Get 4% Cashback As You Spend

By playing your cards right, you can reclaim a nice slice of your next three months' spending. Frankly, it's money for old rope!

Just like anything else (apart from a Möbius strip!), there are two sides to credit cards. If you overspend and get on the wrong side of them, then you face a yearly interest bill which will usually exceed 16.5% APR. At this rate, debts double every 4½ years, purely as a result of compounding interest. On the other hand, if you learn the rules of the credit-card game, then you can take advantage of banks by saving -- or even making -- money using your plastic.

For example, you can avoid paying interest on existing credit- and store-card debts. By moving your balances to one of the scores of 0% credit cards which charge no interest on balance transfers for an introductory period, you can avoid paying interest for up to fourteen months. Raising your game again, you can shop using a 0% on purchases credit card and dodge interest on new spending for up to a year.

However, how can you make money if you're a sensible soul who always pays off his or her credit-card bill in full every month? First, you'll benefit from an interest-free period lasting from 45 to 59 days, which helps to improve your personal cashflow. Second, you can earn as you spend with a cashback credit card. With a cashback card, a credit-card issuer rewards you for your loyalty by refunding a proportion of your spending to you. This may take the form of a yearly credit to your card account, a BACS payment to your current account, or a cheque through the post.

As you'd expect, the level of cashback award varies considerably from one provider to another, so it pays to shop around for a Best Buy cashback credit card. Pick the wrong card and your cashback can amount to a feeble 0.1% of your spending -- just £1 for every £1,000 that you shell out. Then again, choose wisely and you can recoup up to 4% of your spending for a while.

Last month, in Cash In As You Splash Out, I revealed the very best cashback credit cards currently on offer, and did the same for reward/loyalty/points cards in Earn Rewards As You Shop. However, having done more research, I want to repeat just how much you stand to make simply by switching to the table-topping cashback credit card.

My latest number-crunching has proved that one cashback credit card stands head and shoulders above the rest: the Capital One Cashback MasterCard. This pays standard cashback of 1%, which is quadrupled to a delicious 4% for the first three months. No other cashback credit card comes close to matching this reward, so it's my stand-out winner. As you can see from the table below, the more that you spend on this credit card, the higher your refund will be:

Over the past twelve months, I've spent close to £20,000 on my Morgan Stanley cashback credit card, which has made me almost £110. However, by jumping ship to the Capital One Cashback credit card, I stand to earn a handsome £350 over the next year, or an extra £240. Therefore, I've already applied for a Capital One Cashback card and intend to ditch my existing account as soon as my new card arrives.

Rather pleasingly, from clicking on the Capital One Cashback link to having my application accepted took about three minutes, which is about as quick as it can be. Who says there's no such thing as a free lunch?

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