Rewards current accounts

Cashback is typically when you receive money back on certain types of spending, such as bill payments and purchases, often with selected retailers. It is generally paid as a percentage of the money spent and credited back to the current account where the purchase was made. 

A lump sum of cashback might also be offered to customers as an incentive to switch current accounts. 

Whether you can choose your rewards depends on the specifics of the bank account. Often the rewards are fixed and come in the form of cashback or discounts that are linked to ways of spending and at certain retailers. However, if you accrue loyalty points or are given vouchers then often these can be used in a variety of outlets.

There’s no limit to the number of online bank accounts you can have. You could, for example, have one for personal use, one joint account for household bills, and another for business expenses. However, some of the best accounts require you to pay in a certain amount – for example £1,000 – a month. If you’re bad at managing money, having several accounts could also make it even harder to keep track of your finances.

Some types of current account rewards are taxable. Monthly cash payments, for example, can be classed as annual payments or, if you pay a fee to receive them, miscellaneous income.

Banks should deduct 20% tax before you receive your annual payments – although you will need to pay more tax on them if you are a higher-rate taxpayer. Miscellaneous income, meanwhile, is paid before tax, meaning taxpayers may need to declare it.

Other types of rewards, such as cashback switching incentives, are classed as discounts and are not subject to tax.

Cashback current account terms vary, but typically the more you spend – with approved partners such as chain stores and energy companies – the more cashback you earn.

That said, most banks cap the total amount you can earn in a year, as well as restricting the type of spending on which you can earn cashback.

You may, for example, be able to earn up to 15% cashback when you make a purchase with a particular retailer, up to a maximum of £150 per year.

If you are opening a cashback current account to take advantage of a switching incentive, opening two accounts will earn you and your partner more than if you just open one joint account.

If, however, you are opening a joint account to pay household bills, a cashback account offering cashback on bill payments, for example, could be a good choice. 

This will depend on the terms and conditions of the account. Cashback could be paid monthly, quarterly or annually. If you are being paid cashback as a switching incentive for moving current accounts, this is often paid within 7 days of meeting the criteria, which might be paying £1,000 into your new account, for example.

Yes, whether the bank account is online-only or more traditional with branch access doesn’t determine whether you can get cashback and rewards. It comes down to the individual account provider and their plans for attracting and retaining customers.

Mobile banking allows you to manage your reward account on the go, track spending, and monitor debit card transactions. You can easily check your balance, review rewards earned, and manage direct debits. Many banks offer mobile banking apps to help savers maximise their account benefits.

Some reward current accounts come with a monthly fee, which may vary depending on the benefits offered. In addition to the monthly fee, consider the interest rate applied to your balance. Using your debit card frequently might help you earn enough rewards to offset these costs. Always compare the costs against the rewards and check the eligibility criteria. Some accounts may require maintaining a minimum balance or setting up regular payments to be eligible for rewards.