What is a cashback credit card?
A cashback credit card is a type of reward credit card that pays you a percentage of what you spend back as a credit on your bill or in some cases straight into your bank account; monthly, quarterly or annually.
In the past, there were plenty of cashback credit cards to pick from. But in 2015, a new rule was introduced which capped the interchange fee merchants could be charged for accepting card transactions. This fee helped fund cashback perks, which means the cap has led to a number of UK cashback credit card deals being scaled back or pulled.
So, if you are trying to be savvy with your money and earn extra cash for your everyday spending there are fewer options available compared with other types of credit cards.
This guide will help you understand how a cashback credit card works, reveal the best cashback credit card deals on the market and provide tips for using a cashback credit card effectively.
How do cashback credit cards work?
Cashback credit cards pay a rate of cashback that determines how much you can earn each time you spend. So, for example, a cashback rate of 5% means you would earn £5 on a £100 spend.
Some deals come with introductory rates that may be capped followed by an ongoing rate while others pay a flat unlimited rate for as long as you have the card.
The trick with a cashback credit card is to use it as a debit card and load all of your everyday spending onto it to rack up the rewards.
Many of these cards charge an annual fee, but if you regularly spend on your card and repay the balance in full each month, you could earn hundreds of pounds a year.
What are the best cashback credit card deals?
Below we've set out the best cashback credit card deals available right now paying the highest rates of cashback.
Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a credit card provider before committing to any financial products.
American Express Platinum Cashback Credit Card
- 5% cashback for the first three months of card membership capped at £125.
- After the first three months, you get 0.75% cashback on all purchases when you spend up to £10,000, or 1.25% cashback when you spend over £10,000 in a year.
- You could earn £108.75 cashback if you spent £500 each month for a year.
- £25 annual fee.
- Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 24.7% (variable), with a £25 annual fee, representative 30.00% APR (variable). Credit available subject to status and terms apply.
American Express Platinum Cashback Everyday Credit Card
- 5% cashback on purchases for the first three months of card membership capped at £100.
- After the first three months, you get 0.5% cashback on all purchases when you spend up to £10,000, or 1% cashback when you spend over £10,000 in a year.
- You need to spend a minimum of £3,000 in a year to ensure every £1 you spend qualifies for cashback
- You could earn £97.50 cashback if you spent £500 each month for a year.
- No annual fee.
- Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 24.7% (variable), representative 24.7% APR (variable). Credit available subject to status and terms apply.
Santander All in One Credit Card
- Pays 0.5% unlimited cashback on spending
- Up to 15% cashback with Retailer Offers
- £36 annual fee
- Representative example: assumed borrowing of £1,200 for one year, at a purchase rate of 18.9% (variable), with a £36 annual fee, representative 24.7% APR (variable). Credit available subject to status and terms apply.
Who are the best cashback credit card providers?
As well as finding a cashback credit card which is the most rewarding for you based on your spending habits you should also consider the quality of a provider's customer service. But that's pretty hard to do unless you’ve been a customer before.
Fortunately, Which? has rated 26 of the most popular credit card providers based on real-life experiences to help you find out what they’re like for customer service, fees, and benefits before you sign up.
How to use a cashback credit card effectively
With a cashback credit card, there are a few things to bear in mind to make sure you use them effectively. We’ve set out the golden rules below.
1. Avoid borrowing
Cashback credit cards are a rewarding tool if you only use them to spend money you actually have like you would with a debit card.
They’re generally not very good for borrowing, with few cards offering competitive 0% deals.
If you're already paying interest on credit card debt, it's worth considering a 0% balance transfer card, or if you want to spread the cost of a new purchase try a 0% purchase card.
2. Pay off the balance in full every month
It’s important to make sure you pay off the balance of your cashback credit card in full every month otherwise the interest could outweigh the rewards.
With this in mind, we recommend you set up a direct debit to clear your balance each month so you don’t forget.
3. Maximise your cashback with everyday spending
To get the most out of your cashback credit card you should try to use it as much as possible.
The best cashback credit cards reward you every time you make a purchase, so it makes sense to use them instead of cash or debit cards whenever you can.
Have a cashback credit card query? See if you can find the answer in our Q&A below.
Why use a cashback credit card?
A cashback credit card is a great tool to reward yourself on your everyday spending.
Getting one isn’t about getting into debt, just about being savvy with your shopping and being rewarded without spending more than you normally would.
Are cashback credit card rewards taxable?
Can I use a cashback credit card to clear debt?
A cashback credit card works best when you are using it to replace your debit card for everyday spending.
Few cashback credit cards come with introductory offers on 0% on balance transfers and when they do, they tend not to be as competitive as cards dedicated to shifting and freezing debt.
If you have credit card debt, consider a 0% balance transfer card.
Can I use a cashback credit card to spend interest-free?
Few cashback credit cards come with an introductory 0% purchase offer and the ones that do tend not to be the best out there.
You’d be better off looking for the best interest-free credit cards if you want to spread the cost of a purchase.
Do cashback credit cards offer Section 75 protection?
Cashback credit cards come with the same Section 75 protection as other credit cards.
So if you make a purchase worth between £100 and £30,000 on a cashback credit card the card issuer is equally liable with the retailer if something goes wrong.
How is cashback paid on a credit card?
The cashback you earn by using your cashback credit card is usually paid back in the form of a credit on your bill. But some providers will deposit what you earn in your bank account.
When is credit card cashback paid?
Cashback is usually paid monthly, quarterly or annually depending on your provider. Some cards may also require a minimum yearly spend before you can qualify for cashback.
Make sure you check the terms of the deal before signing up.
Does cashback count towards my minimum payment?
Cashback does not count towards your minimum monthly credit card repayment so don’t rely on this to help you pay your bill.
Will I get cashback on items I return?
Cashback is only paid on what you spend, so if you buy something and return it your cashback balance will be adjusted to reflect this.
Will I get cashback on interest and balance transfers?
No cashback will be earned on interest, fees, balance transfers, cash advances or loading prepaid cards.
Is a reward credit card better than a cashback credit card?
Cashback credit cards let you earn money back on your everyday spending, which you can then use on other purchases.
However, if you tend to be loyal to a particular shop you could be better offer with a reward credit card that offers points which can be turned into vouchers to spend there.
Can you get a cashback credit card with bad credit?
You will need to have a decent credit rating to get a cashback credit card so you should check your report to see if it can be improved.
Use our guide credit reports: all you need to know for the lowdown.
However, those with a poor credit history may also be able to benefit from credit builder cards that offer cashback.
Just bear in mind that your credit limit will be fairly low to begin with and these cards come with a high APR so you should make sure you repay what you owe each month to reap the rewards of any cashback offer.