Finding the best cashback credit card for you. 

Cashback credit cards can be a great way to get the most out of your credit card purchases. Find out how they work with our guide. 

What is a cashback credit card? 

When you spend on a cashback credit card, you’ll earn cash rewards where the money earned is either taken off your outstanding balance or given back to you as a voucher. 

For each transaction, you’ll get back a percentage of what you spend, usually between 1%-3%, although some of the best cashback credit cards will earn you as much as 5%.

How do cash back credit cards work? 

Cashback credit cards work the same way as other credit cards. You can borrow up to your credit limit and then pay back what you’ve borrowed, accumulating interest if you don’t repay the total amount within a month. 

The difference with cashback credit cards is you’ll get money back every time you spend. The amount you get back will be a percentage of each transaction’s value, which will be agreed upon when you first apply for the card and may depend on your credit history.

It’s unlikely you’ll get cashback instantly. Instead, the cashback you’ve accumulated will usually be accessible after a certain period of time, which will vary between providers. 

Cashback credit cards will start charging you interest on your balance if you don’t pay it off in full each month. This interest can eat away at the cashback you’re earning, so when you use these cards, it’s important you have a plan to repay your balance each month. 

Some purchases, like when you’re buying fuel, won’t qualify for cashback. Always read the terms and conditions carefully to make sure you’ll get the maximum benefits of a cashback card. 

Are cashback cards worth it? 

If you’re planning on making many purchases in a relatively short time, cashback credit cards can help you save money by reducing the balance you have to pay back. 

Cashback credit cards are beneficial when you’re going through a period of unavoidable increased spending, for example, when you’re moving house and need to buy a lot of furniture.

Cashback cards may not be as beneficial if you’re not expecting to use your card regularly throughout the year. These cards often charge annual fees, and if you’re not making enough purchases to earn cashback, the costs could outweigh the amount of cashback you earn.

Can I get a cashback credit card with bad credit? 

Cashback credit cards offer valuable rewards, and because of that, you’ll need to have a good credit history to be eligible. To give yourself the best chance of being approved, you can do a few things which will help to improve your credit history. 

Some things you can do to improve your credit rating include: 

  • Registering to vote 
  • Updating details on your credit report
  • Reporting any mistakes on your credit report
  • Avoiding late repayments on current credit products
  • Keeping old accounts open to build a credit history
  • Staying under your credit card limit
  • Avoiding credit card cash withdrawals 
  • Paying off any existing debts

You can also apply for credit cards designed for people with a poor credit report. A credit builder card can be a helpful way to improve your credit rating. These types of credit cards have lower credit limits and higher interest rates.

After a prolonged period of using a credit builder card and making repayments on time, your credit history will improve to the point where you’ll be able to apply and get approved for cashback credit cards. 

Are there any fees associated with a cashback credit card? 

Some cashback credit cards will charge annual fees. You’ll have to pay these charges monthly or annually to keep the account open.

Thankfully, some of the best cashback credit cards don’t charge an annual fee, helping you maximise your savings. 

Similarly to other types of credit cards, you may also be charged for using your cashback card to withdraw cash from an ATM.

How do I choose the best cashback credit card for me? 

Some things to consider when you’re choosing the best cashback card are: 

Do you need a cashback credit card? 

Cashback credit cards are useful when you’re going through a period of increased spending. If you don’t think you’ll be using your card often, then cashback cards may not be right for you, because the fees might cost you more than the cashback you get. 

It may also be worth thinking about how you typically manage your credit cards. If you’re regularly paying off your balance in full every month and not paying interest, then a cashback card can be a beneficial way of making your money go further.

If you regularly have unpaid balances that are building interest, other types of cards may be better, such as a 0% purchase card. 

Where will you spend with the card? 

Most cashback credit cards are widely accepted throughout the UK’s retailers, restaurants and online, however not everyone will accept payment from all cashback credit card providers. 

Before getting a cashback credit card, make sure it can be used where you often shop. 

Are the terms right for you? 

Many cashback cards will have various features that can affect how suitable the card is for you. 

When you first get your card, you may be offered a high introductory rate of cashback for the first few months. After this period, your rate will drop to a lower rate. 

The regular rate is important when comparing cashback cards. A card with a high introductory rate of 5% but a low regular rate of 1% may sound appealing when first getting your card, but you could get more cashback over the year with a different card that offers a flat 2.5% cashback rate. 

How do I make the most of my cashback credit card? 

To get the most out of your cashback card, you’ll want to use it for all your necessary spending.

This means instead of using it for less frequent, larger purchases – which you’ll likely use a standard credit card for – it’s more effective to use it for everything you buy like paying for your weekly food shop, takeaway coffees, household bills and public transport costs. Frequent and regular usage will help you to build up your cashback balance. 

When using your cashback credit card this way, it’s best to repay what you use straight away to avoid having to pay interest on your outstanding balance. A balance that’s not repaid within a month increases because your credit card provider will charge you interest on top, which can cancel out any cashback you’ve built up. 

To make sure you’re always paying back what you borrow in full before interest is applied to your borrowed balance, it may be worth setting up a direct debit to repay your entire balance automatically.

When doing this, make sure you don’t go over your credit limit because you’ll be charged a fee. In fact, to ensure you maintain a good credit rating, try to keep your credit utilisation low by using no more than 30% of your credit limit. 

What are the pros and cons of cashback cards?

Pros 

  • Cashback can be used to reduce the balance owed on your credit card
  • Some cashback can be redeemed into vouchers to be used at retailers
  • You get section 75 protection, which makes it easier to get refunds on faulty goods between the value of £100 to £30,000

Cons 

  • Need a good credit rating to be eligible
  • Not all purchases qualify for cashback
  • You may be tempted to spend more than you can afford to get more cashback
  • May only be able to access cashback after using the card for a minimum period of time

Are there any alternatives to cash back credit cards? 

Aside from cashback credit cards, there are other means to help your money go further.

Rewards credit cards

Instead of getting cashback that can be used to reduce your balance, rewards cards will usually give you points that can be redeemed for air miles or vouchers to spend in your favourite stores.

Some rewards cards are tied to a specific retailer or brand. Although you’ll be able to obtain points no matter where you spend, the vouchers you redeem these points for may only be used at specific stores.  

To get the best out of rewards credit cards, make sure the points can be redeemed at stores and brands you shop at; otherwise, they may not be as beneficial to you.

Savings account

When you open a savings account and deposit money into it, the amount you’ve put in will start to earn interest. If you can put in a large amount of money and leave it in a savings account over many years, it’s possible to generate extra money. 

The amount you can generate from a savings account will depend on the account’s AER (annual equivalent rate) and how much you put into it. 

To get the most out of a savings account, you’ll likely need to put a lot of money into it and then not use it for a long time. If you haven’t got much money to save, it may not be the most efficient way of earning additional money. 

Cashback credit cards FAQs

Is there a limit on how much cashback you can get?

Most cashback credit cards will limit the amount of cashback you can get, and this upper limit will vary between card providers. 

Some cashback cards will change the rate of cashback you can earn once you reach a threshold. For example, once you’ve earned a total of £500 cashback, instead of getting 2% cashback per transaction, you’ll start to earn 0.5% on your purchases.  

With many cashback credit cards, you’ll likely need to use the card for 12 months to access the cashback you’ve generated.

Can I have more than one cashback card?

You can have as many cashback credit cards you’re approved for – there is no limit. 

However, every card application you make has an impact on your credit report. When you apply for a card, the provider will perform a hard search of your credit history. 

Every time this happens, a ‘mark’ is left on your credit report that future lenders will be able to see. Having many ‘marks’ on your credit report within a short time may put lenders and card providers off because it indicates you may be desperate for money.

The more cards you apply for in a short time, the worse it will impact your credit score. It’s best to limit your application for new credit products to one or two within six months. This is because too many obligations increases your commitments and applying for several in a short space of time concerns providers that you won’t be able to afford repayments.

What can I get cashback on?

You can get cashback on most purchases with your cashback credit card. These may be items you buy in stores or online, household bills you pay for on your card, and meals out.

Some things are excluded from cashback. Transactions you won’t earn cashback on include, but are not limited to: 

– Buying fuel
– Vehicle dealers
– Car servicing
– Gambling
– Tax payments

There may be other exclusions depending on your card provider.

What’s the difference between rewards cards and a cashback card?

Cashback cards and reward cards are not the same. Although similar, there are key differences. 

A cashback card gives you a percentage of cash back per transaction. With a rewards card, you build up points which can be used and redeemed for money off items or air miles.  

Many reward cards give you bonus points when used with specific retailers, whereas a cashback card will give you the same cashback rate no matter where you use the card.

More Credit Card Options

We compare a range of credit cards to help you find the right credit builder card, 0% interest credit card, travel credit card, money transfer credit cards or credit card for bad credit for you.