Cash back credit cards

Cash Back Credit Cards

Cash Back Credit Cards and Reward Cards are a great choice if you clear your balance each month as they pay you a percentage of your spend in air miles, points or good old cash.

The Benefits of Cashback Credit Cards

The obvious thing to look for on a cashback credit card is the cashback percentage being offered. However, the banks want to make the deal look attractive yet part with as little cash as possible. Here is how they do this:

  1. Introductory Offer - here the percentage only applies to an initial period, usually three months, after which the cashback percentage drops to a much lower value. If you are looking at acard with an attractive introductory cashback percentage you should plan to join at a time when you are planning a big spend to take best advantage of the offer.
  2. Maximum Cash Back - they usually state a maximum amount that they are willing to pay.
  3. Dormancy Fee - there may be a charge for not using your card.
  4. Loaded APR - a higher APR will allow the bank to reclaim some of your cashback by the extra interest they earn on any uncleared balance at the end of month.
  5. Monthly Fees - A small charge that they take out of your account.
  6. Minimum Cash Back - If you dont reach the minimum cashback payout level you dont get paid.

Payments are usually made once per year.

Remember to shop around for a low interest rate and compare the charges for late or missed payments on the credit card you choose. If you were not able to clear your card in full or were late on a payment, having a good rate and low credit card charges would prove very beneficial. Generally most credit cards do not have annual fees but this is not always the case so be careful when completing your application to ensure you are aware of any annual fees.

The Benefits of Reward Cards

With reward cards, points are usually allocated according to the amount spent, for example, 1 point per every £2 spent (which is the same as the 0.5% cash back). Once you have collected a certain amount of points you could be issued with a reduction on a bill, air miles or cash depending on the scheme offered by that credit card provider.

Which Card has the highest cashback percentage

At the time of writing, the highest cashback percentage credit card we could find is Amex Platinum who offer an introductory cashback of 5% for the first three months. After this time it drops to 1.25% or lower depending on how much you spend with the card. The maximum cashback you can accumulate on the introductory offer is £100.

Summary

As in all cases, there is a lot to consider when comparing credit cards including the APR, the credit limit and whether you are able to clear your monthly balances.

For the clever shopper, spending on your cashback credit card could see you earn or save money in many ways. For example, making your purchase through cashback websites, will bring you the reward on your card as well as the cashback from the retailer.

Also, regularly consider whether transferring credit card balances from your reward card to another card, is a better option.

Cash Back Credit Card Providers and Potential Benefits

If you feel that a cash back credit card could be of benefit to your financial situation there are a number of providers offreing varying incentives:

American Express Platinum Cashback - upto 5% cashback
BMI American Express - 1.5 BMI miles for every £1 spent
American Express Rewards - Reward Points
BT Standard - Money off BT bills
AA - Earn AA reward points
BA Amex - 1 BA mile for every £1 spent
Virgin Atlantic White - Flying club miles and travel benefits
Barclaycard Goldfish - Unlimited reward points
Sainsburys - earn Nectar points wherever you shop
Lloyds TSB Airmiles Duo - Collect Airmiles
MBNA Platinum Rewards - Flights, shopping and cashback
Egg - Upto 10% at selected retailers
Sony - 1 reward point for every £1 spent

This is not an exhaustive list and the links below may lead you to other providers. However, this does illustrate the range of different incentives available and the need to search for the card which is most suited to your situation. Please note that the incentives do vary and therefore could have slightly altered since this page was updated.

Read more about Credit Cards & Store Card charges, Credit Card Refunds and Cashback Sites

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Updated on 23rd November, 2009

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