Cashback credit cards are designed to help you generate cash every time you shop. With cashback received for every pound that you spend, you are essentially getting paid for going shopping. There are some great benefits to having cashback credit cards, as long as you know how to use them. So, what are the pros and cons of cashback credit cards and where can you currently find the best deals?
The pros and cons of cashback credit cards
Like any financial product, there are pros and cons when it comes to signing up for cashback credit cards – these are useful to know before committing to one card over another:
The pros of cashback credit cards
Earning cash every time you spend. If you’re using the card in the normal way – i.e. not adjusting your spending habits or spending more – then getting cashback for what you’d be doing anyway is a big bonus.
The better the credit you have, the higher the percentage of cashback. If you have a great credit score then you’ll usually benefit from a much better deal on cashback credit cards. Cashback is usually paid as a percentage total of your overall spend and that percentage will be higher if you have a great credit score.
The savings can really add up. Although the percentages of cashback may seem fairly small initially, those savings can be quite substantial over the course of a year.
If you pay off the balance every month then you get all of the benefits of cashback credit cards with none of the pitfalls. As long as you don’t go forward with an outstanding balance then you are generating a positive return every time you spend.
If your interests align with the savings the card offers then you can save a fortune. For example, some cards give cashback against specific categories, such as fuel and supermarket spending – if these suit you then you can save a lot.
The cons of cashback credit cards
Some of the cards that offer the most lucrative rewards programmes tend to come with a fee. Make sure you’re not paying out more in an annual fee than you’re likely to earn in cashback.
If you don’t have a great credit score then you won’t get the best rates. Like every other type of credit card, cashback credit cards provide the best deals to those who have the most attractive credit history. So, if your credit score is low then you may not find that the cashback deals are worth it.
Interest rates can be higher for cashback credit cards. Pay close attention to the interest rate that you’re offered with a cashback credit card deal. This will, to a certain extent, be dependent on your credit score but is also dictated by the type of card. If you’re looking for really low interest rates on a credit card then a cashback card may not be the right choice.
Cashback cards can create some bad spending habits. For example, you may be tempted to spend more on the card to generate the cashback and then be unable to clear the balance. Remember that if you do that you will usually pay more in interest on the outstanding balance than you will earn in cashback so it could be costly to change your spending routines.
Cashback credit card deals available right now
Amex Platinum Cashback Everyday. The card is fee free and has a 5% introductory rate. Spend £2,000 within three months to get an intro offer of £100 cashback and you’ll then go onto a tiered cashback system – £0 to £5,000 = 0.5% cashback and anything above that generates 1% cashback.
Tandem. The Tandem credit card is also fee free with 0.5% cashback on all purchases over £1 worldwide and you can track your spending via the Tandem app. APR is 18.9% for both purchases and cash withdrawals. No fees for overseas purchases.
The Asda Money card. For Asda shoppers this is a great deal, as you’ll get 1% cashback on every Asda shop in the form of Asda vouchers. Other purchases generate 0.2% cashback. There’s no annual fee and the APR is 19.9%. John Lewis and Amazon also offer cards with similar deals that generate cashback when used to shop with that particular brand.
Aqua Reward. If you don’t have a perfect credit score you could still enjoy cashback credit card benefits with Aqua Reward. The card provides 0.5% cashback on all purchases up to a credit limit of £1,200. The interest rate is higher – APR 34.9%.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read more about Amanda Gillam