Fancy getting an instant discount of up to 4% on everything you buy, without having to ask?
One thing I reckon we Brits are getting better at is realising that by being clever we can all save money. By paying less for our bills, utilities and services and spending less on everyday items we can each have the lifestyle we want, while keeping more of our hard earned cash in our pockets. After all, who wouldn't like more money in their pocket?
And while paying less for everything we have to buy is very satisfying, those that are good with their money and never get into debt can actually take this one step further. How? Well, we all need to pay for things on an everyday basis -- how would you fancy getting a percentage of your spend back again, as cashback?
So what do you have to do? Well, it may require changing your way of thinking slightly. Basically, instead of paying with cash or a debit card when out and about, you need to use a credit card instead. And what makes this card special? Well, it gives you this magical percentage of your spend back again -- and not as loyalty points or other freebies, this is in the form of that stuff accepted everywhere - cash!
Now of course, this is why I had to stress that only those that are good with their cash need read on; taking out a credit card is a serious commitment, and not one to be undertaken lightly. But if you've had a credit card previously and have happily used it and cleared the balance in full each month (or ensured you have never had to pay interest or fees on a 0% card) you could use this to your advantage and make the most of a cashback credit card.
Example
Let's look at an example. Sally is 27; she earns £25k per year and spends roughly £500 a month on food and necessities, plus about £1k on a holiday. She pays for everything with cash or with her debit card, and, at the end of the year she has spent £7k.
Susie is also 27; she also earns £25k per year and also spends roughly £500 per month on food and necessities. However, Susie has just taken out a Capital One Cashback with World Mastercard card (formerly Capital One Cashback), which pays a whopping 4% cashback on everything she spends in the first three months followed by 1% thereafter.
Susie also intends to spend £1k on a holiday, and shrewdly decides to put this sum on her card during the first three months of owning the card to maximise her cashback. At the end of the year Susie too has spent £7k, but unlike Sally, Susie receives a cheque in the post for £145 in cashback. Not bad eh!
And of course, there are other benefits to using a credit card for spending. Susie's holiday would have been protected by Section 75 of the Consumer Credit Act, which essentially means that should you spend between £100 and £30k on goods or services on your credit card, your card provider and the supplier are jointly responsible -- so you can claim against your card supplier if something should go wrong. What's more, this applies even if you've only paid a deposit.
All cashback credit cards are not the same, so if you are intrigued and want to find out more remember to check that any cashback cards you look into do not have an annual fee to pay (which could easily wipe out your hard earned cashback).
If you already hold a credit card you should also be aware of its parent company. Most credit cards are run by one of just seven large financial organisations, and applying for more than one card from the same organisation can result in you being turned down (and so affect your credit history). And of course, these credit cards are for spending only and must be paid off in full each month to make money -- they are certainly not to be used to transfer balances to, or to withdraw cash.
But if you reckon you're disciplined enough to join the millions already making money from their cashback credit cards, here are two of my favourites:
Top Cashback Credit Cards
Capital One Cashback with World Mastercard Card (4% for first 3 months, 1% thereafter).
American Express Platinum card (3% for first 3 months, followed by 0.5% for spend up to £3,500, 1% from £3,501-10k, 1.5% thereafter.
Remember that the more you can pay for with the card the better, every penny counts. So put even the most trifling sums onto the card as just £1 can be worth up to four pence in cashback. Some utility companies will even allow you to pay monthly bills by credit card, but check carefully to ensure you don't end up paying more this way than via direct debit.
And my final tip is to remember that these credit cards can usually have additional cardholders -- if you run your finances jointly with your partner and trust each other why not sign him or her up, too, and really maximise your cashback over the year?
> Find out more about cashback credit cards
> The Five Top Credit Cards For Big Purchases