Purchasing online with a credit card

Is a cashback credit card right for you?

By  , last updated

What is a cashback credit card?

With a cashback credit card you earn a percentage of your spending back from the card provider. If your card pays 1% cashback and you spend £100, you’ll earn £1 back. Cashback rates typically vary from 0.5% to 5%.

If you can use a card like this for all of your regular shopping and bills, it can add up to a sizeable reward. And you’re effectively getting money for nothing except carrying out your normal spending.

What are the catches?

The main catch is that cashback cards often charge a high rate of interest, so it’s essential that you pay off your balance in full each month.

If you are able to do this, a cashback card can be a great way to earn a little back on your spending.

But if not, the interest you pay will soon outweigh any cashback benefits, so a cashback card is best avoided.

What else should I watch out for?

As well as the high interest rate, there are a few other things to be aware of, so it’s important to read the small print carefully.

For example, most cashback cards pay out annually (which can be quite good as your cashback has time to build up to a more substantial sum).

Some cards also offer an introductory cashback rate for the first few months and reduce how much you can earn after that. So, you might, for example, earn 5% for three months and 1.5% after that.

Many cards also limit the total amount of cashback you can earn in a year and some offer different rates of cashback for different kinds of spending, such as a higher rate when you buy fuel.

Some cashback cards also charge a fee, so it’s important to be clear about how you will use the card and whether the fee is worth paying.

Finally, to qualify for most cashback cards you’ll need an excellent credit history - if you want to know how likely you are to qualify for a card before you apply, use our Smart Search tool by clicking the ‘Will I get this card?’ button on our comparison tables. This will tell you how likely you are to be accepted for each card, without leaving a mark on your credit score.

Are there any other options?

As well as cards offering cashback, some offer rewards such as air miles or supermarket loyalty points. Depending on your circumstances, these could be more valuable to you, especially if you regularly shop in a particular supermarket or are a frequent flyer.

Where to next?

Compare cashback credit cards with Smart Search

What type of credit card is best for me?

Advantages and disadvantages of credit cards

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