There are a few different kinds of credit cards available to consumers, from balance transfer cards and low interest cards to cashback cards. At present, these cards are among the most popular of all products offered by banks and credit card companies, as people look to make their money go further. But what are cashback cards, and what benefits do they offer to the everyday spender?
How cashback cards work
Quite simply, this type of card will offer you the chance to earn money back every time you spend. So, whenever you make a purchase with your credit card, you will get a percentage of the amount you spend back again. So, if your card has a 3 per cent cashback rate for purchases and you spend £100 at once, you will earn £3 back again. Money earned is usually paid on an annual basis, but some providers pay it every month. Some cards offer a flat rate for all purchases, whilst others offer tiered rates depending on how much you spend, where you shop or what kind of goods or services you use the card to pay for.
Another type of card often included in this credit card category is rewards cards. These cards give you loyalty or rewards points when you spend on your card, rather than money back. These points can usually be redeemed at a range of retailers.
Should I get a cashback credit card?
When deciding whether a cashback card could be beneficial for you, there are a few important things to consider. For example:
- Is there a fee for the card? Many cards charge a small monthly fee to holders, and you need to work out whether the cashback will be more than this fee.
- Can you pay off your full balance each month? Cashback cards are only a good idea if you can pay your full credit card bill each month, or else the interest will outweigh the cashback benefits of the card.
- Will you be spending the money anyway? If you can get money back on purchases you already make each month, you will be rewarded for making your everyday purchases and the card will work for you.
Before you get a cashback card, you do a little research beforehand. Carry out a credit cards comparison to find the lowest interest rates, the highest rates and a card that suits your spending habits.