What are cashback credit cards? Do they really give you money for free? Read our guide to learn how cashback cards work and find the best deal for you.
What are cashback credit cards? Do they really give you money for free? Read our guide to learn how cashback cards work and find the best deal for you.
A cashback credit card is a type of reward card. Used right, it pays you back a percentage of what you spend on it. Because they tend to have high interest rates, cashback cards are more suitable for people who can repay their full balance each month.
A cashback credit card gives you money back when you spend on it. The more you spend, the more you get back – although this isn’t a reason to buy what you can’t afford. Because of their high interest rates, cashback cards are more suitable for people who can pay off their balance in full each month.
Cashback is often paid to you automatically. But check your credit card agreement to see if you need to do anything. Some lenders pay cashback directly into your bank account either monthly, quarterly or annually. Other lenders take it off your credit card bill. This won’t count towards your minimum monthly payment though.
Cashback is calculated as a percentage of the amount you spend on your card. For example, a cashback rate of 2% means you earn £2 for every £100 you spend. There are several ways lenders may set the cashback rate, including:
Getting paid for spending may seem like a win-win. But cashback cards aren’t right for everyone. Below are some important things to consider.
Cashback is only one way to get perks for spending – you may prefer to earn points or air miles with a different type of reward card. Because of their high interest rates, it’s best to pay off a reward card in full each month.
If your goal is to borrow money over time, it’s worth looking at other options such as:
There are several ways you may be able to maximise your cashback without spending more than you normally would. Here are some tips.
It’s very important to manage your cashback card responsibly. Try to pay it off in full each month to protect your credit score and avoid paying interest. Stay within the credit limit and only use your card to buy things you can afford.
Before you apply or switch cards, make sure you’ve found the best offer for you. Compare deals and look at things like the cashback rate, annual fees and if the deal matches your spending habits.
It’s also worth checking your chances of approval. We calculate your chances when you search cards with Experian, so you can apply with confidence. Searching is free, takes a few minutes and never hurts your score.
We're a credit broker not a lender†