Compare Cashback Credit Cards | Experian (2024)

What is a cashback credit card?

A cashback credit card is a type of reward card. Used right, it pays you back a percentage of what you spend on it. Because they tend to have high interest rates, cashback cards are more suitable for people who can repay their full balance each month.

How do cashback credit cards work?

A cashback credit card gives you money back when you spend on it. The more you spend, the more you get back – although this isn’t a reason to buy what you can’t afford. Because of their high interest rates, cashback cards are more suitable for people who can pay off their balance in full each month.

How will I be paid the cashback?

Cashback is often paid to you automatically. But check your credit card agreement to see if you need to do anything. Some lenders pay cashback directly into your bank account either monthly, quarterly or annually. Other lenders take it off your credit card bill. This won’t count towards your minimum monthly payment though.

How much cashback can I get?

Cashback is calculated as a percentage of the amount you spend on your card. For example, a cashback rate of 2% means you earn £2 for every £100 you spend. There are several ways lenders may set the cashback rate, including:

• Flat rate. For example, the lender may give you 1% cashback on all the purchases you make on your cashback credit card.
• Purchase-specific rates. Your lender may offer different cashback rates depending on where you spend your money. For example, you might get 0.5% cashback on groceries and 2% on petrol.
• Tiered rates. This is where the rate depends on how much you spend on your card. For example, the lender may offer 0.5% cashback if you spend up to £6,000 in a year and 1% if you spend more.
• Introductory rate You may be able to get a higher cashback rate such as 5% for the first several months. After that the cashback rate will be lower. There may be a limit for how much cashback you can earn with the higher rate.

What are the disadvantages of a cashback credit card?

Getting paid for spending may seem like a win-win. But cashback cards aren’t right for everyone. Below are some important things to consider.

• Higher interest rates. It’s often more expensive to borrow with a cashback credit card than with other types of cards, loans or overdrafts. If you decide to get a cashback card, it’s best to pay it off in full each month if you can.
• Annual Fees. It’s not uncommon for cashback credit cards to charge an annual fee. Compare the fee with the cashback you expect to earn. This should help you decide if a cashback card is worth it.
• Impact on your credit score. Applying for a credit card will temporarily lower your score but it should improve over time if you manage the card well. Carrying a balance on your card also lowers your score. This can make it harder to get approved for other credit such as a mortgage.
• Temptation to spend more. Getting cashback may encourage you to spend more than you can afford. Be aware of this danger and stick to your monthly budget.
• Tougher lending criteria. You may struggle to get approved for a cashback card if you have a low credit score. Lenders may also want you to have a monthly income over a certain amount.

Alternatives to cashback credit cards

Cashback is only one way to get perks for spending – you may prefer to earn points or air miles with a different type of reward card. Because of their high interest rates, it’s best to pay off a reward card in full each month.

If your goal is to borrow money over time, it’s worth looking at other options such as:

• Purchase credit cards. These cards usually offer a 0% interest rate for a fixed period. If you can pay off the balance before the interest rate goes up, you may be able to spread the cost of a purchase without paying interest on it.
• Balance transfer cards. Do you have existing card debt? You may be able to lower the cost of interest by moving the debt to a balance transfer card with a 0% period. Once the period ends, you’ll be put on a higher interest rate. Bear in mind there’s usually a fee for transferring your debt.
• Credit builder cards. If you have a low credit score you may struggle to get approved for a cashback, reward, purchase or balance transfer card. A credit builder card may offer you a lower limit but it’s generally easier to get.
• Personal loans. Looking to borrow over the long term? You may find it’s cheaper and simpler to borrow with a personal loan (also called an unsecured loan) instead of a credit card.

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

There are several ways you may be able to maximise your cashback without spending more than you normally would. Here are some tips.

• Use your cashback card regularly. You’re missing an opportunity to earn cashback when you use your debit card or cash instead of your cashback card. To make the most of your cashback card, use it for all appropriate purchases such as groceries, household bills, train tickets, media subscriptions and eating out at restaurants.
• Put work expenses on your card. You may be able to earn cashback on work expenses that you later reclaim from your company, such as petrol or events. Ask your employer if it’s ok. You may have to pay tax on this cashback if it’s considered to be a company benefit.
• Add an additional cardholder. Your lender may let you have a second card to give to someone such as your partner or a family member. They’ll earn cashback for you when they spend with this card. Remember you’re solely responsible for paying off the debt. Also, adding someone may create a financial association.

It’s very important to manage your cashback card responsibly. Try to pay it off in full each month to protect your credit score and avoid paying interest. Stay within the credit limit and only use your card to buy things you can afford.

How do I choose the best cashback credit card?

Before you apply or switch cards, make sure you’ve found the best offer for you. Compare deals and look at things like the cashback rate, annual fees and if the deal matches your spending habits.

It’s also worth checking your chances of approval. We calculate your chances when you search cards with Experian, so you can apply with confidence. Searching is free, takes a few minutes and never hurts your score.