Cash Back Credit Cards
Do they all work the same way?
The most straightforward cash back credit cards pay back a fixed rate percentage on all purchases made. This can provide an easy form of reward, without the need to focus on spending at specific stores or working out how best to increase the rate of cash back. Selected retailer cash back cards provide a bonus rate for shopping at participating outlets. Some credit cards also feature a tiered program, in which different size purchases receive a higher or lower percentage cash back rate depending on the particular deal.
Or another way that cash back cards work is to give new cardholders a lump sum credited to your account when you get approved for the card or when you start to use the card in a store.
How much cash back can I expect to earn?
While the rates vary greatly between different offers, you can typically expect to receive 0.5% or 1% cash back on a flat-rate deal, rising to 5% or even 10% with participating retailer programs or during bonus periods.
Is there a cap on how much is paid back?
What other factors should I consider while selecting a cash back card?
It is very important to look at all the features of cash back credit cards before applying to make sure the deal will be genuinely beneficial:
Annual fee: Calculate your estimated annual spend and how much cash back this earns, and compare this figure with the annual fee. If the annual fee is greater, then you are not going to get any benefit from the card.
Interest rate: Cash back credit cards often feature a relatively high interest rate, which is applied to any outstanding balance on your account. If for any reason you are unable to pay your monthly bill in full, a high rate could quickly negate the savings you make on the cash back.
Introductory offers: Many cash back cards offer an introductory promotion of a bonus cash back rate for an initial period, typically a few months. Check to see how the rate changes at the end of the promotion.
Balance transfers: These cards also often feature the option to transfer a balance so you can repay your existing credit card debt at a lower rate. You should be aware that balances transferred do not earn any cash back, and if your priority is repaying your debt, you are probably better off choosing a different type of card with a better balance transfer deal.
Restrictions and penalties: Banks often impose restrictions on how much can be earned per month, the types of purchases that are applicable and penalties for missing payments or misusing your account. Study all the terms and conditions to ensure you can get the best return.
Still need help? Ask us a question
We welcome your questions but we cannot help if you need personal financial advice or if have lost your card or need to resolve a dispute with your bank.