The top eight cashback credit cards
Friday, 19 November 2010 12:00
by Ben Salisbury
If you are planning to do your Christmas shopping in the next few weeks it could be a good time to consider a cashback credit card. Most people will be spending more in the run-up to Christmas so it makes sense to get something back for spending you are going to be doing anyway. However, it is only worth getting a cashback card if you can pay the balance off in full every month and use it in the right way.
What is a cashback credit card?
If you understand how to use cashback cards to get the benefits from them, they can be a very useful part of your financial armoury. Cashback cards reward you for spending money. This can take the form of actual cash or rewards in other forms such as money-off vouchers at selected retailers, airmiles, Clubcard and Nectar points or even giving to charity. In this article I am going to focus on cards that give you actual cash back.
How cashback cards work
Cashback credit cards only work well if you pay off your balance in full each and every month -otherwise the extra you pay in interest will usually outweigh the benefits. You receive a percentage of the price of every purchase you make with the cashback card. This is usually up to one per cent, but some of the best deals offer more than this to begin with as a bonus introductory rate.
Benefits
Cashback cards reward you by giving you a percentage of all your spending back. The money you earn accumulates and is normally credited to your account or sent to you annually.
If your priority is a long interest-free period on purchases, you should look for the best deals on zero per cent credit cards, and if you have a large balance on your old credit card and want to transfer to another card, then look at the best-buy tables on low-interest balance transfer deals. However, some of the best cashback credit cards offer these benefits too. Think of that as an added bonus but remember it is all about choosing the right card for your own situation.
Negatives
A cashback card is not the right choice if you already have credit card debts or won't be able to pay the card off in full each month. If this is your situation then a zero per cent balance transfer card or a zero per cent long-term purchases credit card will be the best choice. As with most financial products, the rates advertised may not be the ones offered to you. This will depend on the result of your credit report.
Alternatives
Other rewards are available and could be of real benefit to you if you are a frequent-flyer, a motorist or someone who spends a sizeable amount of money on a particular type of goods.
To find out more about the best cards in these categories take a look at our feature on the best credit cards for rewards.
Choose a card linked to your spending habits
Check out the options and choose the card most appropriate to your spending habits. Read the small-print to check if there are any caps on the amount of spending you do that qualifies for the cashback benefits.
Find the best deal on credit cards and loans.
The top eight cashback credit cards
1: American Express Platinum cashback card
This cashback credit card comes top of the list, and is especially of benefit if you are planning to spend a lot over Christmas and the New Year. You get five per cent cashback for the first three months up to a maximum of £100, so if you are planning to spend about £2,000 over the next three months you can take full advantage. After this period the cashback rate reverts to up to 1.25 per cent with no limit on the amount you spend. In addition to this, there is no annual fee and zero per cent interest on all purchases for the first six months. The only downside is that AMEX (short for American Express) is not as widely accepted as most cards.
2: Tesco Bank Clubcard credit card by Mastercard
If you are a Tesco Clubcard holder this is a good option. You get one Clubcard point for every £4 you spend anywhere plus the normal Clubcard rules apply when you pay for shopping or fuel as it doubles as your Clubcard. There are double points available for Clubcard holders at the moment, two for every pound you spend, so when you use this card at Tesco, you get nine points for every £4 spent. It also offers 13 months interest-free on all purchases. The fee for this card is 2.9 per cent.
3: Halifax Rewards Clarity credit card
This is an excellent no-frills cashback card, only useful if you hold a Halifax current account. You get £5 cashback credited to your Halifax account each month when you spend £300 on your Halifax Rewards Clarity credit card. Purchases are charged at 12.92 per cent if you don't clear your balance in full each month. This is also a good card to have if you travel abroad regularly as there are no fees for using it outside of the UK.
4: Barclaycard Platinum Simplicity
This card gives you one per cent cashback on all purchases in the form of reward money that can be redeemed at a wide variety of outlets, or you can save it and use it against a big purchase. It has a low interest rate on outstanding balances of 6.8 per cent, though this could change because the rate is variable.
5: Capital One World Mastercard
This card also gives you one per cent cashback on all purchases and an extra £10 bonus each January. However, it does have a fee of £18 a year.
6: American Express: The Express Rewards credit card
When you spend using this cashback card you receive three points for every pound spent at UK supermarkets, two points for every pound spent at UK department stores, and one point per pound elsewhere. When you reach 5,000 points, you can exchange them for a £25 gift voucher. This is not quite as good a rate as a Tesco or Sainsbury loyalty card, but you will earn points anywhere that accepts AMEX.
7: Barclaycard Platinum with 16-month balance transfer
You can earn reward money and use it against purchases at selected retailers within the programme. There is a 2.9 per cent fee but the balance transfer deal is excellent, with zero per cent interest against these debts for 16 months. There is also zero per cent interest against new purchases for three months, before reverting to 16.9 per cent interest.
8: Virgin Charity credit card
This card from Virgin pays a reasonable 0.8 per cent cashback on all card purchases. You can keep this yourself or give it to any charity that is part of the Virgin scheme. The money is paid to you or the charity annually by cheque.
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