If loyalty points and free gifts from your credit card don't excite you, maybe good old cash can do the trick? We look at the top cashback credit cards.
Although credit cards can be evil beasts, robbing the unwary of their hard earned cash, the disciplined among us can use them to their own advantage. As I previously mentioned, picking the right credit card can reward you with free flights, MP3 players, shopping vouchers and invitations to exclusive shopping evenings. However, for a resolute bunch, these head turning goodies mean nothing - what they want is cold, hard cash! And for this, we need a cashback credit card.
What is a cashback credit card?
So what exactly is a cashback credit card? Well, as that famous advert once said -- it does exactly what it says on the tin. Use a cashback card and you'll get a percentage of what you spend, back, as cash. So, say you pick a card offering 1% cashback. Spend £100 and you'll get £1 back. Simple.
And although this may seem like a relatively small sum, consider the amount of money you spend each month, be it via cash, card or debit card. Move all of this spending to a cashback card and those pennies soon add up. For example, spend £50/week on groceries, £30/week on fuel and £30/week on miscellaneous items and that's £57.20/year to start you off. Add on holidays and any other spending and you can be looking at a cheque for over £100. Not bad, for just using a credit card!
Of course, you're probably asking why a credit card company would ever want to give you cash back. After all, they're not usually in the habit of being so generous.
Well, for a start most cashback cards have slightly higher APRs than normal credit cards -- for example, the Morgan Stanley cashback card has an APR of 15.9%, quite high when you consider there is a whole raft of cards offering 0% on new spending and APRs of less than 10% thereafter. The card providers clearly live in the hope you'll slip up with a payment and rack up some lovely interest for them.
However, they'll have to look elsewhere to make their interest, of course, as the only Foolish readers who would even consider taking out a cashback credit card are those that cannot stand being in debt, and as such pay off their bills with frightening speed!
If you have even the slightest doubts about your organisational skills in this department, stop reading now. Just one missed payment would be likely to cost more than the cashback you could earn, and completely negate any savings made. But if you do consider yourself to be financially disciplined, why not make the most of it and earn some cashback?
If you're keen on earning while you spend, here are some of the current, Best Buy cashback cards:
Cashback Credit Cards
| Provider | Cashback | Paid: | Conditions |
|---|---|---|---|
Morgan Stanley -Platinum MasterCard (apply via the Fool) | 3% until 1 Apr. 2007 on spend up to £2k. 1.5% on spend over £2001, until 1 Apr 2007. 0.5% thereafter. | Yearly | Includes triple cashback promotion |
| Egg Money card | 1% | March | Minimum cashback payment is £5. 1% cashback guaranteed until 31 Jan 2007. Money must be pre-paid into your Egg Money account first. |
| Bank of Ireland Moneyback Mastercard | 0.5% on spend up to £2,999. 1% on spend £3k to £20k | Yearly | |
American Express Platinum card (apply via the Fool) | 3% for first 3 months; 0.5% for spend up to £3,500; 1% for £3,501 to £10k; 1.5% thereafter. | Yearly | No cashback earned in any month you do not make the minumum payment. Minimum cashback payment is £5. |
| American Express Blue | 0.5% for spend up to £3,500; 1% thereafter. | Yearly | |
| Yorkshire BS Base Rate Tracker Visa | 1% on spend up to £2k, 0.5% thereafter. | April | If applied for with a Yorkshire BS mortgage, the cashback will be paid into the mortgage account. |
As you can see, different cards offer different levels of cashback, in addition to some special deals, such as triple points for limited periods. You can use this information to your advantage; for example, if you're planning to book a holiday or buy some expensive items in the January sales, choosing the Morgan Stanley or American Express Platinum cards would mean you could maximise your cashback. The Egg Money card, on the other hand, pays a set 1% throughout the year, although this does involve pre-paying your cash into your Egg Money account first.
And, if you were to spend £500/month on the American Express Platinum card, this does mean you would be looking at a cheque for £80, this time next year -- not bad for just moving your normal spending to another card. And as an avid cashback credit card user myself, I am looking forward to receiving my cashback cheque any day now -- just in time for the January sales!
So if you consider yourself financially disciplined, check out cashback credit cards; you could make yourself some free money. But if all of this has failed to take your fancy and you'd rather have the goodies instead, take note that anyone applying for the Amazon MasterCard through the Fool will not only receive their introductory £15 Amazon voucher, but a bonus £10 gift voucher, too, for a limited period.