credit card cash back

What is cashback and how does it work?

Cashback is really quite simple. For each purchase you make using your credit card, the card issuer will pay you a small percentage back as a 'reward'. To make money from a cashback credit card you must pay it off in full every month, otherwise you will get charged interest. One month's interest could be more than one year's cashback! If you won't pay off your card in full every month, then consider a Purchases Card instead.

How much cashback will I make?

You can typically make between £50 and £200 per year, but more is possible. It depends on two factors: how much money you spend on your credit card and what percentage cashback your credit card offers. For example an annual spend of £10,000 on a 1% cashback card will earn you £100.

Choosing your cashback card

The main feature you should look for is a high percentage cashback rate. That may sound very simple, but it is complicated by the fact that some card issuers provide a flat rate for cashback, whereas others offer different levels of cashback depending on how much you spend on your card during the year. Others have great introductory offers where they pay up to 5% cashback during the first few months.
This means that if you want to maximise your cashback returns then you need to understand your spending patterns i.e. how much you are likely to spend on you credit card in the course of the year and whether you have any major expenses coming up soon that would make a card with a good introductory cashback rate beneficial.
If you track your spending using a computer then look back to see how much money you have spent on credit cards historically. If you don't track your spending, have a look back through a few months worth of credit card statements.
Don't forget that with a cashback card you will be trying to maximise how much of your expenditure you will put through the card, so add a percentage increase on to your historical spending figure. [N.B. This is not advocating spending more money to earn cashback, merely putting a greater amount of your existing expenditure through a cashback card !] . To check out all the latest cashback card deals, take a look at our cashback cards table.

Other things to consider

Credit limit

You should try to find a card with a credit limit that will comfortably take your peak monthly spend. For example if your normal monthly budget is £1000 but you might have a car repair bill (£500) and pay for a holiday (£1500) in the same month then you will need a credit limit of at least £3000.

How widely is the card accepted?

Another consideration is how widely accepted your chosen credit card is. This is not a problem if you have a Visa or Mastercard credit card, but it is a consideration if your primary cashback card is an American Express card . Most major stores, hotels, garages, airlines and travel companies accept American Express, but small shops usually do not. If AMEX is you preferred cashback card, have a Visa or Mastercard cashback card as a backup. unsecured loans

Maximise your cashback

First of all, ensure that you understand your spending profile and choose a good cashback card. Secondly, be imaginative! It might surprise you how many things you can pay for with a credit card. Most people would expect to be able to use a credit card for buying food at the supermarket or buying clothes and CDs etc, but did you know that some local authorities will let you pay your council tax by credit card? Your utility suppliers will probably let you pay by credit card, although many offer a discount for paying by direct debit so that may be better than cashback. You can pay for your house insurance and car insurance by credit card. bad credit loans

When out for dinner, pay by credit card. Some will put a meal with friends on their cashback credit card and have their friends give them cash for their share. This means that cashback is earned on the total value of all meals, not just your own. Of course, friendship is more important than a few pounds of cashback, so don't jeopardise any friendships by doing this. As stated before, it would be a false economy to spend more money than you need solely to maximise your cashback.