If you're bored with loyalty cards, then try switching to a cashback credit card. You could make hundreds of pounds a year!
Last week, in Earn Rewards As You Shop, I unearthed and analysed fifteen of the UK's leading reward credit cards. These cards earn you cash, loyalty points or vouchers which you can exchange for freebies or discounts on flights, gift certificates, holidays, music, wine, etc.
However, the incentive programmes provided by reward credit cards are very varied, which makes it fiendishly difficult to compare like with like -- or even to come up with a monetary value for these rewards. Thus, today it's the turn of cashback credit cards, which are much simpler beasts.
Before I begin, let me repeat the golden rule of cashback and reward credit cards: Always pay off your balance in full every month, and don't transfer balances from other cards to a cashback credit card which you use for spending. Otherwise, you'll pay interest and lose out.
According to The Fool's independent, unbiased search engine, at present, there are fifteen credit cards which pay cashback to cardholders. Most pay a basic cashback of 0.5% to 1% of your spending, although several offer higher cashback for an introductory period. Which card is best for you depends on your total annual spend, as some cards reward big spenders with higher cashback.
Rather than list all fifteen cashback credit cards here, I'll track down the Best Buys, based on three levels of monthly spending: £250, £500 and £1,000. Here are the results of my search for a 'free lunch':
Monthly spend of £250 (£3,000 a year)
Card | Cashback | Cashback in |
|---|---|---|
Capital One Bank | 4% for first three months, then 1% | 52.50 |
1% of all spending | 30.00 | |
Yorkshire BS Classic Visa and | 1.00% on first £2,000 a year; | 25.00 |
Monthly spend of £500 (£6,000 a year)
Card | Cashback | Cashback in |
|---|---|---|
Capital One Bank | 4% for first three months, then 1% | 105.00 |
1% of all spending | 60.00 | |
Yorkshire BS Classic Visa and | 1.00% on first £2,000 a year; | 40.00 |
Monthly spend of £1,000 (£12,000 a year)
Card | Cashback | Cashback in |
|---|---|---|
Capital One Bank | 4% for first three months, then 1% | 210.00 |
3% for first three months, then | 165.00 | |
1% of all spending | 120.00 |
As you can see, for most consumers, the Best Buy card for cashback is Capital One, with Egg Money taking second place. However, for big spenders, the Amex card is certainly worth considering.
For the record, I worked out today that I've spent just short of £20,000 on my cashback credit card in the past twelve months, yet earned cashback of only £100, instead of as much as £350 with Capital One. Clearly, it's high time for me to ditch and switch!
More: | Chop Your Interest Rate To Under 5% | Be Careful With Your Credit Card