Pick the right credit card and you can add £100s a year to your income without the need to do anything. Cashback credit cards pay you each time you spend on them; so provided you pay them off in full each month to ensure you're not charged interest, just use them for all your spending and you'll be quids in.
|
|
|
The Free Stuff Checklist
Freebies, Freebies, Freebies, Voip: Free International Calls Via the Web, Stoozing: Free Cash From Credit Cards, Credit Card Freebies, Free anti-Virus Software, Free Office Software, Free Texts
|
|
Cashback credit cards only pay back a small percentage of any spend, yet when totalled over a year, it's significant. Credit card companies afford this as they charge retailers when you pay; consequently we pay higher prices, so cashback cards effectively let you reclaim some of it.
Yet there is a huge golden rule….
"Only go for cashback if you're never, ever, ever charged interest. This means you must always pay the card off in full each month."
Fail to do this and the interest cost massively dwarves the cashback earned, and you're substantially better off choosing a card that minimises the interest rather than maximises cashback. If that's you forget this article, and start reading Best Card For Purchases.
The easy way to pay off in full
Yet this shouldn't be a hassle; simply set up a Direct Debit to do it. Unlike standing orders, the amount DDs take from your account needn't be fixed, thus one can be set up to ‘pay the card off in full each month'. Sadly some card providers deliberately miss this option off their DD forms, as it's highly unprofitable for them. If so, just write in ‘pay off in full' and send it in; they should honour it, though call up after a week or so and check it's in place.
Many people find switching to the ‘credit cards are good' mind-set tough. Yet think of it this way: a cashback card, paid off monthly in full so there's no interest is the equivalent of a cashback debit card. Simple as that. In fact there are other ways to profit from credit cards ranging from quick hit Credit Card Freebies to the high-end Stoozing: free cash article.
It's not just about cashback; you're better protected too
On top of the cashback, spend on any credit card and you legally get ‘Section 75' consumer protection; this doesn't apply to cash, cheque or debit card transactions. In practice it means buy anything costing over £100, and providing some of it's paid on the card the card company is equally liable with the retailer if things go wrong; this is a valuable additional protection. Better still it also covers goods bought abroad or on overseas websites. For full info on this, see the Consumer Rights article.
The UK's Top Cashback Cards
Only a few cards pay 1% cashback (1p per £1 spent) or more; so this is the benchmark. Any card paying more is a serious contender...
-
The Overall Winner. Amex Platinum pays 5% for 3 months, then up to 1.5% after
The overall winner is the American Express Platinum* card, which pays new cardholders a massive 5% cashback, which is 5p per pound spent, on up to £4,000 spending during the first three months. Once this intro offer expires, its rates are tiered paying a maximum 1.5% cashback.
Therefore if you’re in a couple and trust each other there’s a way to maximise the gain. For example; Janet applies for the card and makes her partner John a second cardholder allowing both to get 5% cashback for three months. After that John applies for the card and makes Janet the second cardholder so both get another three months at 5%. There's no guarantee the offer will still be available then; but you've lost nothing by trying.
It’s worth being aware though that Amex cards are less accepted than Visa or Mastercard and thus you won’t be able to use it everywhere (especially small restaturants & independent retailers - read Who does & doesn't take Amex? discussion. So best practice is to have another cashback card as a reserve.
Intro Cashback. 5% for 3 months on up to £4,000. Standard Cashback. 0.5% on up to £3,500/year, 1% on £3,500 to £10k/year and 1.5% above that. Min. Salary Requirement: £20,000
Specialised Alternatives
-
Abbey Cashback: 5% but only on supermarket shopping. All Abbey credit card holders, meaning both new customers and those who already have one, will get 5% cashback up to a maximum of £50 on all spending in supermarkets before 31 July 2008. So get this card, use it only for your normal supermarket spending and you'll get a free £50. Once you've got that, ditch it. For all other spending use the best normal cashback card.
To be technical "supermarket spending" is defined by the retail category of where you spend. This means all purchases, apart from petrol, at Sainsbury’s, Tesco, Asda, Morrisons, Waitrose, Somerfield and Co-op stores should qualify; but as Marks & Spencer isn't classed as a supermarket, it doesn't. - Earn under £20,000? 1% flat rate. If you earn under £20,000 then the next best is the Egg Money card (don't confuse with the standard Egg card). It simply pays 1% cashback on everything you buy, though the pay-out is capped at £200 annually (so you'd have to spend over £20,000 before it's an issue).
- Rewards cards. Reward schemes, such as Nectar and Airmiles, are the alternative to cashback cards; yet in the main the value of points you get is less than the cashback earned; plus points have limited useability compared to cash. However, there are a few specialised rewards cards which can compete with cashback; for more info read the Credit Card Rewards article.
|
|
On virtually all cards, the cashback only applies to spending on the card. Withdrawing cash or shifting debts doesn't accrue cashback. Worse still both actions have some nasty consequences.
- 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. - Never balance transfer on a cashback card
It's no coincidence that many cashback cards have top balance transfer offers – they want to tempt you to both spend on the card and shift debts to them. This is because your monthly repayments are automatically allocated to repay cheap balance transfer debts first, leaving the much higher interest from spending debts expensively trapped until all the cheap debt's repaid. In other words you can't ‘just pay off the costly debts from spending'.
By far the best thing to do is use separate cards for earning cashback and balance transfers (see the Balance Transfers article).
A family spending £20,000 over a year on a debit card will earn nothing. Yet switch to Amex Platinum with a Direct Debit to pay it off in full and they'd earn £450 in cash in the first year, and £233 in the following years - just for using a different piece of plastic.
|
The Top Cashback Cards | ||||||||
|
Card name |
Annual Spend (1) | |||||||
|
£1,000 |
£2,500 |
£5,000 |
£7,500 |
£10,000 |
£20,000 |
£35,000 | ||
|
Cash / Debit card |
£0 |
£0 |
£0 |
£0 |
£0 |
£0 |
£0 | |
|
Amex Plat (A) |
Intro year |
£16 |
£41 |
£89 |
£142 |
£195 |
£450 |
£825 |
|
Later years |
£5 |
£13 |
£33 |
£58 |
£83 |
£233 |
£383 | |
|
Egg (B) |
£10 |
£25 |
£50 |
£75 |
£100 |
£200 |
£200 | |
| (1) Where bonus rates apply, spending is assumed to be evenly spread across the year (A) 5% for first 3 months, tiered rates after: 0.5% on £0 - £3.5k, 1% on £3.5k - £10k, 1.5% on £10k+ thereafter (B) 1%, Cashback on all spending up to £20,000 | ||||||||
Ask a Question / Discuss
Cashback Credit Cards
Other Articles You May Be Interested In
Credit Card Freebies: Legally Grab Free Gifts
Car Insurance Cost Cutting
Online Shopping
Freebies, Freebies, Freebies
Always double check the product details before signing up to them
Spotted a brokenlink/out of date info? Let me know at brokenlink@moneysavingexpert.com
LINKS THAT HELP THIS SITE (all have a * in above article)
(this has no impact on product or recommendation - see explanation below)
American Express Platinum
You shouldn't notice any difference, the links don't impact the product at all and the editorial line (the things I write) is NEVER impacted by the revenue. If it isn't possible to get an affiliate link for the best product, it is still recommended and still included in exactly the same way. For more details read How This Site Is Financed.
LINKS THAT DON'T HELP THIS SITE
(please only use if necessary)
No * Link Available: Egg Money, Abbey