortunately, Which? has rated 26 of the most popular credit card providers based on real-life experiences to help you find out what they’re like for customer service, fees, and benefits before you sign up.
How to use a cashback credit card effectively
With a cashback credit card, there are a few things to bear in mind to make sure you use them effectively. We’ve set out the golden rules below.
1. Avoid borrowing
Cashback credit cards are a rewarding tool if you only use them to spend money you actually have like you would with a debit card.
They’re generally not very good for borrowing, with few cards offering competitive 0% deals.
If you’re already paying interest on credit card debt, it’s worth considering a 0% balance transfer card, or if you want to spread the cost of a new purchase try a 0% purchase card.
2. Pay off the balance in full every month
It’s important to make sure you pay off the balance of your cashback credit card in full every month otherwise the interest could outweigh the rewards.
With this in mind, we recommend you set up a direct debit to clear your balance each month so you don’t forget.
3. Maximise your cashback with everyday spending
To get the most out of your cashback credit card you should try to use it as much as possible.
The best cashback credit cards reward you every time you make a purchase, so it makes sense to use them instead of cash or debit cards whenever you can.