4 min read

Cashback credit cards

9 February 2017

We explain how cashback credit cards work, what the advantages are and what to look out for.

Cashback credit cards pay you a small amount of cash (usually paid annually or monthly) every time you spend on them. The amount you get back is a percentage of what you’ve spent, for example if your card pays 1.5% cashback and you spend £100, you’ll earn £1.50.

While there are obvious advantages to earning cash on the money you spend on your credit card, there are a few factors you should consider before deciding that a cashback credit card is right for you.

(Prefer to watch a video about this? Head to the end of the article)

What’s the advantage of using one of these cards?

The main advantage of these cards is the cash reward. The money you receive is tax free, and cash is more flexible than other rewards such as bonus points or air miles.

Who are these cards for?

If you pay your credit card bills in full every month, then cashback cards could be for you. With regular full-balance repayments, they allow you to earn cash rewards on money you would have been spending anyway.

However, if you carry a balance over from month to month, cashback cards may not be the best choice. The interest you’ll be charged will usually be more than any cashback you’ll earn.

See credit cards best suited to your credit profile on ClearScore

What should I be aware of?

  • If you rarely use your credit card for regular spending, it’s unlikely you will earn a great deal of cashback on these cards. Don’t be tempted to increase your credit card spending just to earn cashback.
  • If you don’t pay your balance in full every month, you’ll be hit by interest rates that could outweigh any cashback you’ve earned. By setting up direct debits to pay your balance off in full every month, you’ll avoid any interest. (If the providers omit the ‘pay in full’ option from the direct debit form, just write ‘pay off in full’ yourself).
  • If you exceed the credit limit you may be hit with charges. Many cashback credit cards also charge annual fees, which could be up to £140.
  • Some cashback cards pay a flat rate of cashback, whereas others pay you a higher percentage if you spend more. Some cards offer varying rates depending on where you spend, for example at a supermarket or on fuel. It’s a good idea to consider how often you use your credit card at these specific places.

How likely am I to be approved?

This will depend on the individual lender’s criteria and your credit report.

In the 'Offers' section of your ClearScore account you can see your eligibility rating for a list of credit cards chosen for your credit profile, which can help take the guesswork out of applying.

VIDEO: Lily explains the facts on cashback credit cards

In a nutshell:
  • Cashback credit cards are a good option offering cash rewards for things you were going to buy anyway
  • If you don’t pay your balance back in full these cards may not be for you, because the interest you’ll be charged will outstrip any cashback gains
  • You may have to pay an annual fee, so make sure that your cash reward will be bigger than the fee you pay
ClearScore exists to make your finances simple.
We offer a free service where you can handle everything to do with credit in one place. In your ClearScore account, you can see your credit score and the full details of your credit report. Your credit cards, mortgages, mobile phone contracts, loans, overdrafts and utilities all on the record. Our goal is to make ClearScore as simple, calm and straightforward as possible. Money is stressful enough.