Cashback credit cards pay you every time you spend on them, possibly £100s a year, plus you get added legal protection too. Currently the top cards pay 5% cashback for the first 3 months, others give 3% on petrol and diesel spending.
This full guide compares the top cards and includes all the latest best buys.
In this guide
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Cashback cards: The best way to spend
Cashback credit cards are a form of reward scheme, yet rather than giving points, you get cold hard cash, tax-free, every time you spend on the card. As cash is totally flexible - you can spend it on anything - and it's easy to compare, for almost everyone it comes up trumps.
However before you start mentally counting the cash, ALWAYS follow...
Set up a direct debit to repay the card in full each month, so you never pay interest, which would outstrip any gain.
The reason card companies offer cashback or reward schemes is simple. They want to encourage you to spend on the card and pay them interest. The interest cost of all cashback cards dwarves the cashback you'll earn.
Therefore before applying for a cashback card, answer these two questions...
- Are you sometimes unable to repay cards in full? If you can't repay in full every month, focus instead on a card with a lower interest rate. See the 0% Spending Credit Cards guide.
- Got existing credit card debts? You'll save more by keeping them cheap than going for cashback. Every card application has a credit score impact, so ensure debts are sorted before applying for cashback cards (see Best Balance Transfers).
The easy way to pay off in full
The best way to pay off in full each month is via a direct debit. Unlike a standing order, it allows the card company to take a variable monthly amount to correspond with what you owe it (see Direct Debit guide for more).
Sadly some providers deliberately omit the 'pay off in full' option from direct debit forms, as it means they'll make less money. If so, just write in 'pay off in full'. They should honour it, but call up after a week or so and check it's worked.
By doing this, you've effectively made your credit card a debit card, but one that pays you every time you spend on it.
Also, it may sound obvious, but always make sure you stay within your credit limit. If you don't, you'll get hit with £12 charges.
Cashback Cards
Video Guide
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Originally broadcast April 2008
Best Buys: The top intro cashback deals
If you've not had a cashback card before, or are about to embark on some big (but planned for and affordable) spending, you've a choice between a card that pays the highest short-term bonus rate of cashback (then a decent rate after), or one that pays good long-term cashback.
One thing to consider is whether you want an Amex or a Visa/Mastercard (the former is accepted by fewer retailers).
-
Top intro cashback
- Capital One: 5% for 3 mths
- Amex Platinum: 5% for 3 mths
-
Big food/petrol cashback
- Santander: 3% petrol, 2% dept stores, 1% supermarket
Capital One - Mastercard 5% for 3 mths, then up to 1.25% after
- Cashback: 3 mths 5% (max £100) | 0.5% to £6k | 1% to £6k-10k | 1.25% above £10k
- Paid out: Every January
- Max cashback/year: N/A
- Annual fee: None
- Min spend: N/A
- Rate: 19.9% representative APR (see Official APR Example)
- Card issuer: Mastercard
- Min income: £20,000
New customers to the Capital One World Mastercard* will earn a huge 5% for the first 99 days (max £100 cashback in that time), then rates are tiered, paying up to 1.25% cashback.
It's a clear winner in year one. After that, if you want a longer-lasting winner, check the 'top long-term cashback' cards - which includes Amex Platinum (though this now has a £25 fee).
Good if... you've big purchases planned in next 3 months, or are a consistent big spender. But you need to own a property.
There's no cap to the cashback you can earn in a year, yet the £100 intro maximum applies to the first three months, so if you spend over £2,000 (5% of which is £100) in the first three months, the extra is wasted for cashback purposes. After that, your spending resets. So the next £6,000 you spend is at 0.5%, then you move up the tiered rates.
The big boon to this card is that you get a Mastercard - a big relief for those who grumble about perennial best buy Amex's lack of acceptance.
To get one you must have an excellent credit rating, earn £20,000+ and even own your own home. They're pretty strict criteria, so check the options below if you don't think you'll measure up. Fail to repay in full and it's 19.9% representative APR.
| Annual spend... | £3,000 | £5,000 | £10,000 | £20,000 |
|---|---|---|---|---|
| Year one cashback | £49 | £81 | £145 | £233 |
| Years two+ cashback | £15 | £25 | £70 | £195 |
- Time applications. Apply before a period of big spending, eg, Christmas or house move, to get the 5% cashback at that point; meanwhile, use another cashback card.
- Use a joint card. Those in trusting relationships can max the gain. Eg, Janet applies making John 2nd cardholder so both get the intro 5% cashback. John applies, doing the same, to bag another three months 5%. After that, just use one person's card to get into the 1.25% tier.
Is more cashback possible? Users of cashback sites (which are free to join) may be able to get even more cashback when they sign up. If you're new to cashback sites, read the Top Cashback Sites guide for an explanation and key warnings.
Amex Platinum 5% intro cashback + 1.25% after (but £25 annual fee)
- Cashback: 3mths 5% (max £100) | 1.25% after.
- Paid out: On card anniversary
- Max cashback/year: N/A
- Annual Fee: £25
- Min spend: N/A
- Rate: 18.5% representative APR inc. £25 fee - spending is charged at 14% (see Official APR Example)
- Card issuer Amex
- Min income: £20k household salary
The American Express* Platinum Cashback card has just increased its intro cashback rate for new cardholders to 5% for the first three months on up to £2,000 spending. After this, all spending attracts an impressive 1.25% cashback. However, it also charges an annoying £25 annual fee.
If you spend over £10,000 in a year, you'll also get unlimited 2.5% cashback in your anniversary month. Ensure you repay in full every month to avoid the 18.5% representative APR.
Good if... you'll definitely spend over £10,000 every year.
While the flat rate after the intro bonus is a big plus, the annual fee wipes away some of the gain. See the table below for how it adds up.
One drawback here is that the card is issued by Amex. As it tends to charge retailers more when you pay - so can afford to give you more cashback - it's accepted less , especially among smaller businesses. See the Retailers who accept Amex table and the Who takes Amex? Forum discussion.
| Annual spend... | £3,000 | £5,000 | £10,000 | £20,000 |
|---|---|---|---|---|
| Year one cashback (after fee) | £41 | £84 | £175 | £300 |
| Years two+ cashback (after fee) | £13 | £38 | £110 | £246 |
- Time applications. Apply before a period of big spending, eg, Christmas or house move, to get the 5% cashback at that point. Meanwhile, use another cashback card.
- Use a joint card. Those in trusting relationships can max the gain. Eg, Janet applies making John 2nd cardholder so both get the intro 5% cashback. John applies, doing the same, to bag another three months 5%. After that, just use one person's card for the 1.25% cashback.
Is more cashback possible? Users of cashback sites (which are free to join) may be able to get even more cashback when they sign up. If you're new to cashback sites, read the Top Cashback Sites guide for an explanation and key warnings.
Other best buys
While the two cards above offer big intro deals, they may not be right for everyone. Here are the other top options that may be better for some.
Big food/petrol cashback
Santander 123 CashbackTop for bigger spenders: 3% for petrol, 1% for supermarkets
- Cashback: 3% on petrol (max £9/mth), 2% in department stores, 1% in supermarkets, NONE elsewhere
- Paid out: Monthly
- Max cashback/year: £9/mth on petrol, no other caps
- Annual fee: £24/year
- Min spend: N/A
- Rate: 22.8% representative APR (incl fee). 18.9% rep. APR on spending (see Official APR Example)
- Card issuer: Mastercard
- Min income: £7,500
The Santander 123* card pays three different cashback rates: 3% on petrol (on up to £300/mth spend), 2% in department stores & 1% in supermarkets. Yet it has an annoying £24 annual fee so to take full advantage you must drive quite a bit, or other cards beat it.
Good if... you'll definitely spend big on fuel, and majority of spending's in supermarkets and petrol stations.
If you're a big petrol or supermarket spender this should wipe out the annual fee quite easily, but it still eats up the gain. Ensure you repay in full every month so you avoid the big 22.8% representative APR.
One downside is that any spending outside of the specified categories attracts NO cashback (as does fuel spending in excess of £300/mth). Here are some examples of which retailers qualify for the various cashback levels (you can search for more retailers):
- Fuel - 3%. Includes BP, Shell, Esso, Texaco, Tesco, Asda, Morrisons, Sainsbury's...
- Dept stores - 2%. Incl. Debenhams, House of Fraser, John Lewis, BHS, Selfridges...
- Supermarkets - 1%. Incl. Tesco, Asda, Sainsbury's, Morrisons, Waitrose, M&S...
The table below gives an illustration of your cashback profit (after the fee is deducted) on a couple of spending breakdowns. If you spend more in categories that earn cashback, these figures would be bigger.
| Annual overall spend... | £3,000 | £5,000 | £10,000 | £20,000 |
|---|---|---|---|---|
| Yearly cashback (assumes 10% supermkt, 10% petrol, 5% dept store spend) | -£9 | £1 | £26 | £76 |
| Yearly cashback (assumes 30% supermkt, 30% petrol, 10% dept store spend) | £18 | £46 | £116 | £184 |
| Yearly cashback (assumes 30% supermkt, 50% petrol, 10% dept store spend) | £36 | £76 | £134 | £184 |
Nationwide FlexAccount customers
Nationwide SelectGreat all-rounder: 0.5% cashback PLUS 0% 18 months
- Cashback: 0.5%
- Paid out: Annually
- Max cashback/year: Unlimited
- Annual fee: N/A
- Min spend: N/A
- Rate: 12.9% representative APR (see Official APR Example)
- Card issuer: Visa
- Min income: £9,800 to be eligible for FlexAccount
The Nationwide* Select credit card gives 0.5% cashback (50p per £100) on all spending, though is only available to new or existing FlexAccount* current account customers who switch to it and pay in £750/mth (see Best Bank Accounts for how it compares).
Good if... you're a Nationwide customer and you want a card with more than one perk
As well as cashback, it gives 18 months 0% on purchases, cheap overseas spending and a decent balance transfer offer. See below for more details, or how it compares in 0% Cards.
While the card offers 0% on spending, you still must pay at least the minimum repayment each month, otherwise you'll lose the deal. After the 0% ends the rate jumps to 12.9% representative APR.
| Annual overall spend... | £3,000 | £5,000 | £10,000 | £20,000 |
|---|---|---|---|---|
| Yearly cashback | £15 | £25 | £50 | £100 |
This card also offers a host of additional perks such as:
- 18 months 0% on all purchases. The card gives the longest ever 18 months 0% on all purchases but make sure you pay at least the minimum repayment each month. After the 0% ends, it's 12.9% representative APR so ensure you've cleared the balance before then.
- Overseas spending. The card also lets you spend while overseas at no extra cost worldwide (spend £100 in euros/dollars and most cards would charge £103). See full Cheap Travel Money guide for how it compares.
- 17 mths 0% on shifted debts. You can shift existing debts from other cards to this at 17 months 0%, for a 2.95% fee of the amount switched. If you do this AND 0% spending, pay off ALL debts in 17 mths to ensure you pay no interest.
If cutting existing debt costs is your focus, you can get up to two years 0% - see Balance Transfer Cards.
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For a few people these cards can be beaten by specific-use rewards schemes, such as British Airways miles on its Amex cards or Nectar points on some credit cards, yet for most cash wins due to its flexibility. For more, see the Credit Card Rewards and Airline Credit Cards guides.
Get more free cash from credit card companies
Credit card companies throw serious cash at marketing in order to get their cards in our pockets. For those who don't need to borrow, it's possible to ride this wave of freebies to be quids in. There are two other ways to make money from credit cards.
- Stoozing
This is an advanced technique where you take advantage of the fact that many credit cards lend money for a short time at 0% interest. Spend on that card instead of your debit card and then stash your salary in a high interest account and you'll be quids in. Full Guide: Stoozing - Credit card freebies:
Many credit cards offer incentives like gift cards or vouchers for free flights if you sign up to the card. Therefore if you've a good credit score, just take advantage by signing up even if you don't want the card. Full Guide: Credit Card Freebies
Think before adding the 'insurance'
Payment protection insurance is commonly sold with credit cards - the idea is it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).
There have been a myriad of cases where it has been mis-sold - borrowers didn't realise they were signing up for it, or it was totally unsuitable for them - and some big lenders have been fined.
The protection isn't always bad, though policies sold with cards are often overpriced (you pay a monthly amount depending on the size of your balance). If you want it, compare the lender's cover with standalone providers such as Paymentcare or Best Insurance.
Always be vigilant to check you aren't getting more than you bargained for when you fill in the application, then check your statement each month to check you aren't inadvertently paying for extras if you didn't ask for them.
Use the card for all spending
Once you set up a credit card, every time you use it you get paid. While this isn't an excuse to 'spend more' it does mean from now on...
Use the cashback for ALL normal spending, replacing cash, cheques, and other debit, credit & charge cards.
For those who have work expenses they need to reclaim, this can be a powerful way to earn more, at no cost to you, provided you can cope with paying the bill in full each month. 
Do check it's fine with your employer, though as there's a chance it could be seen as a taxable benefit (you'll still be up even if it is).
Yet do beware of setting up regular payments from it, or any other credit card. These are technically called recurring payments and unfortunately, unlike standing orders or Direct Debits, once set up you can't cancel them, only the company you're paying can. If you're in dispute, this can be a nightmare (see the Recurring Payments guide for more).
There's extra protection on all spending too...
There's another big bonus to using a cashback card - you actually have far more consumer protection. This all comes about due to what's called Section 75 of the Consumer Credit Act 1974, which says...
75. (1) If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor.
Which of course, reads like gobblydegook... yet in a nutshell means:
Buy something costing over £100, here or abroad, and pay on a credit card, and the card issuer's equally liable if something goes wrong.
Now this protection only applies to credit cards, not debit cards or any other plastic and it's hugely important, especially in the current credit crunch climate. If you ordered something and if the retailer went kaput, you'd still be able to claim your money back from the card company. Read a full article on Section 75 refunds.
Don't withdraw cash or balance transfer
It's important to understand that you only earn the cashback when you spend on it. Other transactions don't apply. Worse still, there can actually be nasty consquences for doing anything other than spending on a cashback card.
Never use cashback cards for withdrawing cash.
Withdraw cash and you'll often be charged a fee, plus even if you pay the card off in full you'll usually be charged heavy interest. The rule's simple: never, ever, ever use these cards for cash withdrawals.-
Avoid balance transfer on a cashback card
It's no coincidence that many cashback cards have top balance transfer offers - they want you to both spend on the card and shift debts to them. The rules changed at the start of 2011 and monthly repayments are now allocated towards the most expensive debts first.
This is good news, but as the balance transfer's at a higher rate you'll still get charged interest until all the debt's repaid. By far the best thing to do is use separate cards for earning cashback and balance transfers. See the Balance Transfers article.
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