Cashback Credit Cards: The 9 Best in the UK
A cashback credit card provides its customers with rewards, including points, vouchers or air miles, in addition to offering the usual credit card service.
The most common reward, however, is cashback as a percentage of your credit card spend.
The real benefit of using a cashback credit card is for short-term borrowing. This allows you to pay off your balance each month.
Medium to longer-term borrowing will generally spend any cashback you may earn.
When and Why to Choose a Cashback Credit Card
Before you decide to take out a cashback credit card, consider whether it is the best option for you by answering the following questions:
Am I Financially Stable?
It may seem tempting to move your existing credit card debt to a cashback credit card and use the financial reward as a way to wipe out your debt; however, this is a poor notion for two reasons:
First – Unless you have a good credit rating, for example, you do not have extensive and historical debt, you are unlikely to be accepted for a cashback credit card.
Second – If you plan to pay off a large amount of debt over several months, or even years, any cashback you earn will likely be spent by the interest your debt incurs.
The reason for moving debt from one credit card to another is generally to take advantage of 0% interest rates; however, increasingly, cashback credit cards do not offer 0% interest.
To take advantage of the financial rewards provided by a cashback credit card is to use it to replace your debit card spending, and as a result, earn money on that spending.
If you are in debt, except for your mortgage and low-interest long-term equivalents, do not apply for a cashback credit card.
Can I Pay Off My Balance Every Month?
If you do not pay off your full credit card balance at the end of the month, you will be charged interest unless you can find one of the rare 0% interest cashback credit cards.
To take full advantage of a cashback credit card and avoid paying interest, zero-out your balance every month so that you can benefit fully from any cashback you earn.
If paying off your full balance every month is impossible or not your plan, a cashback credit card is unsuitable for your purposes.
How Often Will I Use a Cashback Credit Card?
The best way to use a cashback credit card is in place of your debit card.
It might seem counter-intuitive to spend on credit and as a result build debt. When used cleverly, however, a cashback credit card can be a financially healthy thing to do.
For example, in one month, you use your debit card to pay for:
- Bus fares for your normal commute – £51.00
- Weekday lunches at work – £69.00
- Clothes – £149.99
That is a total of £269.99. In return for buying these items on your debit card, you receive no reward from your card supplier.
If you had purchased those items on a credit card with a 1% cashback and paid the full amount off at the end of the month, the resulting reward would be £2.69.
That may not be considered a lot; however, it is more than you would receive using your debit card.
Here is another example, with a bigger expenditure for the month:
- Supermarket shop – £425.00
- Buying books from Amazon – £40.00
- Lawnmower – £219.99
- Garden fencing – £360.00
That is a total of £1,044.99.
Using a credit card with a 1% cashback to buy the above items would reward you with £10.45. You receive over £10 for spending money and paying off the balance at the end of the month.
If you regularly use your debit card to purchase things and are happy to use your cashback credit card instead, then it could be a good option for you.
Am I Good at Working Terms and Conditions to My Advantage?
Ideally, everyone should fully understand the terms and conditions of any financial arrangement they make, be that a bank account, overdraft, credit card or mortgage.
Knowing exactly what your liability is, for instance, or what the key payment dates are, allows you to work those terms and conditions to your advantage.
For example, if you take out a credit card that has a 5% cashback rate for the first six months, which then reduces to 0.5%. During those six months, you can earn considerably more cashback than afterward.
Take advantage of this by making those bigger purchases on your credit card during the 5% period, as long as you can pay them off at the end of each month.
Here is another scenario:
You want to apply for a cashback credit card and have reduced the choice down to two.
The first offers a 0.5% rate across all spending, while the second offers a 1% rate for supermarket spending and 0.5% for everything else.
The choice you make will depend on how important supermarket spending is to you.
Is your monthly supermarket spend minimal because you source the majority of your food elsewhere? Do you regularly buy clothes, electricals, and your contact lenses and glasses from the supermarket, as well as food and supplies?
Take advantage of the cashback credit card that works best for you.
Will I Use It for Medium to Long-Term Borrowing?
Medium to long-term borrowing might be existing debt or the purchase of items that are impossible for you to pay off in one month. Whatever the details of your medium to long-term borrowing, taking out a cashback credit card to handle ongoing debt is not recommended.
The benefit of cashback will generally be negated by the amount of interest that will be charged on your outstanding balance.
The percentage of interest charged will nearly always be greater than the percentage of cashback.
Cashback credit cards are only suitable for short-term borrowing that will be cleared completely at the end of each month.
Features to Look for (and Avoid)
Once you know that a cashback credit card would be suitable for your needs, narrowing it down to the best one for you is the next step.
Here are the features that you should look for when deciding which cashback credit card to apply for and what you should avoid.
What to Look For
When choosing a credit card in general, it is always recommended to opt for one that has a low annual percentage rate (APR). This is the percentage rate that interest will be charged on your outstanding debt. This applies equally to a cashback credit card.
It is always advised to make sure that you are liable for as little interest as possible. Even though you intend to pay off the balance each month in case something happens that prevents this.
Where you find one of the rare 0% cashback credit cards, the best option is as long a 0% interest rate as possible. Is it a true cashback credit card with an ongoing provision of financial reward or just an introductory offer that will stop after several months? The first of those two options is better.
Cashback is the main benefit of a cashback credit card; however, other rewards could be offered too, such as vouchers or air miles. Besides the cashback, what benefits are the most attractive to you? For example, air miles might not appeal if you holiday in locations that do not require air travel. Vouchers for a shop you do not use are of no use to you. Check exactly what rewards are on offer.
Is the cashback credit card widely accepted, or at least accepted where you want to use it? For example, American Express (Amex) is a well-known name but is not accepted in as many stores as Visa.
Check whether the credit card carries an annual fee. If it does, work out whether that will wipe out the level of cashback you would be likely to receive. Cards that have an annual fee generally make a higher level of cashback.
What to Avoid
- Avoid credit cards that require you to spend a minimum amount before you receive cashback. This is not cost-effective and may tempt you to spend more than you can afford to pay back at the end of the month.
Tips for Using Cashback Credit Cards
Once you have received your new cashback credit card, you can take full advantage of its benefits by following our list of tips:
Use your cashback credit card for your entire normal qualifying spend. For each instance, where you would have used your debit card and maybe even cash, use your credit card instead. This maximizes the amount of cashback you will receive.
If your card offers this option, add another cardholder such as your spouse to share the use of the card. As long as they can pay off their portion of the balance each month, you will both benefit from the cashback earned. You will, however, be responsible for their debt, should they be unable to repay it.
Where cashback is accompanied or replaced by reward points, work out the full value of those points. For example, a cashback credit card offers points related to a supermarket; therefore, you can see exactly how much money that would equate to. Those points, however, can also be spent through other retail outlets and services linked to that supermarket, such as restaurants or experience days, for a different amount.
Do not withdraw cash using your card. This will not incur cashback and could leave you with a debt that you cannot repay at the end of the month.
To avoid the possibility of late payment and incurring interest, consider setting up a direct debit to ensure your full balance is paid each month.
Best Cashback Credit Cards
Here is our list of the best cashback credit cards currently available:
Representative APR: 22%.
Reward scheme: 5% cashback on purchases for the first three months, up to £100. After three months, the cashback rate changes to 0.5% cashback on purchases up to a spend of £5,000. If you spend more than £5,000, the cashback rate increases to 1%.
Other benefits: Supplementary cards for members of your family.
Annual fee: No
Representative APR: 27.3%
Reward scheme: 5% cashback on purchases for the first three months, up to £125. After three months, the cashback rate changes to 1% cashback on purchases up to a spend of £10,000. If you spend more than £10,000, the cashback rate increases to 1.25%.
Other benefits: Supplementary cards for members of your family.
Annual fee: £25
This card is only available to Nectar members of more than six months.
APR: 0% on purchases for up to 17 months and then a representative APR of 20.9%.
Reward scheme: If you spend £400 or more during the first two months of membership, you will be rewarded with 10,000 Nectar points. The monetary value of a single Nectar point is 0.5p which equates to 0.5% cashback.
The value of the 10,000 points is £500. Nectar points can be spent in Sainsbury’s (including the petrol station), Argos, eBay, Vue, Eurostar and Sky Store. There is also a yearly point double-up event at your local Sainsburys.
Other benefits: When you use your Nectar credit card and swipe your Nectar store card in Sainsbury’s and Argos, you will collect up to three points per £1.
When you use your Nectar credit card anywhere else, you will collect 1 point per £5.
Annual fee: No
Representative APR: 22.9%
Reward scheme: 0.25% cashback on purchases. This does not include buying currency or traveler cheques.
Other benefits: Free additional cardholder. 5% saving on event ticket prices and 10% saving on festival pre-sales when bought through Barclaycard Entertainment. 5% saving on food and drink at O2 Academy venues when you use your Barclaycard Rewards Card.
Annual fee: No
Representative APR: 23.7%
Reward scheme: The rate of cashback varies depending on where you shop. Supermarkets 1%. Selected retailers 1–15%. Everywhere else 0.25%.
Other benefits: You can donate part or all of your cashback to charity via NatWest.
Annual fee: £24. If you have a NatWest Reward current account, this annual fee is removed.
Both the NatWest and RBS banking brands are part of the same group; therefore, the above NatWest Reward Credit Card is also available as the RBS Reward Credit Card.
The same terms and conditions apply. For example, the cashback rewards scheme; however, if you already bank with either NatWest or RBS, you may want to choose the corresponding reward credit card.
APR: 0% on purchases for the first six months, then a representative APR of 19.9%.
Reward scheme: You will earn M&S points when you use your M&S Reward credit card to shop anywhere. In the first 12 months, two points for each £1 spent in M&S, reducing down to one point for each £1 spent in M&S after one year. One point for each £5 spent anywhere else.
Each M&S point is worth 1p. That equates to a cashback rate of 2% for M&S spending in year one, reducing down to 1%, and 0.02% on spending elsewhere.
Other benefits: £5 voucher to spend on M&S food, clothing or home when you receive your new M&S Reward credit card.
Annual fee: No
APR: 0% on purchases for up to the first 18 months, followed by a variable APR of 20.9%.
Reward scheme: Earn Tesco Clubcard points when you use your TescoBank Purchases credit card. Five points for each £4 spent in Tesco or Tesco Fuel. One point for each £8 spent elsewhere.
One Tesco Clubcard point is worth 1p. That equates to a cashback rate of 1.25% for Tesco and Tesco Fuel purchases and 0.125% for purchases elsewhere.
Annual fee: No
APR: 0% interest on purchases for the first 20 months, followed by a representative APR of 23.7%.
Reward scheme: 0.5% cashback on all purchases but up to 15% on Santander promoted retail offers.
Other benefits: Up to three additional cardholders.
Annual Fee: Monthly payment of £3.
For short-term borrowers, cashback credit cards can be an excellent way to make your money work harder; however, they are not the solution to reducing existing debt or providing medium to long-term borrowing.
WikiJob does not provide tax, investment or financial services and advice. The information provided is for general reference and you should not rely on it to make (or refrain from making) any financial decisions. Personal situations will vary. Always seek independent financial advice when choosing how to manage your finances.