Credit cards are a flexible, convenient and secure method of paying for services. Most of us have used at one point or another. However, picking the right card is not easy. With such a range of cards available on the market, it can be a confusing process. However, if you regularly pay for items and services on a credit card, then a cashback card could be the right card for you.
A cashback card, as the name suggests, rewards you with cashback every time you spend on the card. The “cashback” is usually credited to your monthly statement. However, some issuers send a cheque, or vouchers. It depends on what you have signed up for, and their terms and conditions.
Not surprisingly, the more you spend on the cashback card the more cashback you earn. However, some cards also offer different cashback rates for different types of spending. To provide an example, you might earn 3% cashback if you use your card in a supermarket. But you might receive a larger 4% for using your card at a petrol station.
You might also earn a different rate depending on the amount you spend. Again to provide an example, the cashback rate might be 1% on your first £1,500 spent, but 2% on anything spent above that total. Some cards may offer cashback at a specific store. Alternatively, they may offer a higher rate of cashback for a limited time for new customers. It’s a case of finding the card that is best tailored to your unique purchasing habits.
People who naturally spend quite a lot on credit cards would suit such an offer as it gives them something back. And thus, the more you spend, the more you tend to get back. Alternatively, a single large purchase would be advantageous on these types of cards.
However, there are caveats to using such a card, and as with any credit card, it should be used wisely. And sensibly. You should not be tempted to run up large debts just in order to get cashback on purchases. This would be a false economy, to put it mildly. Nor should you incur repeated interest charges on the card. This more than wipes out the advantages gained by the cashback you will have received.
Such cards are best suited to people who pay off their bill in full each month, or at least keep on top of what they owe. It is tailored for those that do not borrow on the card and do not pay any interest. In such cases, the interest rate on the card is irrelevant and the cashback is essentially free money.
Some cards will charge an annual fee, which can range from £10 to over £100. For many therefore, these types of cards may not be worthwhile, but the fee is not an automatic reason to reject the option of cashback cards. According to your individual spending habits, it could still be a worthwhile purchase. Do your research and do the maths, and decide if it worth your while.